The Seven Steps of Effective Workplace Investigations (with Sample Questions) Margaret J. Grover and Lauren S. Antonino

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1 The Seven Steps of Effective Workplace Investigations (with Sample Questions) Margaret J. Grover and Lauren S. Antonino Conducting a workplace investigation poorly can do more harm than not conducting one at all. For the careful investigator, a systematic and pragmatic plan for the investigation is a must. Margaret J. Grover is a partner in the San Francisco office of Fox and Grove, Chartered. Ms. Grover serves on the Board of Directors of the Bar Association of San Francisco and is a Vice Chair of the ABA s Tort and Insurance Practice Section s Employer-Employee Relations Committee. Her practice focuses on employment law matters. Lauren S. Antonino is a shareholder of Meadows, Ichter & Trigg, P.C. in Atlanta. Ms. Antonino s practice concentrates on commercial litigation, products liability and employment law. Both Ms. Grover and Ms. Antonino thank Matthew B. Ames of Meadows, Ichter & Trigg for his assistance in writing this article. A WIDE VARIETY of workplace occurrences may suggest the need for an employee investigation. An employee may have muttered a racial or religious epithet within earshot of another. A manager may be in the habit of flying into rages and subjecting his subordinates to strings of profanity or threatening physical conduct. A deliveryperson or courier may be a little too inclined to hang around the receptionist s desk telling dirty jokes. A disgruntled worker may have a bit too much of an edge in her voice when she threatens to get even with her supervisor or other co-workers. A few dollars too many may be missing from the petty cash drawer, or a few expense vouchers may seem a bit fishy. Or a competitor may seem to have suddenly learned an awful lot about the client s business, and one of the client s employees may have a few friends who work for the competitor. Although different procedures may be appropriate for different situations, there are many common considerations and approaches that can be useful in conducting an employee investigation. This article presents an example of a pragmatic and systematic approach that can help an employer to reach fair and defensible decisions regarding its employees.

2 The following steps will enable the employer to plan and carry out an effective, impartial investigation and will go a long way toward demonstrating the reasonableness of the employer s ultimate decision: Determine if an investigation is necessary; Select the appropriate investigator(s); Review and analyze the available documents and other tangible evidence; Conduct interviews; Synthesize information and reach conclusions; Report results; and Determine what, if any, action is necessary or appropriate. A step-by-step approach will enhance the likelihood that the employer s determination will be based upon all the evidence and will provide all interested parties the ability to present their perspectives. This is both a good business practice and good preventive law. Following these or similar procedures can be compelling evidence when defending against the potential claims that a disciplined or terminated employee may raise later. STEP 1: DETERMINE WHETHER TO INVESTIGATE The first step is to determine if an investigation should be done under applicable law or a contractual obligation. Investigations may be mandated by law or by concerns of future liability. In some cases, however, a complaint or suspicion will not warrant a formal employee investigation. Required Investigations Federal law, and the law of several states, requires the employer to investigate: Complaints of prohibited harassment, discrimination, or retaliation; Potential workplace violence; Termination if state law permits termination only for cause ; and (As a practical matter) if the investigation is required by contract. Harassment, Discrimination, or Retaliation The employer must investigate complaints of prohibited harassment, discrimination, or retaliation in the workplace. See, e.g., Burlington Industries Inc. v. Ellerth, 524 U.S. 742, (1998); Faragher v. City of Boca Raton, 524 U.S. 775, (1998); Perry v. Harris Chernin, Inc., 126 F.3d 1010, 1013 (7th Cir. 1997); West v. Philadelphia Electric Co., 45 F.3d 744, 753 (3d Cir. 1995). The duty to investigate arises from the employer s obligation to exercise reasonable care to prevent and correct promptly unlawful discrimination or harassment. See, e.g., Ellerth, 524 U.S. at Thus, an employer s duty to investigate may arise even when the complaining party expressly states that she or he does not want the allegations investigated. In addition, the employer should not wait for a

3 complaint. The obligation to investigate will arise whenever the employer observes acts or statements that suggest prohibited activity. Id. Potential Workplace Violence An employer may also be obligated to investigate and deter potential workplace violence. The Federal Occupational Safety and Health Act and its state counterparts generally require an employer to provide a safe workplace. See, e.g., 29 U.S.C. 654(a)(1). This general requirement may include an obligation to take all reasonable steps to protect its employees in the workplace, including adopting policies and procedures to create a safe and healthful workplace, and to investigate threats of unsafe conduct, including workplace violence. Termination in For Cause States An employer may also be required to investigate the acts underlying its decision to terminate an employee in any state in which termination of employees may only be for cause. As Justice Joyce Kennard of the California Supreme Court recognized, If credible allegations of serious misconduct are made against an employee the employer must investigate the allegations and determine their truth. The employer s determination of the truth of the allegations will often require resolution of close factual questions involving difficult evaluations of witness credibility and hard choices among conflicting inferences. Cotran v. Rollins Hudig Hall International, Inc., 948 P.2d 412, 428 (Cal. 1997) (concurring and dissenting) (construing an employment contract that required cause for termination). In fact, the California court has held that the conducting of an appropriate investigation may insulate an employer from liability from a wrongful termination claim, even if the discharged employee may later prove that he or she did not in fact commit the wrongful conduct of which he was accused. Under this view, the proper inquiry is not, Did the employee in fact commit the act leading to the dismissal? Rather, [i]t is Was the factual basis on which the employer concluded a dischargeable act had been committed reached honestly, after an appropriate investigation and for reasons that are not arbitrary or pretextual? Id. at Under Cotran, an appropriate investigation of the acts leading to discharge is critical to establish that the employer had good cause for the termination. Conducting an investigation also assists the employer in making its proof. In some jurisdictions, if a discharged employee sues her former employer for breach of a for cause employment contract, the employer maintains the burden of showing that the alleged misconduct justifying the termination actually occurred. See, e.g., Touissaint v. Blue Cross & Blue Shield of Michigan, 292 N.W.2d 880, 896 (Mich. 1980) ( Where the employer claims that the employee was discharged

4 for specific misconduct the question is one of fact for the jury: did the employee do what the employer said he did ). Thus, in these jurisdictions, an employer may not be able to avoid liability if it terminates a for cause employee under an honest but mistaken belief that the employee engaged in wrongdoing. Contractual Obligations A formal investigation, however, is probably not required in an at will state, so long as the termination is not based on a discriminatory or otherwise actionable reason. An investigation may nonetheless be prudent if an employee in an at will state has secured a for cause provision in a contract which carves him or her out of the general rule. Because not all states follow the rules set forth in Cotran, supra, conducting such an investigation will not necessarily insulate an employer who ultimately makes an erroneous decision. In Southern Co. v. Hamburg, 470 S.E. 2d 467 (1996), for example, the plaintiff recovered under his breach of contract claim because he was able to prove that he had not engaged in the wrongdoing that had been alleged. In an appropriate circumstance, however, the conducting of an investigation may at least insulate an employer who erroneously, but mistakenly and in good faith, terminated an employee under a for cause provision from a finding that the employer acted in bad faith. In Georgia, the wrongful termination of an employee who had a for cause contract can result in the paying of the employee s attorney s fees under Ga. Code Ann if the employer is held to have acted in bad faith. Finally, although employment agreements frequently state that they do not form binding contracts, a practical duty, albeit not necessarily a legal one, may arise if an employer states that it will investigate under certain circumstances. If an employer establishes a policy, it would be well served in making sure that the policy is followed in the appropriate instances or that there is a non-pretextual, and preferably documented, reason for not following the policy s own procedures. Otherwise, the employer will surely see its failure to follow its own procedures used against it by the employee s counsel. Potential Liability for Failure To Investigate Tort theories of negligent retention or negligent hiring may be successful against an employer who has information regarding an employee s potential unfitness, but fails to investigate. For example, courts have imposed liability against an employer for failing to investigate, discharge, or reassign an employee after becoming aware that the employee may be violent or unfit. See, e.g., Yunker v. Honeywell, Inc., 496 N.W.2d 419 (Minn. Ct. App. 1993) and Alpharetta First United Methodist Church v. Stewart, 472 S.E.2d 532 (Ga. Ct. App.1996). Presumably, not every allegation of unfitness would give rise to a duty to investigate. Instead, the employer should evaluate the reasonably foreseeable risks that could arise from the particular alleged

5 unfitness. A concern that the employee was operating vehicles or machinery under the influence of alcohol or other chemical substance should be investigated because of the inherent risks. In contrast, an employee s inability to understand and operate computer software used for tracking orders, shipments, and deliveries may render the employee unfit for a position in the company s shipping department. However, because the particular failure does not place the employee or others at risk, the employer would not necessarily have an obligation to investigate its concerns. Optional Investigations The employer may, but need not, investigate other types of suspicions or complaints. In some circumstances, the risks of liability arising from an investigation may outweigh the potential benefits of an investigation. For example, suspicions of petty theft by an employee who has tendered a voluntary resignation may be a cost of doing business the employer is willing to absorb, given the difficulty proving the charges, the likelihood that any wrongful act will stop, and the risk of a defamation claim by the employee. Post-Termination Investigations Some employers frequently conduct post-termination investigations, particularly when the employee was disgruntled or has indicated that litigation will ensue. The threat of litigation is especially acute where the employee is a member of a protected class under Title VII, the ADEA, or the ADA. In these situations, the employer may attempt to discover evidence of resumé fraud or other misconduct to minimize the amount that the employee might otherwise be entitled to recover. See McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995) (holding that reinstatement and front pay were not available remedies to ADEA plaintiff in light of after acquired-evidence of plaintiff s misconduct which demonstrated that she was unlikely to remain employed in the future for non-actionable reasons). STEP 2: SELECTING THE INVESTIGATIVE TEAM Selecting the appropriate investigator or investigative team is key to an effective, appropriate investigation. No one person will be effective in all types of investigations. The investigator s background and training should be appropriate to the type of investigation being conducted. Other factors that should be considered in selecting an investigator are: The relative authority of the person bringing the complaint and the person against whom the complaint is brought; The potential impact of the alleged acts on the business; Potential public relations issues; and, Perceptions of bias. Investigators can come from within the corporation, such as a human resources representative, a member of management, or an attorney from the in-house legal