If an employee left the company, why should you continue to retain their personnel file? There are a few different reasons why, but one of the main reasons is that the federal government stipulates that companies should retain personnel data for a specified period of time. There are also some states that have additional requirements beyond the federal government requirements. Some of these requirements are dependent on the number of employees, while some are only for government contractors and subcontractors. Regardless, most employers will fall under the records retention requirements.

Much of the requirements began with the enactment of the Civil Rights Act of 1964, which was established in an effort to protect applicants from acts of discrimination. Title VII and the Americans with Disabilities Act are also major acts for requiring records retention. For instance, these laws require employers to retain applications and other personnel-related records as it relates to the hiring, promotions, transfers, tests used in employment, demotions, layoffs, and terminations for a period of one year from the date of the action or making the record. 

There are many other record retention requirements for personnel records, as well as employment-related data. It is vital to ensure you know what your state requires, which may be different from the federal government requirements. California is a good example of how some of the requirements differ and are crucial to ensure compliance.  For example, California requires employers to keep payroll records two years under the state's Labor Code and four years under the state's Unemployment Insurance Code, but the federal government requires three years from date of last entry under the Fair Labor Standards Act.  In general, a good rule of thumb is to keep files for the longest amount of time required.

It is also a good idea to establish a procedure for auditing your own organization's files to ensure that the files are in order, you have the most current data, and terminated employee files have been removed from active employee files. Just make sure to follow the guidelines set by your state and/or the federal requirements, whichever is greater.