Issues and Facts Presented
The Company has received two anonymous discrimination complaints by way of the company's human resources hotline from callers alleging that management has been actively discriminating against African-American employees (the “Complaints”). Each Complaint states a number of facts, which if supported, could lead to a finding that the Company has a pattern and practice of discrimination, in violation of both federal and state law. You have requested us to review the Complaints and provide a thorough analysis of the appropriate procedure and best practice for conducting an internal investigation in anticipation of any potential litigation of the Complaints under both state and federal law. This memorandum will review the general considerations before undertaking the investigation, provide a general plan for the investigation and highlight any potential legal considerations.
General Considerations for Conducting an Internal Investigation
When developing an investigation strategy for these complaints, the Company should consider the following: (1) when to conduct the investigation, (2) who should conduct the investigation, (3) the scope of the investigation, (4) developing an investigation report, (5) what action to take following the conclusion of the investigation.
Internal investigations should always be conducted in response to actual or credible allegations of wrongdoing have been made by an employee. Investigations should commence as soon as a triggering event occurs to allow for a thorough inquiry and prevent further exposure to damages under Title VII. Internal investigations should be conducted through outside counsel to help establish and preserve a claim of privilege over the company's process in evaluating critical facts. If in-house counsel is used, it is important that they are familiar with all applicable laws and have the investigative experience necessary to conduct the investigation. In addition, the Company should carefully consider any issue which might prevent in-house counsel from conducting an objective investigation or cause the attorney-client privilege to be lost, including: (i) whether the in-house counsel played a role in the underlying activity at issue in the investigation, and/or (ii) has a role in the Company that may cause the lines between business advice and legal advice to be blurred.
Retaining outside counsel to conduct the investigation may give the investigation greater credibility and provide a greater likelihood that the investigation will be privileged because the line between business and legal advice may be less blurred.
It is also important to determine whom the investigator will report. Moving supervision of the investigation away from company management gives further credibility to the objectivity of the investigation; and reduces the risk of any apparent conflict in conducting the investigation.
When retaining outside counsel or investigators, they should be advised: who the client is; and to whom they must report. Throughout the investigation, investigators must keep the designated supervising individual, department or committee apprised of: (i) the investigation plan; (ii) the scope of the investigation; and (iii) all relevant developments. Consider designating one of the following to supervise the investigation and receive the investigator's report:
- general counsel or another in-house counsel;
- the audit committee of the board of directors; or
- a special committee of the board of directors formed for this purpose.
Establishing and preserving the Attorney-Client privilege and work product protection is a critical consideration. Communication with counsel, written or oral, are privileged ONLY if they are: (i) designated confidential; and (ii) made for the purpose of obtaining legal advice. Increase the likelihood that information collected during an investigation remains privileged by:
- Requesting that all employees refrain from interfering with the investigation and use their best judgment and discretion when discussing the investigation with others;
- Restricting anyone outside the attorney-client relationship from having access to this information;
- Carefully handling all documents that are created and collected so that they are not shared or disclosed to anyone outside of the investigation; and
- Clearly marking all privileged and work product-protected documents created during the investigation as “Attorney-Client Privileged Communication” or “Work Product.”
- Make communications in confidence and do not disseminate them beyond those persons who need to know their contents.
When interviewing employees as part of the investigation, it is important to give a “Upjohn Warning” at the start of all employee interviews and discussions to ensure that at every meeting the employee understands that:
- the attorney represents the company and not the individual;
- the conversation is protected by the attorney-client privilege;
- the attorney-client privilege belongs to the company and not the individual;
- only the company can waive the attorney-client privilege; and
- there is a real possibility the Company may choose to waive the attorney-client privilege
Further, when communicating with former employees because some courts may not extend the privilege to counsel's communications with former employees regarding facts that occurred during their employment at the company.
Proposed Investigation Plan
The Company's proposed investigation plan is set forth in the Company's In-house counsel investigation plan. Please note that during the interview process, one of the parties will be designated as a note taker, to take accurate notes. The individual taking notes should: (i) make a verbatim notation at the top of the interview notes of the Upjohn instruction that was given to allow future confirmation of precisely what was told to the employee; and (ii) take accurate, but not necessarily verbatim, notes of the rest of the interview. The more the notes look like a transcript and less like the mental impressions of the person taking the notes, the more likely a court may find the notes are not protected by attorney work product.
When reporting the findings of the report to to the designated committee or in-house counsel, consider whether such report should be given orally as opposed to in writing. It is common for the report to be written and provided to the designated committee or in-house counsel, often with copies of the report not leaving the room. However, because an inadvertent waiver of the attorney-client privilege is always a possibility, some investigators prefer to give the report orally.
In determining whether or not to provide hard copies of the final report to the designated committee or in-house counsel, consider that:
- written reports reduce the potential for debate over what was reported, but can provide a guide for government investigators or private plaintiffs if a waiver occurs;
- oral reports encourage an open discussion, but the finality of the report may be in question; and
- oral reports do not guarantee, if a waiver occurs, that the information will remain confidential (discovery regarding the oral report could occur through conducting interviews or depositions of the individuals receiving and giving the report).
- Determine Whether to Report the Conduct to the Government
Under the facts at hand and because the Company is a private employer, reporting the discovered misconduct to the government is not required by law. Consider that self-reporting is generally looked on favorably by regulators considering any consequences for the Company. In using its discretion to determine whether to report the misconduct to the government, the Company should:
- discuss whether to report the discovered misconduct to the board of directors and possibly outside counsel experienced in these matters;
- make the decision promptly after learning of the results of an internal investigation;
- have a plan in place to remediate the behavior; and
- improve any faulty internal controls discovered during the investigation.
2. Determine Whether to Take Corrective Action Against the Wrongdoer and What Action to Take
Review the Company's policies for guidance on determining whether to take corrective action. Consider that enforcement of Company policies helps ensure future compliance, but overlooking illegal or improper behavior may:
- send the message that the Company does not take compliance seriously;
- increase the risk of future problems; and
- impact how the government determines its course of action.
- At the conclusion of the investigation, be sure to obtain a commitment from Company employees to provide additional cooperation in the future, in the event that there is a government investigation.
Due to the seriousness of the alleged Complaints, the Company should adhere to the best practices specified above in creating and effective an internal investigation of the Complaints in anticipation of litigation. Immediate action should be taken to review the current policies and procedures in place to prevent further claims. In addition, terminations of any complaining employee at this point could be seen as retaliatory and therefore all decisions made in regard to terminations should undergo heighten scrutiny.