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03.02.16   |   Insights

Paperless Personnel Files

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Have you thought about “going paperless” with your personnel files?  You are not alone! Before you shred your documents, however, consider these tips.

General Rule

With a few exceptions, as discussed below, it is not necessary to retain hard copies of your HR records.  Electronic storage of personnel records is becoming more and more popular, and is legally permissible…. if:

  •  You maintain controls that enable you to ensure the integrity, accuracy, authenticity and reliability of the records;
  •  You follow management practices that conform to all legal requirements for maintenance of personnel records;
  •  You organize your electronic files so that you can efficiently locate and retrieve documents for inspection, examination and copying when required for reporting or authorized disclosure purposes; and
  • You back up your files to avoid the possibility of loss of information.

Just a few words about each of the above:

  •  Controls: It is the company’s responsibility to make sure personnel records cannot be tampered with, altered, destroyed, accidentally deleted, stolen, or otherwise improperly accessed.  Maintaining several electronic back-up copies, password protecting the documents, granting access only to individuals within your organization who have a need for certain information, and tracking log-in and log-out information are some of the ways you can help ensure the safety and integrity of the documents.
  •  Management Practices: Because of privacy concerns, whether the records are kept in hard copy or in electronic format, you need to maintain separate files for certain types of information. 

For example, no medical information should ever be kept in general employee personnel files.  You must maintain separate files for medical information, and you must restrict access to the medical files to persons within your organization who have a “need to know” the information.  While it may be important for a supervisor to know about accommodations required by a disabled employee, that doesn’t mean the supervisor needs to know the underlying details of the employee’s illness or disability.  In fact, state and federal laws prohibit the unnecessary sharing of an employee’s personal medical information.  For the same reason, workers’ compensation records and OSHA records that contain information about employee illnesses or injuries should not be kept in general employee personnel files.

Similarly, information you gather (if required) for Equal Employment Opportunity purposes (such as race, religion, national origin, age, etc.) should not be kept in general employee personnel files.

  •  Organization: In certain situations, you may be required to provide records to a regulatory agency within a matter of hours.  In other situations, you will have a need, or desire, to refer to information for internal purposes.  Either way, it will save time, money and aggravation if you design a retrieval system that allows immediate access to information by authorized individuals.
  •  Back-up: Many experts recommend not only a primary back-up system, but also a secondary one.  You should never destroy hard copies until you have backed up the scanned copies of your records.  Of course, back-ups should be stored off site in a safe location, and secondary back-ups should not be stored in the same place as primary back-ups.

Exceptions

As noted above, there are a couple of exceptions to the general rule that you do not need to retain hard copies of documents that you have saved electronically.  For example, if your personnel records include x-rays, the original x-rays should not be destroyed. 

The IRS permits records to be retained electronically, but the U.S Tax Court has ruled that “taxpayers are not relieved from the responsibility of retaining the hardcopy records from which the computer records were derived.” According to this ruling, if you are subject to an audit of your employment tax compliance, you may be required to produce hard copies of information used to generate submissions of payroll information. 

Finally, the destruction of documents must be terminated immediately in the event of litigation or threatened litigation.  You have a legal duty to maintain documents in their original form, and to suspend all destruction and alteration of documents from the time you learn that a lawsuit may be filed until the matter is finally resolved.  This is known as the “litigation hold” rule.  Failure to comply with this rule when you are on notice of an actual or potential lawsuit against your company could result in significant financial and other penalties.

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