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Investigating
Employee Complaints
(last updated February 2000)
When someone needs to have assets
tracked or a person followed, they may call a licensed, private
investigator. But when an employer is wondering how to investigate
an employee’s complaint of sexual harassment, race discrimination
or some form of employee misconduct, whom should they call?
Most private investigators do not understand the sensitive
legal issues involved in handling a situation that could result
in litigation. Instead, employers and their attorneys will
often engage an independent human resources (HR) consultant
to investigate a workplace complaint. While such consultants
may have the expertise necessary to do an excellent job, there
may be some hidden legal problems.
Private Investigator’s Act: The
California Department of Consumer
Affairs (DCA) requires that
anyone who investigates alleged
misconduct or makes determinations
of credibility for the benefit
of an employer must obtain
a private investigator’s license.
The Act does not apply to investigations
conducted by a bona fide employee
of the employer or to an attorney
at law.
Consultant-Led Investigation: Although
HR consultants who conduct
investigations without a private
investigator’s license may
be fined by the DCA, the law
does not impose any specific
penalty on the employer who
hires the unlicensed investigator.
Of potentially greater significance,
however, an employee fired
for misconduct may be able
to challenge the validity of
a harassment or discrimination
investigation that was not
conducted by a legally qualified
investigator. This makes any
actions or decisions by the
employer based on the investigation
vulnerable to attack.
Attorney-Led Investigation: The
employer could avoid this problem
by having a licensed attorney
conduct the investigation.
However, even assuming that
the attorney is sufficiently
comfortable with employment
law issues to do this, the
issue of attorney-client privilege
is an important concern. If
the situation is ever the subject
of litigation, the employer
will almost certainly need
to present all or part of the
investigation as evidence at
trial. If the investigating
attorney is also advising the
employer as to what actions
to take as a result of the
investigation, the attorney
may also be forced to testify
about privileged matters. Even
if the privileged matters could
be compartmentalized, as a
witness in the case, the attorney
would be precluded from representing
the employer at trial.
Fair Credit Reporting Act: The
federal Fair Credit Reporting
Act (15 U.S.C. §§ 1681 et seq.)
requires disclosures to employees
before an employer can obtain
or use a consumer report or
an investigative consumer report
obtained through the use of
a third party.
New Twist: In 1999,
the Federal Trade Commission
published an opinion letter
concluding that a sexual harassment
investigation conducted by
a third party is an investigative
consumer report, and compliance
with the Act is required. The
opinion says that the report
must be provided to the employee
in unredacted form if it is
used in any employment decisions.
Several other notice and disclosure
requirements would also apply,
including a requirement to
inform the subject of the investigation
of the intent to gather information.
The employer must also obtain
the employee’s advance authorization
to gather the information.
Applicability to California
employers: This is an opinion
of the FTC’s counsel, and is
not binding on the FTC. The
letter’s applicability to California
employers is uncertain. However,
such an application of the
Fair Credit Reporting Act would
give rise to numerous concerns
that could hamper legitimate
investigations (e.g., workplace
violence risk assessment; undercover
theft investigations; chilling
effect on witness cooperation;
intimidating harassment victims
from complaining).
So, what should an employer
do if it needs to conduct an
investigation? There are
a few choices.
1. Find a licensed investigator who has specific expertise
in workplace harassment and discrimination issues;
2. Identify an employee who could conduct the investigation
(with the close and privileged advice of qualified employment
counsel); or
3. Find an independent employment attorney who can conduct
the investigation with the understanding that his/her activities
may be subject to litigation discovery.
Employers should also consider having all employees sign an
authorization to investigate any issues of misconduct; this
could be done in a handbook receipt. Any third party used to
conduct an investigation should be familiar with the FCRA requirements.
Since the employee being investigated may be entitled to receive
a copy of the third-party’s report, the investigator should
be careful about how much detail is included. The amount of
information in the report should balance the ability of the
accused person to meaningfully respond to any accusations with
the need to protect witnesses against intimidation. The investigator
must know how to navigate in an area that presents a legal
minefield. |
| This article is a general
overview of the subject matter at the date that it was last
updated, and is not meant to provide professional opinions
regarding any specific case, matter, or set of facts, or
to substitute for the professional advice of Waag and Co.
Instead, please contact Susan S. Waag, Esq. for additional
information. |
