The February 1994 issue of Church Treasurer Alert! contained the first in a series of articles on recordkeeping requirements for church records. That article addressed corporate and tax records. This article addresses personnel records. Future articles will address recordkeeping recommendations for several other categories of church records including insurance, correspondence, contracts, property, financial, vehicles, members, investments, and legal.
The problem. Most churches have no policy addressing the retention and disposal of church records. As a result, churches often go through the following phases:
Phase 1—Don’t throw out anything. Church records are kept indefinitely out of a fear that they may be needed in the future.
Phase 2—Frustration. Phase 1 creates frustration as the volume of records and “clutter” expands out of control.
Phase 3—Get rid of the clutter. Church workers go on “search and destroy” missions, aggressively discarding records to “get control” of the situation.
Phase 4—Anxiety. Church leaders wonder, “What did we throw out that we shouldn’t have?” This results in a return to phase 1, and the cycle begins again.
The solution. What is needed is a records retention policy based on applicable legal considerations and your church’s needs that will make records retention and disposal decisions systematic and rational. The “guesswork” and arbitrary nature of record retention decisions must be replaced with a sound and consistent policy. The table reproduced in this newsletter will assist you in developing such a policy with regard to personnel. A similar table in the February 1994 issue of this newsletter addressed the retention and disposal of corporate and tax records.
Key point. It is possible to keep some records too long—well beyond what is required by law. In some cases this can result in the retention of records that might be harmful in future litigation. On the other hand, disposing of records too soon can lead to unanticipated problems—both with various state and federal government agencies and in future lawsuits.
Tip: You can use the chart as a quick glossary of commonly used terms.
Tip: In establishing a records retention policy you should consider a number of factors in addition to how long to keep records. These include: (1) when to make copies of records, (2) maintaining the security of records (especially records you plan to keep permanently), including backups of computer records, and (3) developing a record retention schedule (a document that summarizes records, lists how long you plan to keep them, and indicates where they are kept).
Here are some additional factors to consider in developing a records retention policy for your church:
- Make an inventory of existing records.
- The church board should develop and approve your records retention policy.
- Your records retention policy should be reviewed by a local attorney (who can check local and state requirements), a CPA, and your insurance agent.
- There are many reasons to keep church records. These include legal requirements, potential relevance in future litigation, the needs of the organization, and historical importance. The table reproduced in this article suggests minimum periods of time for retaining various church records. Some of the suggested retention periods are based on legal requirements, while others are based on practical considerations. You may want to keep some records longer than the table suggests.
- Some organizations maintain a “destruction of records journal”. When the period of time for keeping a record has expired, the record is described in the journal before being destroyed.
- Do not destroy records, even when the period for keeping them has expired, if they may be relevant in pending or threatened litigation or in pending or threatened government (including IRS) investigations.
Personnel records. Every church keeps personnel records. In small churches that employ only the pastor, these records may include an application for employment, reference checks, a job description, and annual W-2 or 1099 forms. In larger churches that employ one or more nonminister employees, the list of personnel records can be long (including many of the forms listed in the table). The table lists most of the kinds of personnel forms that a church will use, along with a description of each form and a minimum time to keep each record.
Key point. Some of the recordkeeping requirements summarized in the table are based on federal laws that apply only to employers that are engaged in “interstate commerce.” Most local churches are not engaged in interstate commerce, unless they have substantial commercial transactions across state lines. For example, a church that sells tapes of its weekly services to individuals in other states may be engaged in interstate commerce. If in doubt, church leaders should assume that their church is engaged in interstate commerce.
Key point. The rules listed in the table are based on federal law requirements. Most states have their own requirements which may apply to churches. A local attorney should be consulted to determine the application of state law.
Key point. The rules summarized in the table are designed for the typical local church. Additional requirements may apply to large churches, denominational agencies, and parachurch ministries. To illustrate, the federal Family and Medical Leave Act imposes additional recordkeeping requirements on employers engaged in interstate commerce and employing 50 or more employees. The Civil Rights Act of 1964 imposes additional recordkeeping requirements on employers engaged in interstate commerce and employing 100 or more employees.
Key point. The recordkeeping rules for corporate and tax records were addressed in a table appearing in the February 1994 edition of Church Treasurer Alert! This table included some personnel records, including W-2 forms, W-4 forms, 1099 forms, receipts substantiating business expense reimbursements, and housing allowance designations.
CHURCH RECORDS—HOW LONG TO KEEP THEM
Note. The recordkeeping periods are minimums. Do not destroy any record that may be relevant in pending or threatened litigation or a government investigation, that has historical value, or that otherwise may be useful or relevant.
|document||description||how long to keep (choose the relevant rule or rules)|
|applications for employment (hired)||churches often have prospective employees complete an application for employment that asks question about an applicant’s background, education, and prior work experience||RULE 1. Employers subject to Title VII of the Civil Rights Act of 1964 (15 or more employees, and engaged in interstate commerce) must retain “any personnel or employment record” for at least 1 year after the record was made, or until the disposition of a discrimination charge. 29 CFR 1602.14.
RULE 2. Employers subject to the Americans with Disabilities Act (15 or more employees, and engaged in interstate commerce) must retain such records for at least 1 year after the record was made, or until the disposition of a discrimination charge.
RULE 3. Employers subject to the Age Discrimination in Employment Act (20 or more employees, and engaged in interstate commerce) must retain such records for at least 1 year from the date of the personnel action to which the document relates. 29 CFR 1627.3.
RULE 4. If an employment application includes screening questions to determine an applicant’s fitness and suitability, or a statement authorizing the employer to obtain references (and releasing the references from liability) the application form should be retained permanently. If the employee later assaults or molests an adult or minor, this evidence will be helpful in proving that the church was not negligent in hiring the person.
|applications for employment (not hired)||churches often have prospective employees complete an application for employment that asks question about an applicant’s background, education, and prior work experience||RULE 1 (above).|
|screening forms||used to determine the suitability of an individual to work with children (whether a paid employee or volunteer); includes background information on the individual’s criminal convictions, prior church membership, and prior involvement with youth activities||RULE 5. Permanently. If the employee or volunteer later assaults or molests a minor, this evidence will be helpful in proving that the church was not negligent in hiring the person. Because of liberalized statutes of limitation in many states, lawsuits can be filed long after an alleged offender leaves the church.|
|reference forms—general||forms or letters completed by current or former churches, employers, schools, friends, or relatives, addressing the suitability of an applicant for employment||RULE 6. Permanently—if the employee counsels adults (or works with minors—see below). If the employee or volunteer later assaults or molests a counselee, this evidence will be helpful in proving that the church was not negligent in hiring the person. Because of liberalized statutes of limitation in many states, lawsuits can be filed long after an alleged offender leaves the church.|
|reference forms—for youth workers||forms or letters completed by current or former churches, employers, and youth organizations addressing the suitability of an applicant for youth work (paid or volunteer)||RULE 7. Permanently. If the employee or volunteer later assaults or molests a minor, this evidence will be helpful in proving that the church was not negligent in hiring the person. Because of liberalized statutes of limitation in many states, lawsuits can be filed long after an alleged offender leaves the church.|
|job descriptions||a summary of the duties the employer expects an employee to perform||RULE 1 (above).
RULE 8. Retain for the duration of the employee’s employment. If the employee is dismissed (or resigns) under circumstances making a lawsuit against the employer reasonably foreseeable, then retain for the applicable statute of limitations period (for the foreseeable theory of liability, including breach of contract, discrimination, or personal injury) following the date of dismissal or resignation.
|employee manuals or handbooks||documents prepared by some employers setting forth the terms and conditions of employment, a summary of fringe benefits, and the grounds and procedures for discipline or dismissal||RULE 9. Permanently. Be sure to retain copies of all editions or versions, and be able to demonstrate which manual or handbook applied to any given period of time.|
|employee statement||a statement, signed by an employee, acknowledging that he or she understands the terms and conditions of employment (including grounds for discipline or dismissal) and agrees to them||RULE 8 (above).|
|payroll records||the following records for each employee: name, address, date of birth (if under 19), gender, occupation, rate of pay, hours worked each workday and week, compensation earned each week||RULE 10. Employers subject to the Fair Labor Standards Act (any church-operated school or preschool, or a church engaged in interstate commerce regardless of the number of employees) must keep such records for 3 years “from the last date of entry.” 29 CFR 516.5.
RULE 11. Employers subject to the Age Discrimination in Employment Act (20 or more employees, and engaged in interstate commerce) must retain such records for at least 3 years after the record was made. 29 CFR 1627.3.
RULE 12. Employers subject to FICA (social security) taxes must retain these records for 4 years after the due date of the tax for the return period to which the records relate, or the date such tax is paid, whichever is later.
|contracts of employment||an agreement setting forth the terms and conditions of employment between a church and an employee||RULE 10 (above).|
|performance evaluations||periodic (i.e., annual) evaluations of several criteria of employee performance, including efficiency, ability, initiative, and attitude||RULE 1 (above).
RULE 8 (above).
|dismissal records||documents explaining the basis for an employee’s dismissal||RULE 1 (above).
RULE 8 (above).
|testing records||tests administered to employees or prospective employees to measure intelligence or various job skills||RULE 1 (above).
RULE 3 (above).
|reports of work-related injuries and illnesses||reports noting the dates and circumstances of work-related injuries or illnesses of any employee, and completed within 6 working days of the injury or illness (OSHA Form No. 200 can be used)||RULE 13. Employers subject to the Occupational Safety and Health Act (any employer with 1 or more employees, that is engaged in interstate commerce) must keep such records for “5 years following the end of the year to which they relate.” 29 CFR 1904.6.|
|fringe benefit plans||employer-sponsored plans addressing the terms and conditions of “specified fringe benefit plans” described in section 6039D of the Internal Revenue Code, including employer paid group life insurance premiums, accident and health plans, employer paid medical insurance premiums, employer-provided group legal services, cafeteria plans, employer-provided educational assistance, and employer-provided dependent care||RULE 14. Employers maintaining a “specified fringe benefit plan” for any year must keep such records as may be necessary to establish that the requirements for maintaining such a plan have been met—for 7 years following the end of the year the documents were created.|
|Form I-9||immigration form completed by employers and new hires, demonstrating an employee’s identity and eligibility to work||Rule 15. All employers regardless of size must retain such records for 3 years after the date of hire or 1 year after an employee’s termination, whichever is later.|