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Attorneys and Counselors

Kimberly R. Stuart Shareholder
Since 1912

July 20, 2011

Put your Sherlock Holmes Hat On: The Who, What, Where, When & How of Conducting Investigations of Employment Complaints
Kimberly R. Stuart Even the best-run companies will inevitably encounter situations where they must conduct internal investigations of employee behavior. Best practices are to initiate these investigations when they are for legitimate business and legal purposes. An investigation can engender trust between an employer and its employees and resolve problems if performed properly. If mishandled or ignored, an investigation can provoke legal consequences and itself become a basis for liability. This paper will discuss the Who, What, Where, When & How of employment investigations. I. Why to Investigate?

A. Discrimination (Title VII and other Discrimination laws) Because of the United States Supreme Court decisions in Burlington Indus., Inc. v. Ellerth1and Faragher v. City of Boca Raton,2 most employee manuals contain grievance procedures for employee complaints. In these two cases, the U.S. Supreme Court held that an employer is strictly liable for sexual harassment by a supervisor if a tangible employment action resulted from the harassment. The Court further held that if there is no tangible employment action resulting from the harassment, the employer may assert an affirmative defense if the employer can prove the following: (1) the employer exercised reasonable care to prevent and correct promptly and sexually harassing behavior; and (2) the employee unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer or to otherwise avoid harm. This second element has been interpreted to mean that an employer must have procedures in place by which an employee can first complain internally that he or she has been subject to discrimination. If the employee fails to take advantage of these internal investigative measures, then the employer may raise that failure as an affirmative defense to the claim of harassment and avoid liability.
1 2

524 U.S. 742 (1998) 524 U.S. 775 (1998)

July 20, 2011 Page 2 Although Ellerth/Faragher dealt with sexual harassment, sexual harassment is founded in the general prohibition against discrimination based upon sex found in Title VII. Therefore, it is widely accepted that the decisions will apply to any form of discrimination under Title VII. B. Sarbanes-Oxley and Whistleblower Complaints As part of the Sarbanes-Oxley Act of 2002, Congress has encouraged whistleblowers to come forward by requiring public companies to establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters.3 Sarbanes-Oxley also protects employees who come forward with such information from retaliation by management. 4 Congress clearly wanted to encourage employees inside Americas public companies to act as watchdogs. C. Safety Concerns OSHA, Workers Compensation For certain types of workplace accidents, employers may be required to cooperate or conduct its own workplace investigations of the accident and its causes and ways in which it can be prevented. Terminations: For Cause Terminations or Just Cause under a Collective Bargaining Agreement Prior to terminating an employee, an employer, of course, determines some reason for which the employee is being terminated. A former employee attempting to make a claim for unemployment compensation, may be disqualified for unemployment benefits if the employee was fired from the last job due to misconduct. 5 Misconduct means mismanagement of a position of employment by action or inaction, neglect that jeopardizes the life or property of another, intentional wrongdoing or malfeasance, intentional violation of a law, or violation of a policy or rule adopted to ensure orderly work and the safety of employees.6 It does not include an act that is in response to an unconscionable act of an employer or superior.7 Misconduct is open to considerable interpretation; therefore it is a good idea for an employer to get its ducks in a row before
3

D.

See 301 of the Sarbanes-Oxley Act, new subsection 10A(m) of the Securities Exchange Act, and new Rule 10A-3(b)(3).
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See 806 of the Sarbanes-Oxley Act, and new 18 U.S.C. 1514A, which provides employees a private right of action against public issuers who retaliate because the individual provided information about possible securities law violations or participated in an investigation of such claims. This cause of action only extends to individuals who provided information to, or for investigations conducted by, a federal regulatory or law enforcement agency, a member of Congress or a Congressional committee, or a superior of the employee with the authority to investigate the alleged violations. See also 1107 of the Sarbanes-Oxley Act and amended 18 U.S.C. 1513, including new subsection (e), which makes it a federal crime to retaliate against individuals who provide information in connection with the commission, or possible commission, of any federal offense. 5 Tex. Labor Code Ann. 207.044. 6 Tex. Labor Code Ann. 201.012(a). 7 Tex. Labor Code Ann. 201.012(b).

July 20, 2011 Page 3 deciding that it will terminate an employee for misconduct in an attempt to block unemployment benefits. Another area of the law where an investigation into an employee termination comes into play is when the employee is subject to a collective bargaining agreement or when the employer is in the public sector. Most government workers and unionized employees cannot be terminated other than for just cause. Just cause is another term widely debated in the case law. E. Federal/State Agency Audits One of the most challenging types of investigations are those that are required by an audit by some federal or state agency. After all, Big Brother is watching. Listed below are just some of the federal/state agencies and the types of investigations or audits they may conduct: Equal Employment Opportunity Commission (EEOC) Texas Commission on Human Rights (TCHR) the EEOC or TCHR may decide to take on the claim of an employee making a charge of discrimination against the employer under any of the laws it administers (Title VII, ADA, ADEA, OWBPA, EPA, PDA). If this occurs, it may be because the EEOC has reason to believe that the alleged discrimination is a pattern or practice of the employer. Department of Labor (DOL)The DOL is responsible for the regulation and enforcement of the Fair Labor Standards Act (FLSA). Under this Act alone, the DOL may investigate a company for violation of child labor laws, overtime pay, and wage violations. National Labor Relations Board (NLRB): The NLRB may investigate an employer upon receiving a complaint from an employee or a tip from an outsider that the employer is discouraging unionizing activity or discriminating against union workers. Texas Workforce Commission (TWC): In addition to handling discrimination complaints for TCHR, the TWC will investigate claims for unemployment and may also initiate audits for failure to pay proper unemployment taxes. F. Employee Morale A sensitive situation for an employer may arise where an employee comes forth with a complaint that does not immediately rise to the level of discrimination or illegality. Maybe the complaint is about favoritism or working conditions. While seemingly innocuous there are important reasons to give these complaints attention, while weeding out unnecessary investigations. For example, a complaint about favoritism may reveal a larger issue of sexual harassment or violations of your company fraternization policyagain that could lead to a later claim of sexual harassment. In addition, a company that encourages an open door policy can severely damage morale and employer confidence by ignoring or brushing off employee complaints.

July 20, 2011 Page 4 When to Investigate? Determining the timing of an investigation is critical. Timing wise, the investigation really depends on the complainant. An employer may receive a complaint via a paper suggestion boxindicating a less critical problem. Or, the employer may be faced with a very emotional and upset employee who immediately seeks a face-to-face discussion. In each of these situations, the employer must respond immediately to determine whether to conduct an investigation at all and how it will be conducted. For example, the suggestion box complaint may be about a lack of Diet Coke in the vending machinenot pressing and doesnt require an investigation (except maybe as to who is drinking it all). On the other hand, what if the written complaint was a complaint of sexual harassment or workplace violence by an introverted employee? In each of these situations, the employer must immediately give attention to the complaint and assess the next step. The employer may need to take emergency interim measures such as reassignment or suspension. Once an employer has decided to conduct an investigation, the investigation should be conducted in a reasonable time after the complaint has been made. The nature of the complaint will dictate what is a reasonable time, but no investigation should begin until the following decisions have been made: 1) Chose an Investigator: An investigator should always be a member of management, preferably the HR manager or point person. An investigator should never be someone mentioned by the employee as part of the complaint. Fairness, impartiality, professionalism are required of the investigator. As important as these traits, the investigator should be someone who has the time to give to the investigation. In some circumstances, such as matters dealing with fraud or theft, it may be advisable to hire an outside private investigator. Amendments to the FCRA in 2003 eliminated any disclosure requirements regarding outside investigators except employers must follow FCRA requirements for credit checks. In addition, for sexual harassment claims, I always advise clients to have a male and female investigatoreach from managementinvolved. II. 2) Gather Your Evidence: Review your policy manual with regard to the complaint in question and for grievance/complaint procedures. Be sure anyone who participates in the investigation has done so, as well. Review the personnel files of the persons involved. This will tell you what kind of employees you are dealing with (i.e. good/bad/senior/new). Review any surveillance cameras of the areas involved in the complaint. Review emails or web site usage of employees in question. For example, if the complaint centers around sexually harassing e-mail sent from one employee to another, review the e-mail usage of each of these employees. This inquiry will help you determine whether this was isolated, a pattern or perhaps some virus. Moreover, you may learn that the victim may have instigated such e-mail by sending one of his or her own or that the victims own e-mail usage indicates similar conduct. Determine who you will interview.

July 20, 2011 Page 5 3) Review potential legal issues. Employers should know whether there investigation is required by law and what the law requires of them. You should consult with legal counsel if you are unsure of what laws apply to or may be implicated by the investigation. Pick a Location: Employee interviews should be conducted in a office away from the area in which the employee works, if possible. Interviews should never be conducted in a cubicle or an office without a door. If such a place is not available onsite, then pick a location offsite such as a hotel conference room or other professional building.

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