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Published: 2008-03-26

Conducting an Internal Investigation in a Big Case: Avoiding Common Mistakes



INTRODUCTION

An organization confronted with an out-of-the-ordinary allegation of wrongdoing, raised either by an employee or by a third party such as a customer, vendor, or governmental agency, must make prompt and often irrevocable decisions regarding the response to those allegations and the means by which they will be investigated and resolved. This chapter outlines the critical areas to be examined and considered by management representatives investigating and dealing with such issues.

The purpose of an investigation is to gather facts so that an organization can make a credible determination as to what happened in a given situation. If someone is thought to have violated a policy, guideline, or the law, conducting an effective investigation helps the organization reach a conclusion that is based on the most accurate facts available. Having accurate facts should lead to a sound, legal conclusion.

Any organization conducting an investigation must exercise care to avoid the Scylla of a litigable claim for defamation, wrongful termination, or other torts from the suspect employee, and the Charybdis of an alleged statutory or common law violation and emotional distress claims of the complaining individual. The aim of this chapter is to steer an employer on a straight course between this policy rock and legal hard place.

  1. What Is a "Big Case"?
    1. Why Does This Matter?
    2. Does the issue go to the very existence of the corporation, its critical business decisions, its relationships with third parties, such as customers, vendors, employees, and shareholders, or its ability to continue to operate under government licenses or permits? Does the matter concern market share, trade secrets, design deficiencies, or the employer's business reputation? In short, does the allegation create a substantial and immediate risk to the well-being of the organization? A big case is also one that may generate a substantial amount of negative publicity. Additionally, a case takes on great significance if the employer or its officers are alleged to have engaged in criminal conduct.

    3. Nature of Allegations.
    4. Often a case can be characterized as "big" because of the nature of the allegations. For instance, claims that the company is engaged in systematic fraud of customers, a pervasive pattern of unlawful conduct, organization-wide unlawful discrimination, or substantial theft or fraud of company assets, can by their very nature create a "big case." Cases of alleged sexual harassment that implicate company officials offering promotions or raises for sexual favors, for example, can cause a major disturbance in the functioning of the employer's business, thus creating a "big case."

    5. Nature of Those Accused of Wrongdoing.
    6. Are those allegedly involved in the impropriety or the subject of the charges lower-level employees? Or are they the most senior members of management who, in the public eye, are often viewed as interchangeable with the organization? Are those accused actually in a position to have carried out or been engaged in the conduct alleged? Or are the charges so distant in time or responsibility from the accused as to cast doubt on credibility? Has the accused previously violated company policies? How long has the accused been with the company? What is the accused's employment history?

    7. Nature of the Accuser.
    8. The nature of the accuser can often be the first tip to the company as to the potential seriousness of the charges and the evidentiary basis for the allegations being made. Is the person making the claim in a position to know? What is his or her access to company records? What is his or her reputation within the company? Has the accuser previously violated company policy? What is the work history of the accuser?

    9. Nature of the Problem.
    10. What is the complaint about? A violation of employer policies? If so, what has the company done in the past with respect to such violations? Is the violation one of a federal, state, or local law? If so, how does this implicate the company and what types of damages may the employer potentially incur? Who is involved in the case?

    11. Potential Damages.

    What is the bottom-line dollar amount in penalties or damages the company may incur? Will it significantly damage the company's livelihood and undermine its ability to secure credit?

  2. The Initial Contact
    1. Supervisor.
    2. Because the front-line supervisor, who works most closely with the complaining employee or in the department in which the matter allegedly arose, is in the best position to quickly get to the bottom of the matters being raised, he or she may be the first person contacted. By the same token, that supervisor might be directly involved in the misconduct charged or might not be able to be viewed as a credible, independent investigator by the very nature of his or her assigned duties, and may be bypassed by a concerned employee. Also consider the fact that often those closest to the problem become emotionally involved, thus losing their objectivity. In any event, supervisors must be prepared to respond accurately to allegations brought to their attention.

    3. Human Resources.
    4. Often, human resources professionals are the first persons contacted by an employee who is troubled by activity in the workplace or matters involving the company's business. At the same time, these professionals, by virtue of their training and experience, may be in a position to best identify evidence of internal wrongdoing by employees, supervisors, or managers.

    5. Outside Auditor/Lawyer.
    6. Frequently, an employee who is concerned about the conduct of others in the workplace, particularly supervisory or managerial personnel, makes first contact with the company's auditor or outside counsel. Persons in these positions must be prepared to respond confidentially, affirmatively, and promptly to concerns raised by employees or others regarding the company's business.

    7. Government Investigation.

    Perhaps the most troubling initial contact the company can receive regarding potential wrongdoing involves inquiry from a state, local, or federal government investigator. At this point, the employee's concerns or the concerns of someone with whom the company has done business or had contact have matured to the point where outside, professional investigators have become involved. The company will no longer be in a position to "make the rules" regarding the conduct of the investigation or to set its pace or level of inquiry, but must act in a responsive fashion to the outside government agency.

  3. Do You Investigate?
  4. While this question may seem unnecessary, the company must, in each case, evaluate whether the charge allegedly rises to the level that formal investigation is necessary. Often the employee involved simply does not have sufficient information to assess all of the facts relating to his concern, or misperceives actions taken by the company or one of its representatives. While an employer must act vigilantly to ensure that legitimate complaints brought forward by employees are promptly investigated and to look into areas that would lead a reasonable person to make further inquiry, those persons who are likely "first contacts" should be aware that often the response to the initial contact can resolve the matter. This can be done by putting the employee involved in contact with the appropriate official, or otherwise gathering the information that will resolve the matter.

    In an effort to determine whether an investigation should be performed, the employee raising the problematic issue should be instructed to write down his or her concerns. The employer should follow up with a confirmation memo to the employee essentially stating what the employer perceives as the employee's concerns. Pinning down the specific details of the concern is crucial. This will aid in avoiding a misunderstanding of the issues involved.

    In deciding whether to investigate, employers should be mindful of incidents that are likely to be immediately dismissed but should in fact be investigated. For example, while complaints of sexual harassment by a female against her ex-boyfriend/co-worker or by a male against a female or by homosexual employees may not be the traditional type of complaint, they are nonetheless forms of harassment that may lead to legal exposure. Additionally, complaints of threats and violence that may all too easily be dismissed as horseplay or a "flare-up of tempers" may lead to legal liability under theories of negligent hiring or negligent retention, as is more fully explained below. In short, employers should seriously consider the nature of the allegation when determining whether to launch a full-blown investigation.

  5. Actions Pending Outcome of Investigation
  6. If an investigation is to be performed, the employer must determine what, if any, actions should be taken pending the outcome of the investigation. For example, allegations of violence on the part of an employee may justify a suspension of the subject employee depending on the circumstances of the case. The company should consider the health and safety of its employees, the welfare of its property, and its integrity in determining whether interim actions are necessary. On the other hand, the employer should avoid sending the signal that if you raise a complaint you will be punished.

  7. Who Investigates?
    1. Internal.
    2. In determining who will lead an investigation of an employee complaint or other allegation of wrongdoing, an employer must balance two competing interests: (1)the need for a prompt, thorough, and independent investigation and one that is perceived as such, and (2)the need for confidentiality, cost-effectiveness, time efficiency, and control over the investigation. Many complaints or allegations of wrongdoing that make it to the investigatory process can be considered candidates for an internal investigation, provided the company's management structure allows the investigator access to the information needed to assess the allegations of wrongdoing and to do so in a credible manner. Potential investigators include:

      1. supervisor

      2. human resources

      3. in-house counsel

      4. special committee

    3. External.

    An external investigation has the advantage of actual and perceived objectivity and independence, the ability to bring special expertise to bear on the investigatory process, the respect of those who are the subject of the investigation and those who are potential witnesses, and credibility of ultimate determination. Companies can use financial consultants such as auditors and accountants, legal counsel, private investigators working in conjunction with either of the above, or, if necessary, law enforcement or governmental agency personnel. The use of outside counsel and/or auditors may protect the investigation as privileged material. Depending on the situation, this may be a benefit or a detriment. However, the use of external investigatory tools carries with it diminished control as compared to a completely internal investigation and, in most cases, some greater expense. Potential investigators:

    1. auditor

    2. legal counsel

    3. private investigator

    4. police

    5. enforcement agency

    6. fact-finder/mediator

    A consideration in determining who should be appointed as investigator is the level of comfort the employee raising the complaint has with the potential investigator. In other words, does the employee believe the investigator will be objective? The simple way to make this determination is to ask the employee directly. For example, in investigating a case where a woman alleges she was the victim of sexual harassment, consider using at least one female investigator.

    More important, however, is whether the employer believes the investigator will be objective. Far from a rubber stamp for its actions or its decisions, the employer wants an investigator who will scrutinize and leave no stone unturned. In this regard, it is advisable that the company use an external investigator, rather than an internal investigator who may be politically aligned with the company.

  8. Documenting the Investigation
    1. Documenting the Complaint.
    2. The company must clearly understand the precise nature of the complaint. Having the employee document it thoroughly, completely, and promptly assures the company that whatever complaint the employee has, it is fully and accurately brought to the attention of those conducting the investigation and at the same time "locks in" the nature of the complaint should the investigation reveal no basis to the allegations made. Documenting the complaint is also the first test of the credibility of those making the allegation.

    3. Documenting the Evidence.
    4. Documentation is critical not only at the initial complaint or allegation stage but throughout the investigatory process, because many people may and in fact will be involved during the course of the investigation. Thorough and complete documentation will allow continuity of the investigatory process. Further, in the event the allegation or complaint is challenged in a subsequent legal proceeding, documentation will demonstrate the thoroughness, accuracy, and conclusiveness of the investigation process. The key elements of documentation are:

      1. What is alleged?

      2. What is found?

      What the company wants to achieve is an accurate account of the facts. Any notes taken by the investigator should be thorough and objective.

      The investigator should make notes of relevant facts. Facts are what you see and hear; they do not include your interpretations, beliefs, or assumptions about what you are hearing or seeing. Rather than guess at the reasons for an employee's actions, ask the employee the reason(s) for his or her behavior. Observe and record the employee's demeanor/behavior without drawing your own conclusion at this time about why this behavior was occurring.

    5. Document Retention.
    6. During the course of the investigation, the company should take care to ensure that it is complying with its own document retention policy. If a document retention policy does not exist, the investigation may lead to the company's drafting and implementing one.

    7. Privileges.

    The involvement of legal counsel early in the investigative process, whether to conduct the investigation or to advise those involved, is critical to ensure that confidentiality privileges are maintained in conjunction with documents that are produced for investigators or generated by them. Nevertheless, everyone preparing documentary records during an investigation should act on the assumption that everything prepared will be used in an external legal proceeding, and nothing should be contained in those reports that cannot withstand legal scrutiny.

    Employers often prefer to cover sensitive investigations by the attorney-client privilege. This privilege will apply if all of the following elements are present:

    1. a communication;

    2. made in confidence;

    3. to an attorney;

    4. by a client;

    5. for the purpose of seeking or obtaining legal advice.

    The attorney-client privilege is absolute and protects from disclosure the content of the communication but not necessarily the fact the communication was made. An employer that investigates a sexual harassment allegation should anticipate having to waive the privilege if there is subsequent litigation. The employer may have to demonstrate that it promptly and properly investigated the allegations, considered the facts, and took appropriate action. In asserting such a defense, the employer may waive the attorney-client privilege.

  9. Method of Investigation
    1. Interview.
    2. Interviews, not only of the complaining party or the source of the allegations, but also of witnesses and those providing corroboration or refutation to the complaint, are critical. Quite often, the successful investigator has but a single bite at the apple. Therefore, initial interviews must be conducted to elicit complete information at the first opportunity. The investigator should determine if it will be beneficial to order or structure the interview sessions in a particular fashion. For example, should Mr.Smith be interviewed before Ms.Johnson or vice versa? The investigator should also attempt to limit the number of interviews so as not to lose sight of the issue. Only those with relevant information need be interviewed. Regardless of who they are, the interviewees will feel stressed simply by virtue of the surrounding circumstances. Conducting interviews in a coercive manner will only increase their stress level. Most people under stress act defensively, thus hindering the investigator's ability to obtain information.

      The investigator must evaluate the credibility of the witness being interviewed. Such an evaluation can be the difference between a complete and effective investigation and one that may result in legal liability to the employer. The final report drafted by the investigator should include statements of all witnesses. Since this will be instrumental in the employer's decision, the investigator should note which witnesses were credible and reliable and the reasons why, so that the employer does not mistakenly give too much credence to unreliable witnesses who have no real basis for their assertions.

      Equally important is for the investigator to note in her final report what information is attributable to firsthand knowledge of the witness, hearsay from others, or mere gossip and rumor. Obviously, some forms of information are entitled to greater weight than others, and the employer should therefore know the nature of the information.

      Witnesses should be asked to reduce their testimony to writing. The investigator should not reduce it to writing herself, since inaccuracies may occur. Additionally, written statements should be requested only if they will be considered. Requesting written statements that the investigator knows will not be considered may give the impression that the employer is not interested in the truth.

      Factors to be considered are:

      1. Is the interview voluntary or required?

      2. What assistance is provided to the interviewee?

      3. What are the logical sources of corroboration?

      4. Is the witness credible?

    3. Document Review.
    4. Corroboration or refutation of wrongdoing often comes from the employer's own documents. Documents that might be critical to an investigation of a complaint include personnel policies, handbooks, benefit books, personnel files, performance appraisals, expense reports, and information from prior investigations. All too often employers state, "We have no documentation," forgetting about underlying business documents such as sales records, accounting records, invoices, telephone bills, and accounting reports, any of which may corroborate or refute the allegations being made.

      Gaining immediate access to and control of documents, including electronically stored information, is critical to the success of a complete investigation. The passage of time can often allow those interested in destroying, tampering, or modifying records the opportunity to do so. Even if that does not occur, the more time that passes, the greater the chance that someone will perceive document tampering might have taken place. The key elements of a document review are:

      1. security

      2. control

      3. thoroughness

    5. Third Party Interviews.
    6. Often the best if not the only means of corroborating or dispelling the allegations creating a "big case" come from third party interviews - i.e., interviews with people other than the accuser and the accused. Depending on who the third party is, the existing business and legal relationships with the organization, and the relationships previously developed, the third party interview can be critical to the investigation. Such witnesses may include, but are not limited to:

      1. other employees

      2. vendors/customers

      3. competitors

      4. witnesses

      5. government officials

    7. Interview With Employees Represented by a Union.
    8. The investigator must keep in mind that she may not question employees about union-related matters, since this can be the basis of an unfair labor practice charge. Additionally, when a workplace is unionized, an employee is entitled to have a union representative present during any investigatory interview that the employee reasonably believes will result in disciplinary action. It is unclear whether an employee in a non-union workplace is entitled to have a co-employee present during an interview.

    9. Interviewing the Subject.
    10. Obviously, a thorough investigation will include an interview with the subject of the complaint. Certain procedures should be followed during the interview:

      The investigator should identify himself and the purpose of the interview. If the investigator is an attorney, he should inform the interviewee that he represents the employer and that, while the employer intends to keep the communications confidential, the attorney-client privilege belongs to the employer, not the interviewee. Thus, there is no guarantee that the information will not be disclosed. If the interviewee wishes to have counsel present, the interview should stop until he or she retains counsel. Remember: even though the information collected may be privileged, the attorney probably will not be permitted to represent the company in a later suit brought by the interviewee, since the attorney could be a witness in that later action.

      The investigator should be prepared to answer questions from the interviewees, such as, "What will happen to me?" No promises should be made. The interviewee should be informed that no decision about appropriate action can or will be made until the investigation is complete. A good way to communicate this is to hand the interviewee at the start of the interview a prepared written statement explaining the purpose of the interview and the above-mentioned ground rules.

      The investigator should understand the issues before the interview and determine what documents may be relevant in conducting the interview. The investigator should start with broad, general questions and narrow them down as she goes along. Avoid leading questions. Use open-ended questions. The interviewee should be doing most of the talking. Do not ask compound questions. Despite the awkwardness of the situation, it is important for the investigator to ask the tough questions to get all the facts. Asking the tough questions does not require the investigator to be hostile. This will only cause the interviewee to become defensive and refuse to give the necessary information.

      The investigator must remember to avoid statements about others that may be viewed as defamatory.

      If the interviewee refers to documents or other physical evidence, the investigator should instruct the interviewee to refrain from destroying any evidence, and request that the evidence be made available.

    11. Public Records.
    12. An often overlooked means of corroborating or dispelling allegations is public records pertaining to, or filed by, the subject of the allegations. For instance, the criminal record of the accused and accuser may often yield additional information regarding motive, means, and opportunity to engage in the alleged conduct. Documents previously filed by the accused may contradict the accuser's allegations or controvert the defenses asserted by the accused or by third-party witnesses. Consistency between the company's stated response to the allegations and documents it has previously filed with public agencies is a critical issue to be examined during the course of the investigative process.

    13. Role of Top Management.
    14. The approach of senior management can make or break the ultimate success of an investigation. By definition, they will set the tone, not only for the investigators but for those contacted during the course of the review and investigation. Full cooperation of senior management, secured early, can be the most valuable aid in effectively and promptly concluding an investigation. Failure to send the message that the allegations are serious and that resolution is vital can hamper, if not destroy, the investigative process.

      Top management should be fully involved in the investigation. Management is most familiar with company policies and the mechanics and operation of the company. As such, management is in a position to help the investigation proceed and to ensure that it is performed properly. This is not to say that management should interfere with the investigation. Rather, management may be able to provide an independent investigator with relevant information that could affect the investigator's final determination and recommendation. Top management should, therefore:

      1. Set an appropriate tone

      2. Develop leads

      3. Require participation

      4. Create an atmosphere that will cause people to come forward with information

    15. "Whose Lawyer Are You, Anyway?"
    16. During an investigation, there often arise legal issues about the sanctity of information provided not only by the accuser but by those who might be willing, in other circumstances, to provide important information to company attorneys. While pledges of confidentiality may generally be of assistance in gaining complete and thorough information to aid the investigative process, such pledges should be made with great care and after consultation with legal counsel, to avoid the situation where witnesses communicate valuable information that cannot later be used in prosecuting wrongdoers or defending the company's position because of initial confidentiality promises. Privileges that arise in the investigation can belong to the company, the witnesses, or, in some circumstances, outside company counsel or advisors.

    17. Tapes/Transcripts/Statements/Affidavits.
    18. Both state and federal law limit an employer's right to record employee interviews or activities during an investigation. In many states, audio recording, whether of electronic communications or face-to-face discussion, is permitted only with the consent of all parties to the communication. Nevertheless, the use of voluntary tape recordings, stenographic transcripts, written statements, and affidavits are essential, not only to memorialize the results of the interviews and investigative process, but as a means of assessing the willingness of those involved in the investigation to commit to their statements and the information they are providing, and to do so in an unimpeachable manner.

    19. Tag-Team Interviews.
    20. In some cases, the use of two investigators is advantageous. Using two investigators often improves the accuracy and thoroughness of the information collected and might help to rebut charges that may later be brought by the interviewee. This tag-team method of interviewing, however, may not be the most efficient or effective means in all cases. Using only one investigator may be less intimidating and therefore more conducive to gathering information. One investigator is also more cost-effective. The employer should determine whether to use one or two investigators, depending on the circumstances of the case.

    21. Polygraphs.
    22. The federal Employee Polygraph Protection Act places severe restrictions on the use of polygraphs during the course of an investigation. Thus, even if otherwise permitted by state law, the inadmissibility of polygraph evidence, coupled with the potential effect on workforce morale, usually counsels against using polygraphs.

    23. "Private Eyes"/Surveillance.
    24. Often, due to the nature of the accuser's allegations, use of external investigative assistance becomes crucial, whether in the nature of private investigators or surveillance of activity at the workplace or elsewhere. While, as a general principle, observation of public comings and goings of any person, including someone who is the subject of an employer's investigation, is subject to few legal limitations, great care must be taken in selecting and using such surveillance or investigative services to ensure that valuable evidence is not compromised by accusations of invasion of privacy, unlawful entry, trespass, or other wrongful conduct. If you are considering using "spottees" or "in-plant hires," be sure the individuals selected are competent and knowledgeable about the legal issues on surveillance.

    25. Searches of Employee Space on Employer's Premises.
    26. The Fourth Amendment of the United States Constitution and the analogous provision in state constitutions protect people from unreasonable searches and seizures. What most employees do not realize is that, unless the employer is an agency of the federal, state, or local government, the Constitution does not regulate employer conduct. As a result, in considering a search policy, you must first determine if you are governed by constitutional limitations. If so, you must build a number of protections into your policy to ensure that any searches are "reasonable."

      Even though employees may be under the misperception that they are protected by the Fourth Amendment, employees have legitimate concerns about privacy that, if ignored, will lead to poor morale. Even without the Constitution as a basis for protection, private sector employees may raise challenges based on state common law, such as invasion of privacy, false imprisonment, and defamation. A well-thought-out and properly implemented program should withstand all of these types of legal challenges. Employers should consider all of the following before performing a search:

      1. Identify a legitimate business reason for commencing what will appear to some as a harsh overreaction by management.

      2. Communicate to employees in advance about what areas or objects are subject to search. It is important to eliminate from these areas the employees' expectation of privacy.

      3. Conduct all searches in a consistent, non-discriminatory manner.

      4. Search in a way that will protect employees from public embarrassment and humiliation.

      5. Avoid loss of evidence.

      6. Obtain consent from employees.

      7. Do risks outweigh the value?

    27. Expeditious Investigation.

    An investigation is effective only if performed promptly. Sitting on a complaint from an employee or customer may run you right into the lawsuit an investigation is designed to prevent. As explained below, this is particularly true in sexual harassment cases where an essential element of the case is whether and when the employer investigated the complaint. Courts have acknowledged that employers that have immediately sprung into action and taken effective remedial action when confronted with a problem should not be liable.

  10. Concluding the Investigation

The conclusion of the investigation is perhaps its most critical phase, in that the validity of the investigation and the conduct of the corporation will be assessed against the conclusion. Among the issues that must be resolved in any internal investigation are completeness of the process as measured against the allegations made, and confidence in the eyes of those making the allegations that the process has been full, fair, and independent. In addition, the conclusion should be accurate. Actions taken by the company, if found to be compromised, should be corrected. If the investigator concludes that the company did not act wrongfully, there may be a need for some restructuring, to assure that honest but mistaken allegations of wrongdoing do not confront the company in the future. The nature of the final report, its recipients, and its format are driven by the results of the investigation, the seriousness of wrongdoing uncovered, and the individuals involved in the wrongful conduct.

Once the investigation has been concluded, the investigator should submit a final report to the company explaining his or her findings and giving his or her recommendations. The final report and recommendation should not be submitted until the investigator is completely certain all avenues have been exhausted and all stones turned over. Additionally, an objective final report should include all the information gleaned, whether favorable or not. Simply because the investigator reaches one conclusion does not mean that the conclusion is law. The ultimate decisionmaker may have questions about certain information in the report that is contrary to the investigator's conclusion and that may prompt the company to re-open the investigation or take a different course of action from that suggested by the investigator.

The final report could include the following sections and information:

  • Investigation Background
  • Application of Employer Policies
  • Key Factual Findings
  • Conclusion

In any event, the company's ability to prevent wrongdoing in the future, to ensure that serious allegations are promptly brought to the attention of the appropriate officials, and to promote confidence that the company is complying with relevant policies and regulations can be assured only by a conclusion to the process that brings closure to all of the allegations and sets the tone for the direction of the organization going forward.

  1. Determining the Appropriate Action.
  2. Once the investigation is complete, the employer must determine the appropriate course of action, assuming action is necessary. In making this determination, the employer must ask, "What is my goal?" For example, does the employer want to eliminate the problem or simply modify it? The employer must also ask, "How can I best achieve this goal?" For example, should the company suspend the errant employee, demote him, transfer him? Because the factual scenario will always be different, it would be imprudent to have a set course of action for a particular violation. Having a range of potential disciplinary measures is more advisable.

  3. Informing the Accused and the Accuser.
  4. Once a conclusion has been reached, both the employee who was the subject of the investigation and the employee raising the issue should be notified of the steps that were taken and the conclusions reached. Both persons may be advised of the action that will be taken, whether that involves discipline to be imposed on the accused employee or a reprimand of the employee who has raised a baseless claim. No need exists for any other employees to be made aware of the outcome of the investigation. This may lead to a claim for defamation by the subject employee.

  5. Potential Legal Pitfalls if the Investigation Is Performed Improperly.
  6. During an investigation of a potentially big case, the employer must jealously guard against incurring additional liability through its methods of investigation.

    1. Invasion of Privacy.
    2. The employer must be careful that only those with a need to know are informed of negative investigation results. Most states recognize a cause of action for invasion of privacy based on publicity that unreasonably places another in a false light before the public. An employee cannot complain when her job performance is examined and evaluated by her superiors. But if this information is divulged to those without a need to know and the result turns out to be false, a court may find that the results of the investigation received enough publicity to place the employee in a false light.

    3. Defamation.
    4. Defamation is the unprivileged publication of false statements that naturally and proximately result in injury to another. An employer has a qualified privilege to publish what may otherwise be considered defamatory matters in statements concerning an employee's conduct or performance at work. Notwithstanding this, in order to ensure against incurring liability, employers should make every effort to avoid using defamatory terms in their investigatory reports. For example, it is more prudent to say that an employee has failed to comply with a particular employment policy than that the employee is a thief or sexual harasser. Additionally, the employer should not disseminate those reports to those without a need to know.

    5. Intentional Infliction of Emotional Distress.
    6. Claims that an employer has inflicted emotional distress upon the accused will generally fail. With rare exception, employer disciplinary actions, including terminations, have not been sufficient to give rise to liability for infliction of emotional distress. To completely avoid incurring an unlikely emotional distress claim, however, the investigator and employer should proceed expeditiously in a non-harassing and non-threatening manner. Avoid dragging out the investigation or giving witnesses the third degree when interviewing them.

    7. False Imprisonment.
    8. Never physically restrain or detain an employee who is being interviewed against his will. An employee selected for interviewing should be verbally requested to cooperate in the investigation or search. If he refuses, he should be reminded of the potential disciplinary consequences. If he still refuses, allow him to leave. Management should then take whatever action is appropriate. Detaining someone against his will gives rise to a claim of false imprisonment.

    9. Sexual Harassment.
    10. While the foregoing causes of action may result from mistakes in performing an investigation, sexual harassment is a cause of action which may arise from the failure to perform an investigation at all. It is imperative that every employer have a policy against sexual harassment, procedures for the reporting of such harassment, and a policy of immediately launching an investigation as outlined above in order to avoid liability. Liability for sexual harassment will be found where the employer knew or should have known of the harassment and failed to take prompt remedial action. Conversely, prompt remedial action by the employer may relieve it of liability for sexual harassment committed by one of its employees.

    11. Negligent Hiring/Retention.
    12. An employer may be negligent if it knew or should have known that the employee had a propensity for violence and employment by the company could create a situation where the violence would harm a third person. This type of claim could arise, as with a sexual harassment claim, where an employer fails to investigate or take action on a charge of violence by an employee made by a co-employee or customer.

    13. Negligent Investigation.

If an employer terminates an employee after a deficient investigation into allegations against that employee, the employee may have a cause of action for negligent investigation if she (a)has a true employment contract that permits termination only for "just cause," or (b)the state, such as Montana, recognizes a covenant of good faith and fair dealing in at-will employment situations. Generally speaking, such a claim is unlikely, since most states recognize the at-will employment doctrine unencumbered by covenants of good faith and fair dealing, and since most employers do not provide their employees with employment contracts. Moreover, with the exception of a few states such as Michigan and Montana, most jurisdictions that have been presented with the issue have uniformly rejected such claims.

Conclusion

A prompt and thorough internal investigation can defuse a potentially explosive situation, send a strong message that breaches of policy or law will not be tolerated, and avoid liability at a later stage. The result should be a sound, legal conclusion based on accurate facts.