Business Records Retention Requirements

By Julie Segraves
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Numerous federal and state laws have requirements for document retention. These document retention standards are set to ensure that records are available to prove or disprove allegations by employees in litigation, for tax purposes, privacy issues and numerous other matters that could arise during the course of doing business. Employers are further categorized and different standards apply depending on your business. For example, employment agencies must keep different records than a hospital.

Laws

Compliance regulations are typically the driving force behind document retention standards. If the documents needed to prove compliance are unavailable, it is difficult for the employer to prove it is following the letter of the law. Furthermore, federal laws may have different requirements than state laws, and some laws are simply state-specific. The primary regulations that require document retention are the Americans with Disabilities Act (ADA), Title VII of the Civil Rights Act of 1964, the Age Discrimination Act (ADEA), Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), Lilly Ledbetter Fair Pay Act, Health Insurance Portability and Accountability Act (HIPAA), Equal Pay Act (EPA), Occupational Safety and Health Act (OSHA) and the Fair Credit Reporting Act (FCRA). Each has its own requirements regarding which records are kept and for how long.

Records

Title VII requires that certain records be kept for one year. These records include: hiring records, such as resumes and applications; pre-employment tests; layoff, recall and workforce-reduction records; promotions and demotions; reasonable or religious accommodations; and training. Documents must be retained for three years regarding I-9 Forms under the Immigration Reform and Control Act, as well as dates of leave under the FMLA, and timebook and timesheet records under FLSA. The Employee Retirement Income Security Act (ERISA) requires that records involving medical or related benefits must be retained for six years, the statute of limitations for violating a fiduciary responsibility. OSHA requires that employees' exposure and medical records must be retained during the employee's career and for 30 years thereafter. Many of the retention requirements are directly related to the amount of time an employer is liable for a cause of action to be filed. It is imperative that employers are well versed on their state's laws as well. Many states have enacted laws that exceed not only the federal document retention periods but the number of years an employer is liable for its actions.

Penalties

For many employers, the biggest penalty is losing a litigation battle because their records are insufficient to defend their actions. However, if an employee files suit against an employer, and the employer no longer has the required records or destroys them while litigation is pending or ongoing, the ramifications can be severe. As an example, the Sarbanes-Oxley Act allows for individuals who knowingly destroy or hide records to obstruct an investigation or administration of any matter related to a government agency be fined and/or imprisoned for up to 20 years.

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