March 2009 • Vol. 29 No. 3 | An E-Publication of the Los Angeles County Bar Association

Gimme 5: What Every Lawyer Should Know about Conducting Effective Internal Investigations

By Ann K. Calfas, formerly Senior Vice President, Employment Litigation with Fox Entertainment Group, now an independent investigator and fact finder specializing in employment claims. She can be reached at anncalfas@aol.com.

The number of employment claims is expected to skyrocket with more massive and frequent lay-offs, the rise in whistleblowers, and corners being cut by struggling enterprises. And since the failure to conduct a sufficient investigation can create an independent cause of action against the company, the need for effective internal investigations following these claims has never been more important. In some circumstances, a well-run internal investigation can provide a complete defense, and in most circumstances, it can drastically limit liability. Accordingly, practitioners advising corporate clients should keep the following in mind when considering an internal investigation. 

1. Create the proper framework.
Before any investigation commences, employers should have up-to-date policies and procedures in place. Codes of conduct, antiharassment, discrimination and retaliation policies, electronic communications policies, and the like should be regularly reviewed to ensure that they reflect current legal and technological developments. For example, a company may have a policy explicitly advising employees that e-mail sent or received on company computers can be monitored, but it may omit any mention of Internet usage or instant messages. This type of information is often crucial, and issues regarding potential privacy violations are distracting and unnecessary. Companies should take care that their policies are regularly distributed to employees (and independent contractors if appropriate), that employees are trained on them, and that records are maintained reflecting these actions. Company policy should always mandate that an employee’s truthful and complete participation in all internal investigations is a condition of employment.

2. Pick the right investigator.
An investigator should be skilled at questioning, experienced in and knowledgeable about the subject matter being investigated, and able to competently testify. Above all, an investigator should be neutral. Selecting an investigator with arguable bias or a conflict of interest is no better, and may even be worse, than selecting no investigator at all. The general public (i.e., the jury pool) has no problem believing that companies are willing to whitewash problems with a sham investigation. Indeed, given the widespread perception that corporate leaders bear significant blame for the current economic crisis, jurors may be more skeptical than ever about corporate ethics. One person who should not conduct the investigation is an attorney who is going to represent the company in any ensuing legal action. Being an advocate for the company is not the same as being a neutral investigator. Further, an attorney/investigator playing both roles will face privilege and work product issues that can harm the client after the investigation is completed and litigation begins.

3. Engage in investigatory due process.
A successful internal investigation must have integrity; no short cuts are allowed. Under the Fair Employment and Housing Act and California case law, employment-related investigations must be prompt, thorough, and fair to those being investigated. Companies can undermine the entire process just by waiting too long to commence an investigation of alleged harassment or discrimination. If at all possible, an initial interview of a complainant should take place within a day of the complaint being made. The investigator should interview all witnesses with pertinent information, ask open-ended questions, and review all relevant documents. An employee being accused of misconduct should always be confronted with the allegations and given a fair opportunity to present his or her side of the story. A process should be put in place for witnesses to provide follow-up information, and witnesses should always be advised of a company’s policy against retaliation. Ideally, a human resources contact should be provided to witnesses should any concerns of retaliation arise. It is also essential to communicate with the complainant at the conclusion of an investigation. While opinions differ as to the amount of information to be provided, at a minimum it should be conveyed that the investigation has been completed and that appropriate steps have been taken to address the complainant’s concerns.

4. Approach documentation and privilege issues strategically.
Before commencing an investigation, a calculated approach to documentation should be mapped out. A threshold issue is whether the investigation may be used in potential litigation, for example, as a defense in an unlawful harassment suit or to mitigate charges of corporate malfeasance. If so, the investigator (especially an attorney) should understand that any privilege or work product protection will likely be waived as to documents such as interview notes, summaries, and findings. These documents should therefore be created with an eye toward disclosure. Legal opinions such as “This conduct constituted harassment” or “The employee engaged in fraud” have no place in investigation documents. Those conclusions are for judges and juries only, and may constitute damaging admissions. An investigator should be focused exclusively on facts and, if applicable, whether the conduct at issue violated company policy. If the investigation is not going to be used either in raising or defending claims, all the usual steps should be taken to maintain attorney-client privilege and work product protections.

5. Avoid traps for the unwary.
Even a skilled investigator can fall prey to one of the many traps for the unwary in this area. Among those to consider: The Fair Credit and Reporting Act and its California counterpart dramatically limit a company’s right to collect background information on employees or third parties even when nothing resembling a traditional credit report is at issue. Investigators should be carefully counseled on these parameters so that digging around in a database does not turn into a violation of federal law. Even the most reputable companies have at one time or another hired private investigators that have used questionable (or worse) techniques in the name of zealous investigation. While valuable information may be gathered through such methods, the price of crossing the legal and/or ethical line during an investigation is always too high.

In addition to such obvious no-no’s as bugging and wiretapping, the use of physical intimidation during the interview process can lead to a claim of false imprisonment. Interviewees should never be made to feel that their movements or ability to leave an interview room have been curtailed.

It is also critical to immediately take steps to preserve relevant documents once an investigation starts. Key documents could otherwise be destroyed pursuant to regular document retention cycles. Not only would that eliminate pertinent evidence, but it could also lead to claims of spoliation or sanctions down the road. In short, both the fact finder and the fact-finding process must always be beyond reproach. 

Find past Gimme 5 articles here. 




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