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THE LAW. Maintaining personnel files can be a chore, but it's the most important element in defending against claims from employees, ex-employees and regulators.

Both federal and state laws require you to maintain various types of employment records. Plus, you must keep some records separate from others. Failure to comply with these rules exposes you to civil and criminal penalties, plus leaves you more vulnerable in the face of lawsuits.

WHAT'S NEW. Recordkeeping requirements are on the rise as security and privacy issues continue to mount. Latest example: The Health Insurance Porta-bility and Accountability Act (HIPAA) dumps new burdens on you to protect the confidentiality of employee's medical records.

Employers and their HR departments must also be prudently paranoid about locking up personnel records. Reason: A new study says the theft of company personnel records is the number one way identity thieves are stealing people's personal data. And your company can be liable for that theft if the victimized employee can show you had lax records security.

HOW TO COMPLY. You must keep certain records separate from personnel files to protect confidential information and to prevent employees from claiming that access to certain information exposed them to retaliation or other illegal job actions.

Your best bet: Maintain at least two separate files for each employee.

One file should contain personnel-related information, such as résumé, personnel change forms and performance reviews, and can be viewed by the employee. The other should be a limited-access administrative file that contains confidential or sensitive information such as medical and benefits data, confidential references, workers' compensation data, wage garnishment information and notes of complaints or internal investigations.

Ideally, you may want to consider building a third file for employee's payroll data, I-9 information and union documentation as well.

Can employees view their file?

Employees' rights to review their personnel files vary from state to state. In some states, employees have an absolute right to see everything in their files; in others, they don't.

Also, the laws differ among states regarding public versus private em-ployees, copying rights, fees for copying, time requirements for access, time requirements for the employer to respond, number of times accessed, written notice, even place of access.

To find out your state law, check with your state labor department. (Find your state agency info at www.dol.gov/ esa/contacts/state_of.htm.)

What if your state doesn't have a law on the topic? It's best to put some limits on your personnel-file practices. For example, you may allow only current employees to access their records; require that they submit a written request; allow them to view the file only in the presence of a manager; prohibit them from making copies; and permit them to provide a written response to anything in the file with which they disagree.

Some courts have said that a company's handbook alone may inadvertently establish the employees' right to access their file. So you should include a provision in your policies that says the company reserves the right to keep certain information confidential. And recognize that an employee, as a party to a lawsuit against an employer, has the right to subpoena a personnel file.

Take note: You must always let employees inspect their own medical records, according to Occupational Safety and Health Act rules.

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