Employment agreements serve as crucial legal documents defining employment relationship terms and conditions. Employers in Colorado must retain these agreements for specific periods to ensure compliance with federal and state laws. Understanding these legal obligations helps businesses mitigate risks and maintain transparency in employment practices.
Legal Requirements for Retaining Employment Agreements
Federal Retention Requirements
Federal laws establish various document retention requirements that impact employment agreements. While there is no single law mandating the retention of all employment agreements, several regulations impose obligations on employers:
- Fair Labor Standards Act (FLSA): Employers must keep payroll, collective bargaining agreements, and sales or purchase records for at least three years. Although employment agreements are not explicitly mentioned, keeping them for this duration is advisable.
- Age Discrimination in Employment Act (ADEA): Employers must retain payroll records and employment agreements for three years for employees over 40.
- Equal Employment Opportunity Commission (EEOC) Requirements: Any employment records, including agreements, must be maintained for at least one year from the termination date.
- Americans with Disabilities Act (ADA): The ADA’s retention requirements align with the EEOC’s guidelines, requiring one-year retention of employment records.
Colorado-Specific Retention Laws
Colorado follows federal guidelines while imposing additional obligations:
- Colorado Anti-Discrimination Act (CADA): Employers must retain employment agreements and related records for at least three years following an employee’s departure to comply with potential discrimination claims.
- Colorado Wage Act (CWA) (C.R.S. §8-4-101 et seq.): Employers must keep records of wage agreements, including employment contracts, for at least three years to ensure compliance with wage and hour disputes.
- Unemployment Insurance Claims: Employers should retain employment agreements for at least four years to address potential unemployment claims under the Colorado Employment Security Act (C.R.S. §8-70-103).
Best Practices for Maintaining Employment Agreements
1. Retain Contracts for At Least Four Years
While federal laws generally require record retention for three years, maintaining employment agreements for at least four years provides extra protection, particularly for unemployment claims or delayed litigation.
2. Digital and Physical Storage Compliance
Employers can store employment agreements physically or digitally, providing they maintain confidentiality and security. Colorado employers must comply with data security laws (C.R.S. §6-1-713) to prevent unauthorized access.
3. Separate Active and Terminated Employee Records
Organizing employee agreements into active and terminated files ensures quick access to relevant documents in case of audits, lawsuits, or employee inquiries.
4. Destroy Expired Records Securely
Once employment agreements surpass the required retention period, employers should securely dispose of them to protect sensitive information. Shredding physical documents and permanently deleting digital files prevents unauthorized access.
Consequences of Failing to Retain Employment Agreements
Failure to maintain employment agreements for the required period can result in significant legal and financial repercussions, including:
- Penalties for Non-Compliance: Regulatory agencies can impose fines for missing employment records.
- Difficulties in Legal Disputes: If an employee files a wage or discrimination claim, the lack of an employment agreement weakens the employer’s defense.
- Risk of Unemployment Insurance Overpayment: Retaining agreements helps employers contest false claims and prevent improper unemployment payments.
Industry-Specific Considerations in Colorado
Specific industries have unique requirements for maintaining employment agreements:
- Healthcare & Financial Sectors: Employers in these fields may have additional retention obligations under HIPAA and financial regulations.
- Government Contractors: Businesses working with government agencies must adhere to strict record retention policies outlined in their contracts.
- Construction & Trade Industries: Union agreements and independent contractor contracts often have different retention requirements under Colorado law.
Contact a Colorado Employment Contract Lawyer
Navigating employment agreement retention laws can be complex, and failing to comply with regulations may expose businesses to legal risks. If you need guidance on best practices or legal compliance, Baker Law Group is here to help.
Our experienced employment attorneys assist businesses across Colorado in ensuring compliance with federal and state retention laws. Contact us today to schedule a consultation.
