Best Practices - How to Self-Audit Your HR Files Eric S. Hayes
Brown & Carlson, P.A. [email protected]
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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. TODAYS
OBJECTIVES
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I am watching you!
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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.
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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.
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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.
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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.
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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.
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Example Green v. Blitz, 2011 WL 806011 (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.
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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.
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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.
181.960, Subd. 4 for definition of personnel record
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Personnel File Guidelines, Continued Payroll/Benefits
Subfolder: W-4 Form Forms authorizing various payroll deductions
Leave records Attendance records Time sheets Benefits enrollment
forms
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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.
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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;
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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.
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What to take out of Personnel files? I-9 forms employer should
have 1 folder for entire office where all I-9s 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
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Minnesotas Requirements Employers with 20 or more employees
must provide written notice upon hire of Minnesotas Personnel
Record Review and Access Statute. Minn. Stat. 181.960 181.965
(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.
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Minnesotas 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.
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Minnesota Requirements, Continued Protected genetic information
(Minn. Stat. 181.974); Employee assistance provider records (Minn.
Stat. 181.980); Employee references (Minn. Stat. 181.967).
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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.
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CONCLUSION Contact legal counsel if you have specific questions
on legal requirements of document management and retention.
QUESTIONS?