Legal Question in Employment Law in California

There is a good explanation of what the ex employee is entitled to and your obligations as the employer on the Dept. of Industrial Relations website here: https://www.dir.ca.gov/dlse/FAQ_RightToInspectPersonnelFiles.htm

How far back you have to go depends on the business entity form of the business and how the son took over, but unless there was a formal closing of the father's business and a transfer of assets only to the son, most likely all three years must be provided.

If they are asking for a tolling agreement, they are considering suing you and are running up against a possible statute of limitations problem. They are asking you to agree to put the running of the statute on hold while they investigate and prepare to sue you. if you think you might be able to convince them not to sue, or to negotiate a settlement without litigation, you MAY want to agree to a tolling agreement, but if you think you are going to get sued no matter what, it is best to make them move fast rather than give them any more time to prepare. In any case, at this point you definitely need a lawyer.