Managing Employees and Keeping Good Records

Many small businesses thrive with a staff of one while others need dozens or even hundreds of employees to run smoothly. Regardless of how many people you employ, and whether or not you have a human resources department (which is likely you), it is important to follow labor and employment regulations and keep the same records for each employee. A Denver-based small business attorney will ensure you start off and stay compliant with all of the complex aspects of employment law from agreements and contracts to liability and workers’ compensation. This post will highlight what your employee files should and should not contain, so you are organized and protected in the face of an audit or lawsuit.

Hiring Employees and Obeying Employment Law

As a small business owner, your checklists never end. Hiring a new employee means yet another checklist: get an Employer ID Number (EIN), register for an unemployment account, sign up for workers’ compensation coverage, submit employment verification, classify workers properly, implement an employee handbook, display workplace posters, and so on. The various state and federal regulations can be dizzying, but once you have completed your new hire checklist, the next step is to maintain organized employee files.

Without certain documents on file, you are not only subject to costly audits and fines, but you are actually at risk of being shut down.

What Colorado Small Business Employee Files Should Contain

  • employment contracts, agreements, or acknowledgments between the employee and you
  • documentation related to employee performance, including commendations as well as disciplinary actions taken (this is particularly helpful when you are asked to give a reference for a former employee)
  • job description
  • application and resume
  • offer of employment
  • W-4 form
  • Colorado employee withholding allowance certificate
  • employee signature upon receipt of employee handbook
  • position/rate change forms
  • requests for time off
  • emergency contact and next of kin information
  • documents of any training programs completed by employee
  • warnings of poor attendance or frequent tardiness
  • documents relating to an employee leaving the company (exit interview or clear documentation of why an employee was terminated)

Maintaining certain records separate from employee files allows for appropriate access by managers, employees, and outside auditors while preventing people from having inappropriate access to other employee information.

What Employee Files Should Not Contain

  • documents or entries that do not relate to the employee’s job performance or qualifications (e.g. political views, private life, or criticisms involving race, gender, or religion)
  • medical records (if you employ someone with a disability, you are required by law to keep that employee’s medical records in a separate file with limited access)
  • Employment Eligibility Verification (Form I-9)
  • Equal Employment Opportunity (EEO) records
  • interview notes and employment test results
  • reference or background checks
  • drug test results
  • child support or garnishments
  • litigation documents
  • workers’ compensation claims
  • requests for employment or payroll verification

As a small business owner (and HR officer), it is your responsibility to provide your employees with a safe and healthy workplace, to comply with state and federal employment laws, and to maintain good records. Just as you keep track of your inventory or financial transactions, you should have complete records of all of your work with your employees. Your small business attorney will see to it that you are prepared and protected regardless of whether you are faced with an audit or lawsuit. Good records mean good business and peace of mind.

If you need help with employment law, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email:

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