Best Practices - How to Self-Audit Your HR Files Eric S. Hayes Brown & Carlson, P.A.

Identify why all employers want to conduct a self-audit; Discuss what laws mandate that certain records be maintained by all employers; Identify where employment-related records need to be maintained; Identify some Minnesota-specific issues; Identify common pitfalls in maintaining employment records. TODAY’S OBJECTIVES

“I am watching you!”

Why Self-Audit HR Files? In human resources, self-auditing is not routine; There are no laws or regulations requiring employers to engage an independent auditor to audit company policies and practices; Because of the complexity of state and federal labor laws and regulations, it is wise to do periodic check-ups; Proper record keeping essential to avoid liability and save your company money.

Why Self-Audit? Employers face serious consequences for failing to maintain proper employment records; Both civil and criminal penalties for failure to maintain proper records; Also consequences if employer sued for: Discrimination; Harassment; Breach of Contract; Wage, hour and pension laws.

Benefits of Conducting Self-Audit Good records provide good written history; If employer sued or questioned about its decisions, records can be used to show: Decision making process; Consistent use of company policy among all employees; Show a jury that the employer properly disciplined an employee; Even outside of a lawsuit, good records can help a company identify efficiencies, identify areas for improvement, etc.

Risks of Not Self-Auditing Both State and Federal statutes and regulations impose fines on employers for not keeping accurate records. Under OSHA, employers can be fined up to $7000 for each violation; Under Minnesota law, an employer can be fined $1000 for each failure to maintain proper payroll records; Courts can impose sanctions for failure to produce appropriate records in response to a lawsuit.

Example In Combs v. King, 764 F.2d 818 (11 th Cir, 1985), trustees of several retirement trusts sued an employer because the contributions did not comply with the union contract. The Court held that the employer had a duty under ERISA to keep accurate records of the hours each employee worked so it could verify the accuracy of the contributions to the fund. The employer did not have accurate records, so the court held it was the employers burden to disprove the damages asked for by the trustees.

Example Green v. Blitz, 2011 WL (E.D. Tex. Mar. 1, 2011); During discovery, Defendant had one employee collect documents relevant to the litigation. The employee did not do a complete jog or even communicate with various departments within the organization to see where relevant information may be stored. The Court ordered Defendant to pay $250,000 in civil contempt sanction to Plaintiff.

What Laws Apply? Federal and State laws apply to record keeping; Generally, they fall into 4 categories: Fair Employment Practices; Compensation, Leave and Benefits; Occupational Health and Safety; and Tax Law.

Guideline for Personnel files A personnel file should be created on the date of hire. Each file may contain the following 5 subfolders: Employment Subfolder: Application for employment; Education verification; Background check results; Employment references; Employment offer letter; Emergency contact information; Employee handbook acknowledgment; Check list from new employee orientation; Job description; Wage information. *See Minn. Stat , Subd. 4 for definition of personnel record

Personnel File Guidelines, Continued Payroll/Benefits Subfolder: W-4 Form Forms authorizing various payroll deductions Leave records Attendance records Time sheets Benefits enrollment forms

Personnel File Guidelines, Continued Performance Subfolder: Performance reviews; Discipline, warning and termination notices; Documents on promotions, demotions, transfers; Performance Improvement Plans; Notes to file regarding performance issues.

Personnel File Guidelines, Continued Medical Subfolder Medical information; FMLA forms; Disability or Workers’ Compensation forms; Accommodation requests; Information regarding impairments or restrictions Fitness for Duty certifications; Results of any employer sponsored medical examinations or tests;

Personnel File Guidelines, Continued Investigation/Litigation Subfolder Information relating to a charge, investigation, lawsuit or complaints: Should include investigation notes; Statements; Other information collected as part of investigation: Must be kept confidential to avoid exposure to defamation or retaliation claims. Attorney client privilege must be maintained.

What to take out of Personnel files? I-9 forms – employer should have 1 folder for entire office where all I-9’s are keep in a secure location; Medical information/records; Investigation notes and reports. Supervisors should not have access to the personnel file in making employment decisions

Minnesota’s Requirements Employers with 20 or more employees must provide written notice upon hire of Minnesota’s Personnel Record Review and Access Statute. Minn. Stat. §§ – (2007) Employee has right to review file every 6 months and obtain a copy of records at no charge; Former employee can review personnel record once every year, obtain copy at no charge as long as employer maintains the personnel record; Written notice must include: The right to review personnel records; The right to dispute records; A statement that employer cannot retaliate; The remedies available to the employee for violation.

Minnesota’s Requirements, Continued Minnesota regulates employer use of employee social security numbers (Minn. Stat. §325E.59): Cannot be publicly posted; Should not be part of accessing work material/website; Cannot use social security numbers as primary account identifier. Only people with “need to know” should have access to employee social security numbers.

Minnesota Requirements, Continued Protected genetic information (Minn. Stat. § ); Employee assistance provider records (Minn. Stat. § ); Employee references (Minn. Stat ).

Document Retention Policies Implement consistent and systematic policy for retaining and discarding records. Intentional destruction of records to avoid liability is unlawful. Timeframe for destruction will depend on business needs and complying with legal requirements. Statutes identify minimum retention periods; Consider statute of limitations for guidance.

CONCLUSION Contact legal counsel if you have specific questions on legal requirements of document management and retention. QUESTIONS?