To Keep or Not to Keep? The Answer is Not Always Clear

To Keep or Not to Keep? The Answer is Not Always Clear

Are you storing and managing your documents and data correctly? This is a question you certainly should be asking yourself. In today’s digital world there’s so much information constantly created and shared, it’s hard to keep track of what to do with it all.

Do you keep it for one year, seven years, forever? It is hard to get a handle on it, but it is important to remember there are some legal requirements related to what to keep and what to destroy. 

In this blog post we’ll give some ideas of what you must keep and what you should consider keeping as a matter of good business practice. If you are unsure, do some more research and get expert advice before you hit the delete button or turn on the shredder.   

Let’s dive in.  

First, let’s take a look at this list of federal laws/agencies. Yes, it is a long list, but it is applicable to most businesses, so a careful review is a critical first step to informing your company’s document retention practices. 

  • Internal Revenue Service (IRS) 
  • Federal Insurance Contributions Action (FICA) 
  • Americans with Disabilities Act (ADA) 
  • Age Discrimination in Employment Act (ADEA) 
  • Occupational Safety and Health Act (OSHA) 
  • Employee Retirement and Income Security Act (ERISA) 
  • Civil Rights Act of 1964  
  • Fair Labor Standards Act (FLSA) 
  • Family and Medical Leave Act (FMLA) 
  • Equal Employment Opportunity Commission (EEOC) 
  • Health Insurance Portability and Accountability Act (HIPAA) 
  • Federal Unemployment Tax Act (FUTA) 

Notice a common theme in this list? You got it, employment related documentation.  

There are a lot of rules that apply to the employer-employee relationship and maintaining documentation may not only be required by law but may also be your saving grace when disputes arise. The EEOC requires that all employment and personnel records be maintained for a minimum of one year.

You don’t want to take these legal obligations lightly because mistakes might come with financial penalties and may also be resolved in favor of the employee if your record keeping is sloppy and deficient. 

Mastering Document and Data Management for Business Success

Even if some of these federal laws, such as the FMLA, do not apply to your business because it does not meet the number of employees threshold, it is important to note that there may be an applicable state law that provides greater rights than federal law.

So, if you have an employee that qualifies for family leave under a state law, make sure you keep documentation pertinent to the state mandated leave. Alternatively, a federal law AND state law may be applicable so do not assume compliance with federal law means automatic compliance with state law, and vice versa. 

Next, let’s talk about common business documents that may or may not be required by law but are important to maintain for at least some reasonable period. One good rule of thumb that some businesses follow is to maintain a document for one year past the time it was no longer useful or effective.

For contracts, the applicable statute of limitation for breach of contract is a helpful guide for how long to keep the actual contract and support documents. Note that if there is an ongoing dispute or potential for dispute, documents should be maintained for longer and destruction may result in serious penalties if litigation has been threatened or initiated. Here are examples of business documents that should be maintained: 

  1. Contracts 
  1. Bylaws/Operating Documents 
  1. Business Plans and Reports 
  1. Employment Agreements 
  1. Compliance and Regulatory Documents 
  1. Transactional Documents 
  1. Company Policies 
  1. Meeting Minutes 
  1. Board Resolutions 
  1. Insurance Policies, Licenses, and Permits 

Finally, let’s get to the magic number. How many years do you need to keep that document for? It is not always clear but fortunately, for some documents it is. But even then, the number of years is different. Are you pulling your hair out yet? We understand.  

In general, records should be kept for as long as they serve a purpose or until legal or regulatory requirements are met, and if you are a nervous Nellie then add a year or two for good measure. Just remember, that often the answer to the question of “how long?” will depend on your business. Here is a general guide, but remember that consulting with your accountant, attorney, and/or state record keeping-agency is always best before you make final decisions. 

  • One year: Paper bank and credit card statements, pay stubs after reconciling with your W-2 
  • Three years: Job advertisements, employment applications and contracts (from date of termination), employment eligibility forms, payroll records 
  • Five years: OSHA accident forms, other personnel records 
  • Seven years: Federal tax returns and accounting records and supporting documentation applicable to your taxes, federal payroll tax records, bank statements, investment statements 
  • Indefinitely: Business formation documents, ownership records, deeds, trademark registrations, patents, auditor reports, non-profit tax-exempt certificate 

In conclusion storing and maintaining your records properly is essential to the health of your business. By doing so you are facilitating legal and regulatory compliance requirements, protecting yourself against legal risks, and setting yourself up for success in the future. Never underestimate the value of getting professional advice when it comes to proper document retention practices. 

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Disclaimer:  

Every effort is made to provide accurate, complete, and current information in Milestone Law Group’s blog.  However, Milestone cannot guarantee that there will be no errors. In addition, note that articles are current as of the date of original publication and therefore may no longer reflect the current state of the law.   

The information in our blog is shared for informational purposes, not to provide specific legal advice. Receipt of this material does not establish an attorney client relationship. The blog should not be used as a substitute for competent legal advice from a licensed professional attorney. Please contact us if you have any questions. 

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