Original posting by Howard Levitt in the Financial Post, September 12, 2018
When to Use a Lawyer and/or an Outside Investigator — And When Not To
Perhaps the biggest boondoggle in legal services in 2018 is the workplace investigation industry. There is a solution, but you will have to read further for that.
Calling for an investigation has become the de facto position for a company to avoid the responsibility, let alone the time, of making an executive decision. It is also used as a strategy to delay providing a substantive response when faced with threatened litigation.
Outside investigators, and investigations generally, used to be reserved for only the most intractable, complex situations involving only the company’s highest officers that internal staff could not objectively investigate. Besides those, investigations were the preserve of human resources staff who, unlike outsiders, did not require educating on the company’s policies, procedures and the idiosyncrasies of its personnel. Now, deferring to external investigators has become the default. As well, although full investigations previously only occurred over allegations of the most egregious variety — generally fraud or sexual harassment — increasingly, any employee making a complaint about almost anything leads to outside investigators being summoned.
The law seldom requires full investigations. Almost invariably, speaking to the complainant, any witnesses, putting the complaint to the accused and hearing their version of events will legally suffice. Even that is more elaborate than is required in most cases.
Regardless of whether it is legally required, in every case of misconduct, an accused employee should be advised of the allegations against them and provided a chance to respond. Doing so concretizes the employee’s position and prevents their inventing a better version of events after speaking to counsel. It also prevents the employer making the decision without the necessary information. If the employee lies or refuses to answer, that can provide the cause for discharge the company requires.
The two circumstances calling for an outside investigator are: to uncover systemic problems in the organization to ensure there is no broader pattern of misconduct, and when the person accused is so senior that no one internally has the objectivity to investigate.
But let there be no confusion. You are not necessarily obtaining objectivity by delegating the task to outsiders. They are equally dependent on the organization’s goodwill. They are motivated to please the members of the organization retaining them and to come to conclusions that will ensure they are hired again.
Although the law is simple, most investigations are unduly expensive. I have seen too many cases in which an investigator, called in to determine whether there was cause to discharge an employee, charges a multiple of what it would have cost to simply terminate without cause. If it is found that there is not cause for discharge, and the employer decides the relationships are too fractured to continue with the employee, it still must pay full severance in addition to the cost of the investigator. The company could be worse off, insofar as the employee can now claim they were discharged despite being cleared and that the investigation created a stigma, all creating a risk of additional punitive or aggravated damages. If the investigator finds that there is cause for discharge, the company is little further ahead because the investigator’s findings do not bind a court, which will come to its own independent position. Indeed, the investigator’s findings are hearsay and not even admissible in court. If the investigator is the company’s legal counsel, that counsel and his or her firm will then be conflicted out if there is a lawsuit, creating additional costs for the employer given that new counsel must be hired and acquainted with the facts.
Do not believe that any investigation is neutral. The fact of someone being investigated, by itself creates such a stigma that the employee’s position often becomes untenable. I have known few cases in which an employee is suspended pending investigation and is ultimately recalled to work, regardless of the ultimate findings.
In addition to costs, practical problems in using a lawyer as an investigator include that it entitles the employee, and each witness, to have their own lawyer present during the investigation, further lengthening the process, creating undue structural rigidity and having the employee’s lawyer potentially take the position that they need not answer questions. If the investigator is not outside legal counsel, employees cannot bring a lawyer and failure to answer a question or to answer honestly is itself cause for discharge.Therefore, there are major advantages to not using legal counsel.
An outside investigator’s findings are hearsay and not even admissible in court
But if a lawyer is not to conduct the investigation, who should? Many of the issues respecting employee misconduct are those of employment law and a non-lawyer lacks that expertise and can therefore write a less credible report. So, if lawyers are unsuitable for investigation and non-lawyers are, for different reasons, similarly unsuitable, who should be conducting those investigations that are necessary?
The answer is so obvious that it is almost shocking that this group is so seldom used. Who is expert at fact-finding? Not lawyers, whose jobs are prosecutorial or defence oriented. Not human resource managers, who do not know the law.
The go-to group for workplace investigations should always be retired judges. They know the law. They have the credibility and they spend their careers hearing evidence and making findings of fact. With many judges having left the bench and gone into private mediation/arbitration practices, there is a legion of judges, many of whom have both criminal and civil backgrounds, with considerable employment-law knowledge. Ironically, their fee structure is also generally lower than counsel’s and, at the end of the day, if your case goes to court and the judge or arbitrator hearing the case knows that one of their brethren/sisters made certain findings, they cannot but be influenced by it.
It is not just what happens at trial. If a company is speaking to its stakeholders, whether they be its employee base, other executives, their board or third parties, who is going to question the company’s conduct in following the recommendation of a judge?
None that I can think of.