The Importance of Effective Internal Investigations

August 3, 2016 - 9 minutes read

You’re a busy business owner, and you’ve got so many things in the air that you always tell your employees not to bother you with the small stuff.  But today, you heard of a three things that stopped you dead in your tracks:  First, you just learned that one of your many employees angrily walked off the job last week after repeatedly telling her co-worker to stop harassing her about her appearance and acting like a pig.  And if that weren’t enough, you also just heard from your bookkeeper that she suspects that one of your key employees is stealing money from the company.  Finally, to top it all off, your assistant just received an anonymous phone call reporting that one of your most prized foremen has been underreporting workplace accidents to your state regulator for several years.  When it rains, it pours.  These are just some of the common scenarios faced by hundreds (if not thousands) of companies each year.  What do they all have in common?  They all are common scenarios that will spur an internal investigation to determine if the reports are true so that the company may can take appropriate action.

What is an Internal Investigation?

Internal investigations are a key component of an effective risk management program. Companies use internal investigations to respond to reports of wrongdoing in the workplace. An effective investigation demonstrates a serious, credible investigation of the reported wrongdoing. It also shows an appropriate basis for the chosen course of action.

Typically, an independent investigator will conduct a confidential, thorough investigation of the facts and circumstances surrounding the alleged wrongdoing. This includes prompt interviews of witnesses and careful reviews of documentary evidence. After evaluating the facts developed, the investigator will report the findings to the company. The report also evaluates whether any laws or company policies were violated so that the company may respond in appropriate measure.

In sum, the purpose of an internal investigation is to uncover the truth about alleged misconduct in the workplace so that appropriate action may be taken.

When Do I Have a Duty to Investigate?

Many federal and state laws impose legal duties on employers to investigate employee-related complaints concerning certain key subject-matter.  The most common instances concern (i) discrimination and harassment; (ii) workplace safety and accidents; (iii) whistleblower issues and claims of retaliation; (iv) and instances of theft, embezzlement or erroneous financial reporting.  In many cases, the duty to investigate is mandatory

It is also common for a company to launch an investigation in response to threats of litigation and settlement demands, or to determine whether good cause exists to merit employee discipline, demotion or termination under relevant employment agreements.

The Benefits of Effective Workplace Investigations

There are several reasons why businesses should conduct effective workplace investigations. Foremost, an effective investigation helps ensure compliance with applicable laws and company policies. It also helps managers and directors resolve the underlying issue. Companies that are quick to intervene in problem matters will avoid future headaches. Moreover, an effective investigation preempts later claims that management and key decision-makers were complicit in the alleged wrongdoing or otherwise turned a blind eye to the problem. It also can serve as a chronicle of when key facts became known to management and key decision-makers within a large organization.

When an investigation reveals credible evidence of wrongdoing, the company can fix the problem. This may include anything from advising and disciplining employees, counseling managers, to revising training modules and business rules. Effective internal investigations ensure that candor and compliance are key components of corporate culture.

Business culture often differentiates strong companies from weak ones. Strong organizations have clearly-defined policies and procedures, along with rule-abiding employees. This is of paramount importance in industries with large headcount and frequent occupational hazards. Employers who confront workplace issues create a stronger compliance environments and reward conscientious employees who aren’t afraid to raise issues to management. This, in turn, prevents minor issues from becoming big ones and improves operations.

Additionally, a strong compliance culture helps companies preempt negative publicity and cut litigation risk. For instance, an effective investigation limits liability for certain claims of hostile work environment under Title VII and its state counterpart.  See, e.g., Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998); Faragher v. City of Boca Raton, 524 U.S. 775 (1998).

Consequences of Failing to Conduct Prompt and Effective Investigations

Companies that ignore or minimize workplace complaints are not doing themselves any favors. If anything, they are enhancing the risk of future legal troubles. If left unfettered, problem employees will become even bigger-problem employees down the road, and, in the worst case, failure to conduct an effective investigation may show the following:  

• Management failed to prevent harassment or discrimination from occurring or otherwise condoned the conduct ƒat issue;

• Management ratified the conduct by “looking the other way” and using kid gloves; and

• Malice justifying an award of punitive damages as shown by management’s decision to ignore the problem or conduct a toothless investigation.

Why Would My Company Use an Outside Law Firm to Conduct an Internal Investigation?

Many businesses entrust their in-house legal team or human resources departments with control over internal investigations. But there are many reasons why many businesses opt to hire outside counsel instead. This is common when the anticipated investigator is subordinate to the target of the investigation or has a personal relationship with the target. Either scenario impairs the independence of the investigation, which causes many organizations to hire an outsider for the task.

This is especially true for outside counsel who have never before represented the company. They are often perceived as more independent than persons with prior affiliations. This independence is often a benefit in high-stakes criminal matters, particularly if the company decides to release the details or results of the investigation to the appropriate authorities. If performed correctly, an internal investigation and its findings may remain cloaked the attorney client privilege. Still, some companies choose to waive that privilege to avoid prosecution or for cooperation-credit.

Hiring the Moya Law Firm For Your Investigation

If you are a business owner in need of advice and counsel on how to conduct an internal investigation, or if you’ve decided that you would like to hire an independent law firm to investigate reported wrongdoing, we urge you to contact us to discuss your matter and inquire about the services we can provide.  We have worked on several investigations (large and small) throughout our careers, and we are adept at how to conduct a quality, cost-effective investigation with minimal intrusion on employees and company operations.