It’s a popular question that doesn’t often get addressed — how long is an employer required to keep employee records, and when can you dispose of them?
Let’s go over what’s stated in the law, and then read between-the-lines. The Fair Labor Standards Act (FLSA) states that every employer covered under its jurisdiction (which is most employers) must keep payroll records, collective bargaining agreements, and sales and purchase records for a minimum of three years for each nonexempt worker. Records on which computations are based (i.e. time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages) should be retained for two years.
“The records must be open for inspection, which may include requests to make extensions, computations, or transcriptions,” says Charles Vethan, Founder and CEO of Vethan Law Firm. “The records may be kept at the place of employment or in a central records office. If you believe there is no legal requirement for a type of record, it’s best to maintain records for at least 3 years. But make sure to document your efforts in searching for that guidance.”
While three years is the length of time the FLSA requires for retaining employee records, there are other local laws and statutes that require longer periods of retention. According to Employment Attorney J Bryan Wood, Founder of The Wood Law Office LLC, it might be advantageous to hold onto records for as long as possible.
“Assuming records aren’t subject to a litigation hold, you want to keep employee records until you won’t need them anymore. Typically, that means retaining records beyond the period for governmental compliance audits or statute of limitations for legal claims relating to them. But ultimately, the answer depends on the type of employee records at issue and where the employee worked. So even though FLSA may only have a 3-year statute of limitations period, but the Illinois Wage Payment and Collection Act has a ten-year statute of limitations on claims for unpaid wages. Other states’ laws differ. It pays to dig into the details – otherwise, you risk destroying your own evidence you were legally compliant.”
If you’d like to double check your compliance with the laws that apply to your business, Vethan suggests setting up a recordkeeping system and running that by an employment and labor law attorney to make sure that you are complying with all requirements. “Aside from the minimum time requirements, flag any records involving disputes or if litigation or an investigation seem likely (i.e. employee disputes, terminations, etc.),” says Vethan. “A good recordkeeping policy should include where employment-related records will be kept, who will maintain those records, who will have access to those records, and when records will be destroyed.”
If you’re looking to spring clean your business, time and attendance and payroll records can easily be stored and maintained online with digital systems like FingerCheck. All the data that passes through is safely and securely stored for anytime access by the right people.