Workplace Investigations: The Essential Law & Best Practices For Handling Employee Relations Issues and Conflict Re

1. Mary Wangmwang@hixsonnagatani.com Workplace Investigations:The Essential Law & Best PracticesFor Handling Employee Relations Issues and Conflict ResolutionMarch 21, 2012

2. WELCOME! • Topic: Investigations • Materials • Questions/Comments

3. James Stevens v. Vons Cos.,(Cal. Ct. App. 2009) • January 2002: Stevens was given the highest rating of “excellent” in his performance review, and had been with the company for 24 years. • August 2002: Stevens complained that his supervisor, Marko, made several inappropriate sexual comments • HR Investigation: 5 of 6 witnesses confirmed that Marko made inappropriate sexual comments. • HR Investigation Report to Stevens: • His allegations were “not substantiated” • Both he and Marko would be transferred • Marko was told she was going to be transferred for “safety” reasons. • Marko “refused” to be transferred, and was not transferred or otherwise disciplined

4. Stevens v. Vons Cos. (cont’d) • 2003-04: Stevens participated in union strike, and wrote letter to SEC accusing CEO of insider trading. • March 2004: • Tarter, District Manager, terminated Stevens based upon a report by store’s loss prevention representative that Stevens violated company policy regarding store donations of damaged products to charity. • The report: • Inaccurately said that witness statements had been obtained. • Indicated that Stevens said he was not aware of the policy • Tarter terminated Stevens without further follow up.

5. Stevens v. Vons Cos. (cont’d) • Jury Verdict: $18 million for sexual harassment, and retaliatory discharge. • Investigation deficiencies found by Court of Appeal: • Handling of sexual harassment investigation amounted to “ratification” of Marko’s conduct. • Tarter did not give Stevens an opportunity to respond directly to the charge that he violated the donations policy. • Stevens claimed that he: • Did not see the charitable organization remove the boxes • Was asked in a vague way why the bottled water was in certain boxes, but that he never understood that he was under investigation for violating the donations policy. • Tarter did not contact any of the witnesses mentioned in the report

6. When Investigations Are Required • When employer is on notice of potential: • Sexual Harassment • Discrimination • Potentially unsafe working conditions • Including workplace violence • Need for disability or religious accommodation • Employee non-compliance with trade secret or contractual obligations to employee’s former employer • See Attachment A • Any other unlawful activity

7. What does “on notice” mean? • Management awareness of facts that would cause a reasonable employer to inquire further • What management knows may just be the “tip of the iceberg.” • Employee does not need to use any “magic words” • Employee does not even need to complain! • What if the complainant is no longer with the company, and there is no evidence of continuing problems? • Fuller v. City of Oakland, 47 F.3d 1522 (9th Cir. 1995) • What if the affected employee demands that the employer keep the matter confidential, and not investigate?

8. Ingraham v. UBS Financial(Mo. Cir. Ct., 2011) • Carla Ingraham worked as Sales Assistant for UBS, supporting a broker by processing trade requests and preparing presentations • Beginning in 2003, her supervisor allegedly made inappropriate comments about her breast size, called her into his office to view sexually offensive emails, talked about the size of his genitals, asked her about her sexual fantasies, made calls and sent texts after hours, and told her she should perform oral sex on a client • After he berated her for leaving early one day, she complained about harassment and he fired her shortly thereafter (although she continued working with other brokers)

9. Ingraham v. UBS Financial (cont’d) • During investigation, most of interviewees were “drinking buddies” with her former boss • They stated that she was willing participant in banter and participated in after-hours drinking with them • The investigator didn’t tell Ingraham about these assertions or give her an opportunity to respond • Investigation concluded that charges weren’t corroborated

10. Ingraham v. UBS Financial (cont’d) • When other brokers asked to have Ingraham assigned to them, management took no action • Ingraham was moved closer to her former boss, giving him the opportunity to glare at and intimidate her • Ingraham was assigned to a college friend of her former boss who called her claims “silly” and “stupid” and called her a “liar” • UBS submitted a form with FINRA stating that she was terminated for lying during investigations into HR matters • Jury verdict: $10.6 million ($10 million for punitive damages)

11. Botched Investigations: Legal Exposure • The affected employee(s) • Includes observers of inappropriate behavior • The accused employee • Botched investigation can be seen as evidence of pretext for discrimination or retaliation • Defamation • Including by employee “self publication” • Dible v. Haight Ashbury Free Clinics (Cal. Ct. App. 2009) • Punitive damages

12. Recommendations • Before the investigation: • What to communicate to the affected employee • See sample memo (Attachment B) • What to communicate to the accused employee • See sample memo (Attachment C) • Selecting the investigator • When should you retain an external investigator? • Should the external investigator be an attorney?

13. Conducting the Investigation • Determining Which Witnesses to Interview: • Start with the affected employee • Generally, interview the accused employee next • Then, other witnesses as necessary to resolve “he said, she said” matters. • Do you need an observer to attend the witness interviews? • Witness Interview Notes • Caution: don’t include counsel advice in the interview notes.

14. Interviewing Witnesses • First—Standard Guidance to All Witnesses: • Admonish not to speak with other witnesses • State purposes of investigation: • Determine whether company policy violation occurred • To find the truth • Determine what if any corrective action needs to be taken • Second—Start with general questions: • Example: Ask for chronological summary. • “Start with the beginning, and tell me what happened in the meeting on July 1.” • “What happened next?” • Remember: Who? What? When? Where? Why?

15. Questioning Witnesses • Third—Follow up with more specific questions as needed: • Example: “Did John make any remarks of a sexual nature to Jane?” • “Did John say XXX to Jane?” • Always give the accused employee the opportunity to admit or deny the specific allegation. • Fourth—For every key event, always ask every witness: • Were there any other witnesses to the event? • Are there any relevant documents, including e-mails? • Fifth—Always ask: • “Did anything else happen?” • “Is there anything else you think I should know?”

16. Concluding The Investigation • When do you stop gathering information? • Common mistake: assuming you cannot or should not reach a conclusion in a “he said, she said” case • Employer enjoys wide latitude in making good faith determinations, so long as full and proper investigation conducted. • Corrective action • Legal standard: what is reasonably necessary the prevent the inappropriate conduct from recurring • Termination rarely required • Commonly includes warning, coaching, “clear the air” type meeting.

17. Concluding The Investigation • Writing an investigation report • See sample report template (Attachment D) • Should report be treated as confidential, attorney-client privileged? • Communicate the conclusion in writing to the affected employee(s) and the accused • Sample memo to affected employee (Attachment E) • Sample memo to the accused employee (Attachment F)

18. Privacy Update • Hernandez v. Hillsides, Inc., (Cal. Supreme Ct. 2009): hidden video camera in shared employee office infringed employee privacy, but was not so offensive to support cause of action. • Key facts: camera inactive when employees were present, and employer had particularly strong need to investigate computer access to pornography at facility for abused children. • Beware: surveillance cameras may be unlawful under other circumstances.

19. E-mail Review During Investigations • Electronic Communications Privacy Act • Fraser v. Nationwide Mutual, (3rd. Cir. 2004) • Nationwide accessed computer network server to review Fraser e-mails • No violation of ECPA – Nationwide did not “intercept” e-mails; Nationwide was the provider of the e-mail communication service • Stored Communications Act • Pietrylo v. Hillstone Restaurant Group, (Dist. N.J. 2009) • Plaintiff creates private myspace.com group; manager asks hostess for her password; views vulgar posts and plaintiff terminated • Management’s access violated Stored Communications Act

20. E-mail Review During Investigations • Fourth Amendment Issues • City of Ontario v. Quon, (U.S. S. Ct ., 2010) • Employer had handbook reserving right to monitor electronic communications; contrary to policy, employer advises plaintiff it will not review his text messages • Plaintiff sued after employer reviewed his text messages on employer-issued pager. • Held: No Fourth Amendment violation because employer had legitimate work-related rationale for the search.

21. FCRA/ICRAA & Workplace Investigations • Federal Fair Credit Reporting Act • Requires notification and consent for consumer report by consumer reporting agency • Previously included misconduct investigations in this requirement • Federal Fair & Accurate Credit Transactions Act • Excluded notification and consent requirements for investigations related to misconduct and compliance with laws • California Investigative Consumer Reporting Agencies Act • Excludes notification and consent requirements for investigations related to wrongdoing

22. Workplace Investigations Under FCRA • Employer Obligation When Using CRA • Where adverse action is taken arising out of workplace misconduct investigation, employer must provide employee: • Summary containing nature and substance of communication upon which adverse action is based, except that sources need not be disclosed • Note: Obligation imposed on employer and not on CRA

23. Workplace Investigations Under ICRAA • Employer Obligations When Not Using CRA • Where information collected is a matter of “public record,” the employer must provide the documentation at the completion of the investigation, unless the consumer waives the right to receive a copy • Contrast: Must be provided within seven days of obtaining record if not sought for investigation of wrongdoing • Exception: Record must be provided regardless of waiver if adverse action is taken as a result of the record

24. Workplace Investigations Under ICRAA • “Public record” – Records documenting an arrest, indictment, conviction, civil judicial action, tax lien, or outstanding judgment • Important Note: Compliance with ICRAA does not necessarily ensure compliance with laws prohibiting discrimination based on arrests, bankruptcies, prior lawsuits, etc.

25. Conclusion • Thank you!