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How to Effectively Manage an Internal
Employment Investigation: Doing it Right and
Keeping Your Company Out of the Headlines
Presented by:
Barbara Hoey
Kelley Drye & Warren LLP
Michael Lynch
Kelley Drye & Warren LLP
Colleen Giusto
Associate Counsel, Labor & Employment, Saks Fifth Avenue
July 23, 2014
Why Are We Here?
 What has changed?
 What are the dangers?
 What are the opportunities?
2
How Many Companies “Look Back” and Regret
How a Situation Was Handled At Its Infancy?
 “Kobayashi claims that if matters had been handled
differently, the lawsuit would never have happened.”
(Excerpt from Business Week, May 22, 2006 – “Trouble At
Toyota – Behind the sexual harassment suit roiling the
carmaker’s U.S. executive suite”
3
Recent Headlines

“Court Upholds Racial Harassment Ruling Against Trucking
Company“

“Illinois Whistleblower Awarded $3 Million Following Jury Trial”

“California Jury Awards $6 Million in Sarbanes-Oxley Act
Whistleblower Lawsuit”

“Minnesota Jury Awards Whistleblowing Dean Nearly $400,000”

“$700k Attorney’s Fees Award Upheld for $27k Jury Verdict”

“$4.6 Million Jury Verdict in Retaliation Lawsuit Confirmed”

“NJ Jury Renders $2.1 Million Punitive Damage Award in
Whistleblower Case”
4
Whistleblower Legislative Expansion
 Dodd-Frank
 Sarbanes-Oxley
 Fraud Enforcement & Recovery Act
 Affordable Care Act
 Revised False Claims Act
 American Recovery & Reinvestment Act
2009
 Consumer Product Safety Act
5
PLUS
Anti-Retaliation Protections are Everywhere
 Discrimination laws
 NLRA
 USERRA
 Title VII, ADA, ADEA, etc.
 False Claims Act
 OSHA
 Fair Labor Standards Act
 State/local laws
 Immigration Reform and
Control Act
6
Retaliation: The Trends
 Retaliation complaints on the rise?
 41.1% of EEOC charges in 2013 included a
claim of retaliation
 Retaliation was the most frequently cited
basis for charges of discrimination in 2013
 Up from about 25% from 15 years ago
 Best predictions – retaliation
and whistleblower claims will
go higher in 2014
7
7
Money – Always a Motivator
 Retaliation/whistleblowers verdicts are rising
 Retaliation claims are “easy” to prove & expanded boundaries of
“protected conduct”
 Expanded boundaries of “protected conduct”
 Whistleblowers – Dodd Frank – increased potential “bounty”
recoveries and created easier burdens of proof, longer SOL
 Attorneys Fees – Plaintiffs’ bar smells “green”
8
Eye Popping Whistleblower Numbers
 DOJ collected more than $3.8 billion during FY 2013 in FCA
settlements and judgments.
 Whistleblower lawsuits have skyrocketed from about 400 in
2000 to 752 lawsuits in 2013.
 Johnson & Johnson reaches $2.2 billion settlement of criminal
& civil investigations and whistleblower suits:
 $1.72 billion to state and federal
governments
 $168 million to a group of whistleblowers, $28 million to
the original whistleblower
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Why Do You Investigate?
 Comply with Legal Requirements
 Provide Defense to Legal Claims
 Support Good Workplace Climate
 Your Goal - Determine the Facts
10
The Balance
Thorough
Prompt
11
What is Expected?

Whether investigating an employee complaint, or an
incident of individual or corporate misconduct
Courts/government agencies/juries will look at 3 factors:
1. Did the Company act in good faith and in compliance with
the law
2. Was the investigation reasonable and thorough
3. When the Company acted – did it have an objective basis
for the action taken
12
Investigation – The Stages
I.
Planning/Key First Steps
 The First 48 Hours
II. Methodology
III. Reporting
13
I. Planning/ Key First Steps
“I Need To Talk To You”
Key Questions – First 48 hours
 What is the complaint?
 Do we need to investigate?
 How broad will the scope be?
 Who is the investigator/team?
 Where is the evidence?/How do we preserve it?
 How do we preserve the privilege?
15
What is the “Complaint”?
 Statements about the workplace or a supervisor?
 Report to a supervisor?
 Anonymous complaint?
 Workplace griping
 Lawyer letter?
vs.
 The “official” grievance or hotline complaint
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How Did This Complaint Come In?
Legal
Legal
Compliance
HR
Location
Managers
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EH&S
Corporate
Security
Other
Teams
Supervisors Receive Majority of 1st Reports
56% Your Supervisor
26% Higher Management
6% Other
5% Hotline/Help Line
5% Other Responsible Person Including Ethics Officer
3% Someone Outside Your Company
Does your management know how to handle?
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Subject: What Are We Dealing With?
 Harassment/Discrimination
 Violence/Threats
 Safety
 Regulatory
 Financial/Theft
 Criminal
Each will require a
different response
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Is the government already involved?
 EEOC
 Department of Labor
 Attorney General
 Office for Civil Rights
 OR
 Other regulatory agency
 If the complaint affects your core business, consider all implications
20
Who Do You Need to Notify?
Ethics &
Compliance
Human
Resources
Audit
Legal
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Management
Security
Formulate The Plan
 An investigation plan does not have to be formal,
but should set the scope.
 Be prepared to explain why you did what you did.
 Never put yourself in the position of explaining your
plan by saying that you never considered any other
course of action.
If documented – cloak it in privilege
22
Preserving The Privilege: The Law
Attorney-Client Communication
Protects from disclosure any communication made in confidence between a
lawyer and person who is a client or is about to become a client for the
purpose of obtaining legal advice or assistance
 Client holds the privilege
 Only applies to communications, not facts
 Does not apply to all communications to an attorney
 Confidentiality must be preserved
23
Privilege: The Law
Attorney Work Product
Protects from disclosure “materials” prepared in anticipation of litigation or
for trial
 Includes correspondence, witness statements, interview memoranda,
investigatory reports
 Can include materials prepared by a non-lawyer, so long as nonlawyer acts at the direction of counsel to assist counsel in rendering
legal advice to the company
 “Fact Work Product” vs. “Opinion Work Product”
 Confidentiality must be preserved
24
“Primary Purpose” Test
“In the context of an organization’s internal investigation, if one of the
significant purposes of the internal investigation was to obtain or provide
legal advice, the privilege will apply”
 Translation: It is acceptable for a communication to have “dual
purpose” – legal and business – and still be privileged
Barko v. Kellogg, Brown & Root, 1:05 CV 1276
(D.C. Cir. June 27, 2014)
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Privilege: Will You Waive?
 Yes – if prompt investigation and remedial action is used as an affirmative
defense?
Pray v. New York City Ballet Co., 1998 WL 558796 (S.D.N.Y. Feb. 13, 1998)
(sexual harassment case)
 Maybe – If you “voluntarily” choose to disclose documents to a
government agency
In Re Steinhardt Partners, 9 F.3d230 (2d Cir. 1993)
 What about “selective waiver”?
Gruss v. Zwirn, 2013 WL 3481350 (S.D.N.Y. 2013)
26
Steps to Preserve Privilege
 Communicate and Document Investigation Purpose
 Distinguish between communications in the ordinary course of
business, versus those in anticipation of litigation
 Make purpose clear at the beginning of any witness interview
 Mark investigation work product (i.e., notes, memoranda and reports)
 Do not share documents, beyond those on the investigative/legal
team
27
Steps to Preserve Privilege
 Prevent Inadvertent Disclosure
 Secure investigation files
 Limit and control access
 Control what is shown and said to witnesses during investigatory
interviews
 Maintain clear delineation between privileged and non-privileged
materials
28
Understanding the Allegation
Step One
 Meeting the Complainant
 Determine who, what, where, when, why
and how
 Ask the reporter with whom do they think
the investigator should talk.
 Ask whom the reporter has spoken
to about the issue
 Ask whether the issue has affected
the reporter’s job.
 Get as much detailed information as
possible to prepare a good, efficient
investigation plan.
29
First Conversation is Crucial
 Why?
 Sets the tone
 Sets expectations
So that first communication must by a consistent
message about the company’s policies and practices
DO ALL OF YOUR MANAGERS HAVE THAT MESSAGE?
30
The Complainant – Concerns
 Thank the complainant for coming in to report
 If the reporter says that he only wants to share his concerns
but does not want an investigation conducted, inform the
reporter that your company may have a legal obligation to
investigation the report.
Remember – allegations are not facts.
31
Questions?
 Explain the process
 Say “we take complaints seriously”
 Emphasize no retaliation
 Ask them to “tell me everything”
 What about:
 How will the accused be punished?
 Should I get a lawyer?
 Will (accused) know my name?
32
Key Points
 Be objective and do not express opinions about the alleged
conduct and avoid opinions or comments about the character
or ability of the others involved
 Reassure the reporter that the company takes these
complaints seriously and will determine whether an
investigation is needed.
 Emphasize that no final conclusion will be reached until the
investigation has been completed.
33
What About Confidentiality?
 Old Rule – Investigations should be confidential and should
not be discussed in the workplace
 Still a good rule (in general)
BUT
 Be Aware – the NLRB has taken the position that such
rules can violate that NLRA. So, be careful how you
implement
34
Anonymous Reports
 Anonymous reports should not be discounted unfairly.
 An anonymous report maybe malicious, or may be valid and
accurate.
 Most employees do not trust management to keep their
names confidential. Most people do not want to be identified
as the person responsible for bringing the matter to the
attention of the management.
Question – Do you want to know the name of the anonymous reporter?
35
Choosing the Right Investigator
Who Should Investigate?
 Your lawyers (inside or outside)
 Auditors and Accountants
 Corporate Security
 Human Resources
 Private Investigator
Rule: Resist the temptation to use any investigator. For best
results, match their skills to the type of investigation you are
conducting.
37
Criteria: the Good Investigator
 Impartial Fact-Finder (No Biases)
 Appropriate Credentials
 Good demeanor
 Attention to Detail
 Good writer
 Good Witness
 Sensitive to needs and culture
38
In-House Counsel or Outside?
Consider:
 What are internal resources within and outside Law
Department?
 Do you want to make lawyer a witness?
 Is it practically or “politically” feasible?
 Who in the organization is being investigated?
 What about bias?
 Ascertain privilege protections
 Do you want to conflict your outside counsel?
39
Lawyer-Witness Rule
 In-House Counsel
 Can wear two hats but lines of demarcation become complicated to
manage
 Outside Counsel
 Attorney conducting the investigation is disqualified from
representing you at trial
 Navigate the theoretical versus practical reality of outside counsel as
witnesses
40
“Can You Manage” The Investigator?
 If investigator is used as a defense, there will be no privilege
 Make sure s/he knows to stay inside scope
 Stick to the issue
 Don’t go outside scope without talking to you
 This is not CSI – treat employees with respect and presume
innocence
41
Gathering and Managing the Evidence
Evidence
3 Sources
People
Paper
Electronic
Each must be gathered and “managed” in a different way
43
People
 Who are the executives and managers?
 Who are likely witnesses?
 What should they be told?
 What they should / should not document
 Does anyone need to be removed / placed on leave?
 Do we need a privilege protocol?
44
Key Points
 Don’t destroy evidence
 Delete emails
 Delete documents
 Don’t “create” evidence
 Write memos
 Write emails to each other
 Don’t RETALIATE
45
The People/Witness Interviews
46
Witness Interviews – General Guidelines
 Prepare a Standard Introductory Statement:
 Who you represent
 What you are investigating
 Legal compliance
 Why you are talking to interviewee
 How information supplied will be used
 How “confidential” will the information be
 Why interviewee may not discuss investigation with others
 Truth and Cooperation are expected
47
Witness Interviews – General Guidelines
 No “right” not to answer questions without possible disciplinary
action
 Omissions, false statements or misdirection of investigation can
result in disciplinary action against interviewee
 Protection against retaliation
 for participation, not for wrongdoing
48
Lawyer Interviews: Ethical Obligations
Model Rules of Professional Conduct Client-Lawyer Relationship
Rule 1.13 Organization As Client (continued…)
(f)
In dealing with an organization’s directors, officers, employees,
members, shareholders or other constituents, a lawyer shall explain
the
identity of the client when the lawyer knows or reasonably should
know that the organization’s interests are adverse to those of the
constituents
with whom the lawyer is dealing
49
Upjohn Warning: “Mirandizing” Your
Employees
1.
Identify yourself
2.
Explain that you are conducting a confidential investigation on behalf of
the company into a matter having legal implications
3.
Explain the purpose of speaking with your particular witness (i.e., that
s/he has information necessary for the company to receive legal advice)
4.
Explain that the interview is confidential and privileged, but that the
privilege belongs to the company – not to the employee
5.
Make clear that you are counsel for the company, not any particular
employee of the company
50
Do I Need A Lawyer?
Gen Rules: The answer is “No”, if our interests are aligned
And
If you need a lawyer in the future, you will be so advised
 Question: What will the company do if a lawyer is
“demanded”?
51
Interviewing Complainant
 Ask Complainant to explain the issue
 Ask for Chronological Recounting of Events or Incident(s)
 Who, What, When, Where, How?
 Ask for Names of Observers or Witnesses
 Has Complainant Discussed the Incidents With Anyone? Who?
Supervisors?
 Ask Complainant For List of People to Interview
 Was the Incident Isolated, or Part of a Series of Incidents?
 Ask About Written Documentation: e-mails, notes, receipts, photos,
etc.
52
Concluding Interview With Complainant
 DON’T Make Sweeping Promises Regarding the Process
 Stress Need for Complainant and Others Involved to Keep
Information “Confidential”
 Inform Complainant His/her Input Is Valuable, - But Final
Resolution is Company’s Decision
 Complainant will be asked to come back and must cooperate
53
Interviewing the Investigation Subject
 Explain Need for Information
 Explain Obligation to Internally Investigate Allegations
 No Predetermination of Outcome
 If Refusal to Cooperate, the Investigation Will Continue
 Generally - no Right to an Attorney During Internal Investigation – of a
civil matter
54
The Paper and the ESI
Documents — What Can You /
Should You Look At?
 Personnel files
 Time cards
 Emails & texts
 Others Electronic files
 Medical files
 Expense files
 Project files
 Documents in possession of the claimant
and witnesses
56
Electronic Evidence
 Get out a “hold”
 Who should get it?
 What should it say?
 Make sure recipients really understand obligations
 Make sure to involve IT
 Understand your systems and how they work
 Follow up
57
E-Mails - Can You Review Them?
 If you have a policy – yes, you can review e-mails.
 But, do you want to?
 Why/why not?
58
Practice Tips
 Announce early and often that e-mails and phone calls may be
monitored
 Defeats privacy expectations
 Has a deterrent effect
 Do some random monitoring
 Be aware of what is going on over your “airwaves”
 Also for the deterrent effect
59
Other Sources?
 Text messages
 Outside work emails
 Personal Twitter, Facebook messages
 Photos/Data - on cell phones,
Facebook, Instagram???
60
Should You Use Google, Check Social Media?
61
Other Methods
 Use of Video
 Within your property is permissible
 As long as not in restrooms and locker rooms
 Photographs
 “Permissible” – as long as personal privacy is not invaded
 Workplace photos – lawful
 Work vehicles – lawful
 Outside work – be careful
62
Legal Restrictions On Workplace Monitoring
 Common law protections against invasion of privacy
 Constitutional protections: First and Fourth Amendment
claims
 Electronic Communications Privacy Act of 1986, 18 U.S.C. §
2511 et. seq.
63
Key Points of the ECPA
 With employee consent (i.e., your signed policy) – you can
monitor e-mail and telephone communications
 Without signed consent – may have to prove “legitimate
business purpose”
64
Other Legal Limits on “Surveillance”
 Employment discrimination laws
 NLRA/Union Organizing Rights
 Sarbanes Oxley
 Fair Labor Standards Act
 False Claims Act
Remember
 Employees have a right to discuss workplace concerns or issues in
confidence
 Employees may have some rights to “explore” or “investigate”
 Don’t want the investigation to lead to a lawsuit against the Bank
65
Avoid
 Any surveillance in areas which are too personal
 Locker room
 Restroom
 Break room
 Some states have made such surveillance illegal
66
Issues to Think About
 Be Careful
 Unlawful “targeting”
 Discrimination claims
 Privacy claims
 Employee morale
 Drug Testing
 Only lawful if with “cause,” need reasonable suspicion
 Maintain chain of custody
 Use professional/laboratory
67
Potential Civil Claims
 Retaliation
 Discrimination
 False imprisonment
 Emotional distress
 Assault & battery
68
Conclusion: The Report
Will This Investigation Ever End?
When to Pull the Plug:
 Look at your plan
 Consider your goals
 Review legal obligations
 When you have gathered the
material facts, conclude the
investigation
 Keep your investigator “on
course”
70
What is the “Right” Conclusion?
 The “right” conclusion is an informed decision that is based on full
knowledge of the facts and the law
 Have you looked at key civil/criminal/regulatory issues?
 Do you know all of the facts?
 Can the Company make an intelligent/informed decision as to
its legal liabilities and how to proceed
71
Final “Report” –
To Write or Not to Write?
 Pros
 Good record of serious effort
 Forces comprehensive analysis
 Consistent communication and
results
 Cons
 Expensive to produce
 Danger of leaks (internal and
external)
 Waiver of privilege
 May be discoverable
72
The Final “Report”
 As you prepare:
 Assume it may be discoverable
 Assume you may want/need to use it in future civil or
criminal litigation
 So – document only what you would want an adverse
party (or the government) to see
73
What Should It Say?
 Scope and purpose
 Witnesses and materials reviewed
 Facts - Good and bad
 Good – exonerate those who are innocent
 Bad – note some conflicting accounts
 Don’t want to appear to be whitewashing
 Opinion?
 Recommendations?
74
Special or Remedial Recommendations
 To the CEO or Board
 Make it verbal
 If written - should be separately documented in a
Privileged Report
 Written by counsel
75
The End
 The Report – thorough, but only the facts
 Recommendations – only by counsel
 The crisis – averted
 Your constituency – satisfied
 Your boss – pleased
 Your job - secure
76