Employee Data Compliance Best Practices

to Avoid Lawsuits and Fines

Organizations many times need or have access to personal employee data. They also must protect that data. Many have moved away from paper data collection, easily kept in a locked file cabinet. Technology allows us to store employee data in a much more accessible way. While it’s great to have access anywhere and at any time, employee data must not be accessible to just anyone.

Without adequate data policies and security measures in place, digital records can easily end up in the wrong hands, including those that may have malicious intent for it. Think about it. Employers store social security numbers, bank routing numbers for direct deposits, birth dates, addresses, and potentially medical data. Imagine what the bad guys could do with all of that valuable data!

While most of this employee data is necessary to store to prove employment eligibility, offer medical benefits, and conduct other employment activities, it leaves an organization subject to employee data protection legislation. Failure to comply with data legislation can lead to lawsuits and substantial financial penalties.

Following are some best practices for storing this personal and sensitive employee data.


1) Know the most current employee data protection legislation applicable to your organization.

Concern about the ease of access to personal employee data has led to an increased appetite for privacy protection legislation at the state and federal levels. And lawmakers are only seeking more comprehensive privacy laws as technology advances.

It’s particularly tricky as HR data compliance requirements vary from state to state. Plus, they are constantly evolving. For example, the California Privacy Rights Act (CPRA) replaces the California Consumer Privacy Act (CCPA), effective January 1, 2023. It will require California employers to create comprehensive privacy programs for HR data that include detailed reviews of collection practices and ample security measures to protect HR data. This is just one example.

It’s vital to understand which employee data privacy laws apply to you from a federal, state, local (and, when applicable – international) perspective. Ensure you have a way to monitor changes in any of these laws for ongoing compliance.


2) Set clear employee data privacy policies

Your company’s employee data privacy policy should include what, how, and why the data is collected, processed, and stored. Additionally, it should note how long your organization will keep the employee data. Policies must also inform employees of their data privacy rights. Include employee consent (and their right to withdraw) and access to their data. You should also ensure a timely response to correct any inaccurate employee data.


3) Develop robust employee data security measures

External threats like cybercriminals and potentially internal employees at your organization are finding more sophisticated ways to breach HR systems. So, work closely with your IT department to build a range of security measures to protect your employee data. These measures need to include the following:

  • Encryption of sensitive data
  • Protection of accounts and digital employee files through passwords and multifactor authentication
  • Vetting of third parties who will gain access to sensitive data
  • Regular training of employees and managers on proper record keeping and identifying sources of potential security breaches (i.e., phishing emails)


4) Keep data to a minimum

Only store data your business needs – nothing more. This practice is known as data minimization and is a good one that helps you avoid holding more sensitive information than necessary. Note that European countries require it, and the United States is considering adopting it in future legislation.


5) Give access to employee data sparingly 

Another essential element of data protection is ensuring that only authorized people can access sensitive employee data. It’s crucial to avoid blanket access. Authorization to access data also needs to be regularly reviewed and updated. For example, a supervisor may move to a different department and no longer need access to certain employee data.

There is no doubt that data protection laws will become more stringent in the future. Take measures now to protect employee data privacy and ensure employee data compliance. It will keep you out of legal trouble and demonstrate your commitment to handling employee data with care and confidentiality.