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Reeling from recordkeeping? Sound strategy makes the task manageable

A seemingly vast array of laws requires employers to create and store an equally vast array of records, and keeping up with the task is enough to make anyone’s head spin. The chore is less daunting, though, with some advice and a plan.

Ryan A. Olson, an attorney with the Felhaber Larson law firm in Minneapolis, Minnesota, advises employers that the safest way to ensure compliance with recordkeeping requirements is to consult an experienced attorney about what records to keep, how long to keep them, and how to share them. An attorney also can advise on recordkeeping strategies that may not be required by law but may help protect against and defend future lawsuits.

“Ultimately, each company’s recordkeeping requirements will depend on its business type,” Olson says. “Because there are so many state- and sector-specific requirements, each employer should determine which requirements apply before developing a strategy to remain compliant.”

Reasons for records
Of course detailed records are important for tax purposes, accounting, and business planning, but Olson says good recordkeeping serves employers in two other important ways. “First, it memorializes employer-employee transactions. Second, it helps prevent and defend against future administrative and legal proceedings.”

Many federal and state laws include specific recordkeeping requirements, Olson says, but most don’t impose specific civil or criminal penalties. “Failing to keep adequate records, however, can lead to claims by employees or make it more difficult to defend employment-related claims,” he says. “Consequently, it is vital that a company maintain detailed records to defend its actions.”

Olson reminds employers that recordkeeping laws generally are enforced by local, state, or federal agencies. These agencies may bring enforcement actions against a company and may, in some circumstances, bring civil or criminal actions against a company for failing to comply with recordkeeping requirements.

Keeping track of changes
Part of the job of recordkeeping is keeping up with and responding to changes in laws that require employers to keep records. For example, in recent years several states and cities have enacted new minimum wage laws, and some have passed laws mandating paid sick leave. Those and other changes mean employers need to examine their practices to make sure their records are in compliance with the new laws.

The move toward electronic recordkeeping is another change employers must respond to. “The most dramatic change specific to recordkeeping has been the trend towards electronic recordkeeping and storage,” Olson says. “Several states have passed laws to encourage such practices.”

State laws cover other areas of the employment relationship as well, and most states have laws that supplement federal recordkeeping requirements, Olson says. “The most commonly changing state laws that affect recordkeeping are those pertaining to family and medical leave, minimum wage, hours worked, and discrimination,” he says. “Other state laws include those governing employee personnel files and storage requirements.”

Monitoring law changes is an important part of the recordkeeping responsibility, Olson says. “While these laws do not all include specific recordkeeping requirements, they are frequently changing and can lead to litigation if violated,” he says. “Thus, it is critical that employers keep records to document their adherence to these changing laws in order to protect against and successfully defend future lawsuits.”

Electronic trend
As technological advances give employers more choices in how they create and store records, many employers wonder how far to go in the shift toward electronic recordkeeping. Generally, the law doesn’t require an employer to keep hard copies or original copies of employee records. “It is highly advisable, however, to keep original copies of records that are difficult to authenticate or have independent legal or financial significance,” Olson says.

Examples of such records include notarized documents, settlement records, or promissory notes. “Moreover, if an employer chooses to store files electronically, the employer must ensure the documents are available for later use and inspection,” Olson says. “This may require employee training on document storage, working with a third-party storage company, creation of storage procedures, and implementation of a disaster recovery system.”

Also, if records are disposed of after being stored electronically, the employer must carefully consider the confidentiality and sensitivity of the documents when deciding how to destroy them, Olson says.

The advisability of going with electronic versus hard-copy storage depends on the company, its records, and its recordkeeping procedures, Olson says. “Streamlined electronic recordkeeping and backup procedures will help eliminate future problems,” he says, “But a company seeking to store records electronically without sufficient protections may risk future liability.”

Like electronic storage, paper-based recordkeeping must be done in compliance with applicable laws, Olson says. This typically involves keeping records in a manner that makes them accessible on short notice; sufficiently safe and confidential; and for the designated time period.

Need to learn more? Join us November 15-17 at the 2017 Advanced Employment Issues Symposium where Ryan Olson will present Recordkeeping Audits: Best Practices for Paper and E-Storage, Meeting Mandatory Notice, Posting, and Policy Drafting Requirements, and More. This three-hour comprehensive workshop is your one-stop shop for all things related to employment recordkeeping, mandatory posting and written notice requirements, and policy drafting tips in light of new and existing federal requirements. For more information, click here.

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