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Records Retention Rules
By Michael C. Dennis and Steven Kozack

Companies are required by federal and State laws to maintain records for business, legal and tax purposes. Although many business records only need to be stored for three years, there are important exceptions. For example, federal and State tax records usually need to be maintained for seven or more years. Employee records need to be stored for even longer, and may have special reporting requirements established under federal laws including the Fair Labor Standards Act. Also, Federal and State regulations governing document retention vary according to business sector. For example, a pharmaceutical manufacturer may be required to keep records for much longer than a steel producer. In addition, State laws may have different retention requirements that federal laws for certain types of records, such as worker injury/worker's compensation reports.

A special note of caution: If recent news events have taught companies anything it is this: Records that may be the subject of litigation should not be shredded. They should be maintained beyond the period of the applicable statute of limitations.

Companies should consider creating a Master Records Retention Schedule that establishes a timetable for retention and the eventual destruction of company records. The records retention rules are usually developed in a consultative process with the company's outside professionals, in particular its accountants. Once approved, these rules should be used to control all record retention and records destruction activities in the company.

Records retention rules would typically cover:

  • Accident and injury reports

  • Accounts payable records

  • Accounts receivable records and aging reports

  • Attendance records

  • Audit reports

  • Bank records, and cancelled checks

  • Check registers and account statements

  • Company policy statements, and correspondence sent to all employees

  • Disciplinary reports on employees

  • EEO-1 reports

  • Employment applications

  • Employee complaint reports, and the results of internal investigations

  • Employee handbooks [one of each version]

  • Financial statements

  • Tax records of all types

  • Training records

* Note: This is not a complete list of company records. These are examples of categories of records. Next to each of these categories would be the minimum number of years the records must be stored before they may be destroyed. A company can always retain records for longer periods of time.

One additional comment: Record retention rules apply to all company records - including both paper and electronic records. Record destruction, irrespective of the media the data is stored on, must follow applicable records retention rules - except that duplicate copies can usually be destroyed without special approval. The laws governing records retention are not static. If applicable laws change, the records retention rules must do likewise. And as a practical matter, it may become apparent that certain retention schedules should be lengthened based on the frequency the records are being accessed, rather on the applicable federal or State law[s] relating to their destruction.

Steven Kozack is a consultant that specializes in helping companies organize their credit operations and make them lean and efficient. Please send your questions to Steven at:


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