Navigating Employment Investigations: What Are the Key Steps?

Chris Fisher: Welcome to our Employment and Benefits Unpacked series, where we dive into the many employment benefits and mobility issues facing employers around the world. Each episode is hosted by a different Mayer Brown lawyer from our Global Employment and Benefits Group, and we hope to offer fresh perspectives and insights for employers, HR professionals, and in-house counsel. I'm Chris Fisher, head of Mayer Brown's UK Employment and Benefits Group, and I'm delighted to be joined today by Hagen Köckeritz, head of the Employment and Benefits Group in Germany. Hagen, thank you for joining me.

Hagen Köckeritz:  Thank you, Chris. Pleasure to be here.

Chris Fisher: So in today's episode, we're going to be unpacking the topic of employment investigations. In recent years, internal investigations into employee complaints and employee conduct have been on the rise across a variety of industry sectors. Employment investigations can take many forms and can be instigated by the employer, by an employee, or by a third party. For example, investigations are frequently a critical component in addressing disciplinary issues and grievances relating to bullying and harassment allegations, as well as whistleblower complaints. Employees are more empowered than ever to raise concerns following the Me Too movement, heightened interest in conduct issues from governments and regulators, and numerous high-profile cases making the news. Certainly since the COVID-19 pandemic, I've seen an increase in complaints being raised in writing which then tends to lead to more formal processes, including more formal investigations. If you can manage to produce an investigation that's robust, compliant and credible, then it will certainly help to reduce the risk of litigation, or where litigation does follow, it will put you in a better position to respond. And where employers operate internationally, there can be a need for investigations to cross borders, which adds another layer of complexity.

As we know, employment laws generally operate locally and so local laws need to be considered for things like obtaining evidence, privacy and rules relating to interviews and legal privilege. And on that point, I should say that what Hagen and I will try to do today is provide guidance that will apply in most situations and in most countries, but it will always be necessary to take local advice. There are various stages to an investigation which Hagen and I are going to touch on here.

And I should add that many of these are covered in our employment investigations checklist on the Mayer Brown website, which may be a helpful reference for viewers and listeners after this episode. So let's start today's discussion at the beginning. One of the first issues to consider is what form of investigation are you embarking on? So Hagen, how do employers decide what form of employment investigation is appropriate? 

Hagen Köckeritz: Before deciding on the form of the employment investigation, the first step is usually to acknowledge the grievance complaint or allegation directly to the complaining party. It is also important then to consider if there are any applicable deadlines or other formalities that ought to be followed, or are under relevant internal policies such as whistleblowing, grievance, bullying and harassment, or antibribery and corruption policies. These may also govern the appropriate steps to follow. All of this will help determine whether a formal or informal investigation is appropriate. Some factors may indicate that a formal investigation is appropriate. For example, the applicable laws or internal policies and procedures, past practices, or the seriousness of the complaint.

Employers could potentially approach the matter informally if the issue is less serious and of course the employee concerned may have a preference. Either way, it's important that the employer's response is reasonable, consistent with past practice and policies, and proportioned to the nature of the complaint.

Chris Fisher: Yes, I agree. It's important for employers to assess these issues before selecting the informal or formal path; you say, certainly in the UK, there are circumstances where a formal investigation will be appropriate. For example, if it's a high-level executive that's involved or the matter could attract regulatory attention or where lawyer-client privilege is important, then a formal route will normally be advisable. And I think we're going to touch on that a little bit later on.

Hagen Köckeritz: Yes, I agree. And depending on the sensitivity of the matter and the jurisdiction concerned, it's also important to consider whether there's an employee representative body and whether it should be included in the investigation in order to enhance its impartiality. Under certain circumstances, prior involvement of a works council may even be mandatory.

Chris Fisher: Absolutely, thanks, Hagen. That's certainly something I know you encounter in Europe, but it will come as more of a surprise for the UK audience.  Once the form of the investigation has been decided, the employer can embark on the all-important preparatory steps. So, Hagen, can you talk us through some of the key preparatory steps employers should bear in mind at the initial stage of their investigation?

Hagen Köckeritz: Yeah, of course. The initial steps will set the tone for the entire investigation. Let's run through a few of the key actions. First, employers should identify who needs to be notified of the investigation. For example, the board, audit and risk committees, other management, legal and compliance functions, but retain confidentiality as much as possible. Employers then need to consider also who else may be implicated or need to be notified, such as witnesses ceasing or about to cease employment.

Employers should also consider whether any intermediate steps are necessary. For example, if consideration needs to be given to suspending an employee who is the subject of a complaint. But here, employers in most jurisdictions will need to think carefully before taking this step. Take advice locally and avoid any knee-jerk reactions. It might also be relevant to consider if the complainant should be allowed to take a period of leave or work remotely, again taking care that this is not seen as a retaliatory step against someone raising a complaint. It will also be important to identify whether the complaint involves wider issues. In whistleblowing cases in particular, one should address both the complaint and any underlying issue that the whistle was purportedly blown on, such as violations of law, rules and regulations, accounting issues, or health and safety violations. Preserving evidence will be vital.

This means suspending any routine document destruction procedures in relation to relevant employees; for example, regarding emails, instant messaging services, or mobile phones, and considering whether to send document-retention notices to relevant individuals and whether that needs to identify the complaint by name, which could cut across confidentiality, anonymity, and in some cases be considered retaliatory.

Make sure that the HR, compliance and legal teams are working together so that all considerations are covered. Compliance with regulatory obligations will be vital, which may include notifications to regulators at the appropriate time and being ready to respond to their questions once they have been notified.

Consulting early on with the compliance team will be critical here. Employees should also create a clear communications protocol to determine when issues should be escalated and reported and to confirm which issues attract legal privilege, particularly in cross-border cases where privilege and confidentiality rules can differ.

Chris Fisher: Thanks, Hagen. I certainly agree that confidentiality is paramount. Whistleblowing policies will often require added levels of confidentiality or even anonymity, and it's often easy to overlook that when employers are assembling their investigation teams and looking to make the necessary internal stakeholders aware. And there may be external notifications to be made; for example, when disclosure to regulators or law enforcement is required, as you touched on, and there may also be limitations under national laws. Generally, though, I think apart from keeping the circle as small as possible, it's essential to remind everyone involved about the need for discretion. The same should apply to the complainant and the accused themselves, but there should usually be carveouts so they can speak to certain third parties for advice. In the UK, this would include a legal advisor, regulator, police, medical professional or a trade union representative.

They should also be made aware of any resources that the employer may have to support them, such as employee assistance programs or helplines. OK, so moving on from those initial steps, appointing the right investigator is obviously another important initial step which needs some thought. Hagen, can you give us some thoughts on selecting an investigator and perhaps touch on what employers should keep in mind regarding legal privilege?

Hagen Köckeritz: Of course. So as you say, selecting the right investigator is vital. First and foremost, the investigator must be credible, impartial and not involved in the matter at hand or likely to be involved at a later stage. Employers will need to consider whether they should appoint an internal or external investigator and their pros and cons for each. For large employers, an internal investigator or investigation team with corporate knowledge and expertise may be preferable.

But this should be balanced with the possibility that an internal investigator or investigation team could be perceived as biased in favor of the employer. An external investigator, while appointed by the employer, may not be perceived to be biased in the same way. But employers may have concerns around relinquishing control of the process to an external investigator who may not understand the organization and the way in which it operates. It's worth noting that for complaints raised on whistleblower protection laws, the investigation may have to be conducted by a person or team determined in advance such as an internal reporting body. Where whistleblowing doesn't apply and an internal investigator is appointed, employers may wish to ensure the investigator has previous experience of the subject matter and is senior enough to conduct the investigation.

The level of seniority may depend on the employer's policies or the seniority of the employee on investigation. It's also worth planning ahead to consider who may need to be appointed to deal with any appeals or disciplinary action following the investigation. It's important to ensure the potential investigator has a sufficient amount of time to complete the investigation and consider the complexity of the issues they are handling sensitive or high-profile matters or where regulatory issues are at play, it may be appropriate to appoint an external investigator, such as a law firm or other professional. Employers should also consider whether subject matter experts are needed. In terms of legal privilege, this is a particularly tricky area. Investigations will sometimes be carried out on a legally privileged basis so that the employer can understand its legal position before taking further action. Applying privilege rules to employment investigations can be fraught with difficulties, whether an in-house legal team is involved or an external law firm. Privilege rules are generally construed narrowly and will vary across jurisdictions. In most cases, they won't apply to all stages of an employment investigation. For example, witness interviews won't usually attract privilege. Other stages are more likely to be capable of protection, but early planning is required to identify issues such as who the client is so that communications are restricted to a sufficiently small group of people. Under German law, there is very little room to rely on legal privilege. In principle, privilege is limited to communication between criminal defense lawyers and their clients after the start of official investigations by authorities. That means that there is no general protection of documentation prepared by external interviewers against seizure. The use of external interviewers is still recommended, as it often gives more time before action needs to be taken by company management.

Chris Fisher: Thanks, Hagen. That's interesting regarding the limits on legal privilege in Germany. It's certainly limited in the UK too, although perhaps not quite so much, but there will normally be parts of an investigation that simply can't be covered by privilege, witness interviews being the prime example, as you say. So moving on from appointing the investigator and legal privilege, let's turn to planning and executing the investigation itself. So, Hagen, back to you. Can you talk us through some of the key issues for employers to consider?

Hagen Köckeritz:

So first it's worth noting that all investigations require careful planning and documenting investigation plan as recommended. The plan should include the scope in terms of reference, outlining what will and what won't be investigated, the output of the investigation; for example, a written report, who will receive the findings and whether decisions or recommendations are required or only findings of facts.

Employers also need to consider the timeline and mandatory deadlines, for example, to notify regulators or other authorities and whether organizational policies or guidelines need to be followed. Documents may need to be reviewed, for example, electronic searches of systems and mobile phone computer imaging, and expert assistance may be required.

There will also be a need to consider data privacy and telecommunication law issues, where, for example, employee emails are to be searched. Employers may need to use secure electronic folders protected by encryption and anonymized data where possible.

Of course, it's also worth remembering that the plan may change along the way. Any changes should be documented and the plan should be kept under review during the investigation. When cross-border issues are involved, local laws may restrict certain investigative actions, such as data transfers, privacy rights or employee suspensions. As we've touched on, privilege and disclosure rules may also vary. Cultural sensitivities also play a role, particularly in how interviews are conducted.

Chris Fisher:

Absolutely. I think planning the scope of the investigation is one of the most important stages for sure. Certainly, we've both worked on investigations at Mayer Brown for clients where there was a potential for the scope to be vast in terms of issues and events raised in the complaint, as well as documents and potential witnesses. But often there's a need to step back and consider what is the aim of the investigation. And often that is to find a remedy to the issue being complained about.

And that sometimes means that not every historic reference needs to be investigated and a limit can be put on what is and what isn't going to be looked at. Hagen, can you now perhaps talk a bit more about the interview stage itself?

Hagen Köckeritz: Absolutely Chris. deciding who to interview is vital and within that there are questions about the sequence of interviews, the language the interviews will be conducted in, whether subject matter experts need to be interviewed, and deciding on the appropriate interviewing team for consistency. As we've said before, confidentiality is key, particularly if the number of interviewees and people involved grows. Interviewees need to be told to keep the investigation confidential and often will only need to be told certain limited aspects that are relevant to the questions being asked. Reasonable adjustments may be required for interviews and there may be a right to be accompanied under local law. If the allegation is sufficiently serious, it may also be appropriate to allow legal representation during the investigation. Employers should also arrange a notetaker for the meeting. An audio recording may be requested but this will depend on the employer's policies, the circumstances of the investigation, and obviously permissibility under local law. Following the meeting, employers can consider whether to share the notes with the interviewee so they can make amendments or comments that can be included in the final version of the notes. However, it's worth noting that in some jurisdictions, such as the United States, this will not be done if the investigation is being conducted by lawyers and the notes are considered privileged or turn client work product.

Chris Fisher: Thanks, Hagen. So we've already covered a lot of ground, including the form of the investigation, appointing the investigator, legal privilege, and now planning and implementing the investigation. So that brings us, I think, to documenting the findings and determining the way forward. So, Hagen, what should employers focus on to ensure this stage is handled correctly?

Hagen Köckeritz: Employers should discuss with stakeholders, including the legal team, whether and how to document the investigation's findings. This should already have been covered in the initial stages regarding the form of investigation and the agreed scope. It's important to consider what form of report will be made. For example, will it be written or oral, fact-finding only, or with legal analysis and recommendations for the decision-maker to consider.

Will it be privileged; for example, if conducted by lawyers or on the record for the purposes of an internal process such as a grievance or whistleblowing investigation? In such cases, it may be that two reports should be prepared, a privileged version and a non-privileged version. The reasoning should be clearly set out. Every factual statement must be accurate and backed up by a reference to the evidence in question. Any conflicting facts should not be left out.

They need to be addressed transparently so that the investigation is balanced and seen to take account of evidence pointing both ways. It's worth noting that, even where there is evidence pointing both ways, there will be a need to come to a view. Different tests may apply, depending on the jurisdiction.

Chris Fisher: That's right, Hagen. In the UK, the relevant test is the balance of probabilities. So, for example, is it more likely than not the event being investigated took place?

Hagen Köckeritz: For Germany, the test is very much the same. It's important to form a final opinion on the basis of all findings, taking into account the reliability and validity of the evidence. Moving on from the relevant test, documenting any breaches, legal and other relevant departments should be notified. Employers must also consider what information will be shared with the complainant and whether there are regulatory reporting obligations.

Employers should then decide what the next steps should be. This could be formal or informal action. Further investigation may be required if new issues have come to light and if any other issues have occurred during the investigation. The investigator should inform the employer of these in a separate document. If formal action is chosen, employers should consider which policy or process they are moving to; for example, a disciplinary process. If the investigation is privileged, employers should take care concerning the wider sharing of the report, as doing so may waive privilege. A media strategy may also be appropriate if the investigation report is disclosed or internal leaks are anticipated. Going forward, employers may wish to consider reviewing their company policies and training programs to prevent similar issues arising in the future. Finally, all investigation records should be securely stored and any broader issues identified during the investigation should be flagged for further action.

Chris Fisher: Great, Hagen, thank you for shedding light today on the many challenges that arise from employment investigations and providing guidance on how we can best navigate them. So before we wrap up this episode, from your perspective, what would you say is the most important takeaway for our viewers and listeners when it comes to navigating employment investigations?

Hagen Köckeritz: Yeah, in my view the most important takeaway is that every investigation irrespective of jurisdiction must be carefully planned from the outset and tailored to the specific issues arising from the particular complaint. Early planning, clear communication, and seeking local legal advice where necessary are all essential and will help ensure the investigation is both robust and compliant.

Chris Fisher: I couldn't agree more. Thank you, Hagen. Investigations are increasingly complex and can have serious implications beyond the issue at hand, particularly for regulated businesses. So it's wise for employers to plan their process from the outset. Hagen, thank you for joining me today. For our viewers and listeners, there are more episodes to come. Please check out our Employment and Benefits Unpacked page on the Mayer Brown website or your preferred streaming platform. If you would like to discuss any of the issues we've covered today, please get in touch. Until next time, thank you for joining us.