Nonprofit Personnel Files — A Guide from Ask Rita

Article Highlights:

• Records of many employment matters are required by many state and federal laws.
• What NOT to put in the personnel file
• What can the employee put into his or her own file?
• Where should we keep personnel files?
• How long should we keep a personnel file?
• Checklist for documents to keep in a personnel file:

Records of many employment matters are required by many state and federal laws.

Dear Rita:

We’ve never paid too much attention to our personnel files, but we’ve just entered a contract with the county and we think it’s time for us to get our act together on this. I know we need a personnel file for each employee — but what should be in it?

Signed,
An Accidental HR Manager

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Dear Accidental:

It’s great that you are asking this question now! Good personnel files are important not just for your county contract but because documentation of various employment matters is required by many state and federal employment laws and most employee-specific documentation is best retained in a personnel file.

• For example, to comply with the Fair Credit Report Act (FCRA) when doing a background check, you’ve got to give specific written notices and get a written authorization if a third party conducts the records check. The proof that you’ve complied with FCRA should be kept in each individual’s personnel file.
• The file should also contain performance evaluations and any documentation that evidences the employee’s employment status (a signed offer letter, an Employee Change Form reflecting things such as job title, wage rate, promotions, benefit coverage, and leaves of absence). The personnel file should read like the rings of a tree, giving evidence of an employee’s history with your agency.

The rest of this article provides an overview of how to manage your organization’s personnel files and a checklist of documents to include in a personnel file. First, let’s talk about what should not be in a personnel file, which is just as important from a legal perspective.

What NOT to put in the personnel file

Following are the most important items to exclude:

• Any writing regarding the employee’s performance that the employee has not seen should not be in the file. For example, while the performance evaluation that was presented to the employee should be in there, a complaint memo from a department manager about an error the employee made that was never shown to the employee should not.
• Working notes or logs that a supervisor has kept for her own benefit, usually to assist in the drafting of a performance evaluation. The notes should be destroyed after documenting anything of importance in the annual performance evaluation.
• Any medical information (including drug testing information) about the employee from any source should never be in the employee’s personnel file, but rather in a separate, more restricted confidential medical file. This separate medical file could also include any medical-related information such as documents related to Workers’ Compensation, FMLA and ADA.
• Complaints or investigation reports (harassment, discrimination, ethics, licensing etc.). Any complaint about an employee that is subject to an investigation should not be in the employee’s personnel file, but in a separate complaint file. For example, if an employee is accused of sexual harassment, the only thing that should be lodged in the personnel file is any disciplinary action taken against the employee or a substantiated report of wrongdoing — but not the original complaint or investigation notes.

These items also should not be kept in a personnel file, but in separate, confidential files:

• Hiring Documents, such as letters of reference, background investigation reports, or I-9s
• EEO Statistical Information for the EEO-1 Report
• Payroll records

In short, to manage all of this personnel information we suggest four sets of files:

1. A personnel file for each employee
2. A separate medical file for each employee
3. One folder that has Forms I-9 for all employees
4. A file (or set of files) for all employee payroll records

What can the employee put into his or her own file?

Most employers’ policies allow an employee a limited period of time to submit a written response to any negative information in the file regarding performance. While responses and rebuttals are not required by law, this practice allows the employee to have her concerns documented, typically making it easier for everyone to move beyond any dispute and focus on performance.

Where should we keep personnel files?

Since personnel files contain confidential personal information, you will also need to establish a policy about access and security of these files. We recommend these practices:

• Keep files in a locked cabinet and identify two staff (such as the HR manager and the executive director in a small organization) who will hold the keys.
• Maintain a written log that shows when a personnel file has been reviewed and by who. You can, for instance, staple such a form to the inside front cover of the file.
• Include a policy in your employee handbook that personnel files can only be accessed by the employee, his or her supervisor/manager, and others only if they have a need to know. (Note that many states have laws that grant employees the right to review their own personnel file or to keep a copy of certain documents.
  • In a separate locked drawer:
  • Keep one file that has Forms I-9 (Immigration) for all employees. Again, do NOT put an employee’s I-9 in his or her personnel file, athough you might want to have a checklist in the file that indicates that this information has been collected. Form I-9 is the “Employment Eligibility Verification” form from the U.S. Citizenship & Immigration Services (USCIS, formerly called the INS). The government is entitled to inspect these forms, and if it does, you don’t want the agents viewing the rest of the employee’s personnel–and personal — information at the same time.
  • Keep a medical file for each employee.

How long should we keep a personnel file?

As a general rule, keep files for four years after an employee separates from your organization, with the exception of the following documents, which must be retained for a longer period of time:

• Employee Benefit Plan documents and enrollment forms (medical, retirement, etc.) (must be retained for 6 years under ERISA)
• OSHA Toxic Chemical Exposure records and Material Safety Data Sheets (30 years) and
• Workers’ compensation lost time injury reports (example: in California, 5 years)

Remember also that since personnel files contain confidential information, proper destruction of records is critical. The Fair and Accurate Credit Transactions (FACT) Act, effective in 2005, requires all employers to burn or shred all applicant or employees’ personal information such as Social Security numbers, addresses, telephone numbers and any other information reported to an employer by a consumer reporting agency. Medical information should be handled similarly. Employers that use an outside party to dispose of records are expected to conduct due diligence in hiring a document destruction contractor.

Checklist for documents to keep in a personnel file:

• Job description(s)
• Resume and/or employment application
• Offer letter
• Authorizations for background checks
• Certifications, licenses or proof of educational degrees or training
• Drivers’ license and proof of auto insurance (if employee drives as part of the job)
• Personal and emergency contact information
• W-4 tax exemption form
• Benefits enrollment forms
• Beneficiary and dependent benefit forms
• Employee acknowledgment of receipt of Employee Handbook or any additional Employer Policies
• Performance evaluations
• Letters of commendation
• Attendance records (but not payroll records)
• Disciplinary memos
• Personnel action form (also called employee change forms): Changes in salary, job title, etc.
• Payroll information including direct deposit authorization, memos related to wages attachments or garnishments, request/authorization forms for leaves of absence (excluding medical certification)
• Letters of resignation or termination

Dear Accidental: This may be more information than you expected, but it isn’t as complicated as it might seem. Sincerely, Rita in HR

See also:

• Model Records Retention Policy
• Criminal Records Checks for Prospective Employees and Volunteers
• A Beginner’s Guide to Filing a Form 990 for Your Nonprofit Organization

You might also like:

• Drive Your Nonprofit’s Mission by Investing in Your People
• Supporting Caregiver Employees in the Nonprofit Sector
• Increase Safety for Your Nonprofit’s Team
• Ask Rita in HR: Should Murphy’s Law Be a Consideration in Making HR Decisions?
• Moving Beyond Performance: Making DEI Actionable

 

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