When it comes to California employment law, sometimes it’s not what you pay or when you pay—it’s what you document that makes or breaks compliance. Employers often underestimate how critical recordkeeping is until they’re faced with an audit, a PAGA claim, or a class action lawsuit.

In California, recordkeeping requirements are among the most detailed in the nation. From payroll to personnel files, employers are required to maintain accurate records for years, and failure to do so can create penalties just as severe as wage violations themselves.

Why Recordkeeping Matters

In wage and hour disputes, the law presumes that if an employer doesn’t have the records, the employee’s version of events controls. That means the burden shifts to the employer to prove compliance, even when claims go back several years.

For example, if an employee sues for unpaid overtime and the employer has no timecards from the relevant period, courts will accept the employee’s estimate of hours worked—even if it seems inflated. That estimate then forms the basis for damages, penalties, and attorney’s fees.

Recordkeeping isn’t just about avoiding lawsuits—it’s about protecting your business when your practices are challenged.

Payroll Records: The Foundation of Compliance

California Labor Code Section 1174 requires employers to keep payroll records for at least three years. These records must include:

• Names and addresses of employees
• Hours worked each day and each week
• Rates of pay and gross wages earned
• Deductions and net pay
• Dates of each pay period

Copies of wage statements must also be kept, and employers must make these records available to employees upon request within 21 days.

For example, if an employee requests their pay history to verify overtime calculations, failing to provide it on time can trigger penalties—even before a lawsuit is filed.

Personnel Records: Longer Retention, Broader Scope

Payroll isn’t the only documentation that matters. Employers must also keep personnel records for a minimum of three years after termination, and in many cases, longer. These include:

• Job applications and resumes
• Offer letters and contracts
• Performance evaluations
• Disciplinary actions
• Termination notices

Employees have a legal right to inspect their personnel files, and employers must provide access within 30 days of a request.

A common pitfall occurs when employers purge terminated employee records too soon. For example, if a former employee brings a wrongful termination claim two years later, the lack of a disciplinary record can leave the employer defenseless.

Time Records: Precision Is Key

California requires minute-by-minute tracking of all time worked for non-exempt employees. This includes start and stop times, meal periods, and rest breaks. Donohue v. AMN Services (2021) made clear that rounding meal periods is unlawful, and any gaps or inconsistencies in time records will be held against the employer.

For example, if time records consistently show meal breaks starting at exactly “12:00 p.m.,” courts may assume the system is inaccurate and side with employees who claim their breaks were delayed or cut short.

Document Retention Timelines

Different records have different retention requirements, which can cause confusion. While three years is the minimum standard for payroll and personnel files, many employment lawyers advise keeping certain records for up to four years to cover California’s statute of limitations for wage claims and PAGA actions.

• Payroll records: 3 years (best practice: 4 years)
• Personnel records: 3 years after termination
• Wage statements: 3 years
• I-9 employment eligibility forms: 3 years after hire or 1 year after termination, whichever is later
• Workers’ compensation records: 5 years

The PAGA and Litigation Connection

Recordkeeping errors are a favorite target in PAGA lawsuits. Even when employees were properly paid, failure to keep accurate records—like wage statements or meal period logs—can result in significant penalties.

For example, a group of employees might bring a PAGA claim alleging their wage statements omitted pay period dates. Even if their paychecks were correct, the employer could still face penalties of $50 for the first violation and $100 for each subsequent violation per employee, capped at $4,000 each.

Best Practices for Employers

To stay compliant and protect against litigation:

• Use reliable payroll software that tracks hours and produces compliant wage statements.
• Centralize personnel files and set reminders for retention timelines.
• Train managers on accurate timekeeping and documentation practices.
• Audit records regularly, especially wage statements and timecards, to ensure accuracy.
• Respond promptly to employee requests for copies of records—delays can create liability.

Documentation is Key

In California, accurate records are as important as accurate paychecks. Without them, employers face an uphill battle in audits, lawsuits, and PAGA claims. By investing in strong recordkeeping systems, employers not only comply with the law but also gain peace of mind knowing they can defend their practices if challenged.

This post is for informational purposes only and does not constitute legal advice. California’s meal and rest break laws are complex and vary by industry and workforce. Consult an experienced employment attorney for guidance tailored to your business. Cal Comply is a paid training provider mentioned for illustrative purposes; other compliance resources are available.