When workplace misconduct, whistleblowing or harassment is at issue, employers commonly turn to outside investigators to help ensure an unbiased investigation that will withstand challenge in future litigation. Engaging an investigator who is an attorney helps ensure that the investigation file and report will be protected by attorney client privilege. Employers may later decide to waive that privilege and produce the report, which can give rise to mandatory disclosure of the investigator’s entire file and, potentially, testimony by the investigator. These tips help protect the privilege that applies to the investigation and help ensure the integrity of the investigation.

  1. Watch What You Tell the Investigator.
    At the start of an investigation, it is tempting to provide the investigator with a download of all relevant details – for example, that the employer finds the claimant not to be credible, or the employer’s opinion on the likely outcome of the investigation. Instead, provide the investigator with just the basic information to enable them to conduct the investigation – let the witnesses provide the details, and allow the investigator to draw their own conclusions about credibility and outcome.   
  2. The Employer Decides the Scope.
    Issues often arise that are beyond the scope of the investigation as initially envisioned. For example, a witness may have their own complaint, or allegations of unrelated misconduct may arise. When this occurs, the investigator should return to the employer to determine whether the investigator’s mandate should be expanded to include these issues. The employer determines its instructions to the investigator.
  3. Let the Investigator Decide What to Do.
    The investigator should decide what witnesses to interview and documents to review. If the employer is part of these decisions, the integrity of the investigation could be challenged on the basis that the employer played too large a role in shaping the investigation. Instead, provide the investigator with the complaint, and possibly very key documents, such as clearly applicable policies, a write-up given to the claimant if directly relevant, or an annual review that is being challenged. If the complaint is not in writing, it should be reduced to writing by someone representing the employer, with the claimant confirming it is accurate.
  4. Don’t Ask the Investigator for Legal Advice.
    When an attorney conducts the investigation, the investigator should not also provide legal advice to the employer; another attorney should be engaged for this purpose. Questions to direct to separate counsel may include, for example, the scope of the investigation (see #2 above); how to handle a reluctant witness; managing performance issues of the claimant, accused or witnesses while the investigation is pending; or the possibility of intermediate measures such as separating the claimant from the accused or putting one or both on administrative leave. Obtaining legal advice from the investigator creates the risk that that advice will be discoverable as part of the investigator’s file. 
  5. Handling Draft Reports.
    Ideally, at the end of the investigation the investigator should provide their factual findings and conclusions by way of an oral report to the employer, before the employer decides whether to obtain a written report. When a written report will be prepared, the best practice is for the employer not to review drafts of that report, since those drafts may ultimately be discoverable. If a draft is reviewed, the employer should correct factual misstatements but should not influence factual findings or conclusions.  
  6. Separate Recommendations from Findings of Fact.
    If the investigator is asked to make recommendations, they should be listed in a separate document from findings of fact and conclusions reached by the investigator. Recommendations may include, for example, that the accused should attend training, that policies should be changed, or that an employee should receive a written warning or performance improvement plan. Keeping recommendations separate from the rest of the report helps protect those recommendations from disclosure later on.   

The growing concern around cyberthreats for companies across the nation is reflected in the increasingly crowded legislative landscape that provides guidance to organizations, employers, employees, consumers, and investors. As part of that landscape, enterprises — both public and private — operate under an unprecedented level of scrutiny. Last month, new SEC requirements went into effect for public enterprises. Final Rule: Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure (the “Rule”). The Rule not only requires public enterprises to report cyber breaches within only four days, but it also requires annual disclosure of material information regarding cybersecurity risk management, strategy, and governance and other periodic disclosures about the enterprise’s processes for assessing, identifying, and managing material cybersecurity risks, management’s role in assessing and managing material cybersecurity risks, and the board of directors’ oversight of cybersecurity risks.

This Rule adds yet another layer to the complicated issues of managing cybersecurity risks, but strong corporate governance equips companies to address them efficiently and accurately. The best practices for public companies that must comply with the SEC’s Rule also guide advice for private entities for managing cybersecurity risks. Key components of the SEC’s Rule shine a light on action items for preventing, navigating, and responding to cyberthreats through strong board governance and engagement, including:

  1. Identify cybersecurity risks as a required disclosure to the organization’s Board;
  2. Ensure the Board understands that it is responsible for oversight of the organization’s cyber security program;
  3. Provide the Board with “decision-useful” information relative to cyber risks;
  4. Train leadership on the necessity of reporting actual and potential cybersecurity incidents and risks to the Organization’s Board;
  5. Create a cybersecurity breach response plan enforced by the Board;
  6. Perform stress tests of the cybersecurity breach plan, with Board participation; and
  7. Leadership and the Board should engage with the Organization’s IT/ Data Governance Teams to ensure best practices are being followed, including ensuring employees are trained on cybersecurity risks.

If you have questions or need assistance with Corporate Governance related to cybersecurity risks or with the SEC’s Final Rule regarding Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, please reach out to the Jackson Lewis attorney with whom you regularly work, or any member of our Corporate Governance and Internal Investigations Practice Group and/or our Privacy, Data and Cybersecurity Practice Group.

Whistleblower claims of all types generally require proof of three elements; a complaint of conduct believed to be unlawful (protected activity), some form of discipline (an adverse action), and proof that the adverse action was motivated by the protected activity (causation). Oftentimes, the existence of an adverse action (such as termination) is undisputed. In whistleblower cases, the disputed issues typically relate to whether an individual engaged in protected activity and whether they can prove causation. The Pennsylvania Appellate Court, in an unpublished, non-precedential decision, recently addressed what evidence is sufficient to prove causation.

In the Pennsylvania case, David Olson sued Lehigh University alleging that he had been fired as a result of his internal complaint that the university reported inflated numbers of job postings and on-campus interviews. The trial court granted summary judgment to the University after finding that Olson did not present sufficient evidence to establish that his report resulted in his termination. The court noted that Olson did not “allege that his supervisors threatened to fire him or to impose any other adverse consequences because of his report.” The court ruled that Olson’s subjective contention that his supervisor “did not like the fact that the data was revealing inaccurate reporting, and the relationship changed after that”, and that “all of a sudden things got cold with [his] supervisor” was insufficient. The court noted that Olson’s reliance on vague and inconclusive circumstantial evidence did not constitute the concrete evidence of causation required under Pennsylvania law.

When defending or evaluating these claims, we are often faced with subjective testimony from the alleged whistleblower claiming they were treated differently after engaging in protected activity. This subjective assessment can include feeling isolated, not being engaged by team members, not receiving plum assignments and a general feeling that the plaintiff was being treated differently. The defendant’s arguments in the Olson case, while non-precedential, will be worth keeping in mind regardless of jurisdiction when defending whistleblower claims where the plaintiff asserts subjective perceptions and feelings in an effort to establish causation. 

Jackson Lewis attorneys are available to further discuss investigations, whistleblower defenses and preventive strategies.

NLRB General Counsel Jennifer Abruzzo is pressing for stricter enforcement against the use of workplace technologies to monitor employees.  As a result, employers should consider the National Labor Relations Act (the “Act”) when conducting forensic reviews of employee emails and texts during internal investigations. 

On October 31, 2022, Abruzzo issued Memorandum GC 23-02 titled “Electronic Monitoring and Algorithmic Management of Employees Interfering with the Exercise of Section 7 Rights.”  This memo urges the NLRB to find that employers presumptively violate the Act if their electronic monitoring and automated management practices interfere with or prevent covered employees from engaging in protected concerted activity. 

Abruzzo suggests a new legal framework for determining the lawfulness of electronically monitoring employees.  Her memo proposes that if the employer establishes that their surveillance practices are “narrowly tailored” to address a legitimate business need (i.e., that its need cannot be met through means less damaging to employee rights), the Board should balance the respective interests of the employer and the employees to determine whether the Act permits the employer’s practices.  Even if the employer’s business need outweighs the employee’s rights, Abruzzo suggests that an employer should be required to disclose to employees the technologies it uses to monitor and manage them, its reasons for doing so, and how it is using the information it obtains.

When conducting internal investigations, employers should be cognizant of the NLRB General Counsel’s new focus relating to electronic monitoring.  A forensic review of employee emails and texts should be carefully tailored to the situation to make it more likely to be acceptable under any new standard the NLRB may set based on Abruzzo’s initiative.  Employers should consider whether their existing policies are appropriately tailored and sufficiently address the review of e-mails/texts during an internal investigation.

Employers should be aware of other examples Abruzzo identifies relating to how the increased use of new technologies for monitoring employees might violate the Act, including: (1) using wearable devices, security cameras, and radio frequency identification badges to track conversations and movements; (2) inserting GPS tracking devices and cameras in vehicles used by employee drivers; and (3) utilizing computers to monitor employees in call centers, offices, or at home through keyloggers and software that takes screenshots, webcam photos, or audio recordings throughout the day.

Her memo also considers when surveillance extends to break times and nonwork areas – which could be viewed as preventing employees from engaging in solicitation or distribution of union literature during nonworking time.  Just recently, in Stern Produce Company, 372 NLRB No. 74 (Apr. 11, 2023), the Board considered a situation where a known union-supporting employee was told by his supervisor not to cover the inside-facing camera in his truck during a lunch break.  The Board found that the employer violated the Act because the supervisor’s actions created an impression of surveillance which departed from the Employer’s past practice as the employee was never told not to cover the camera during his lunch break and was not aware of a policy prohibiting employees from doing so.

In sum, employers should keep their eye on the possible NLRB impact on internal investigations. Considering Abruzzo’s memo, employers should evaluate their electronic monitoring policies, and review NLRB updates on enforcement against such practices as well as their internal investigation strategies for legal compliance on an ongoing basis.

The Jackson Lewis Corporate Governance and Internal Investigations practice group is well-versed in workplace surveillance issues and continues to analyze ongoing developments in the area.  Please contact a Jackson Lewis attorney with any questions regarding workplace surveillance and any other corporate governance and internal investigations developments.

In late December 2022, in conjunction with an omnibus spending bill, Congress passed the Anti-Money Laundering Whistleblower Improvement Act, which President Biden signed into law on December 29, 2022. This law permits whistleblowers to receive 10% to 30% of any monetary sanction the government imposes over $1 million for money laundering.  Money laundering is the process of concealing the origin of illegally-obtained money – typically acquired through illicit activities such as drug trafficking, corruption, embezzlement, or gambling – by converting it to legitimate sources. 

Depending on the size of the case, whistleblower awards under the new law can be substantial, running into the millions or tens of millions of dollars.  Not surprisingly, these changes are aimed to incentivize whistleblowers to report wrongdoing.

In light of the new law, employers could expect to see a considerable surge in whistleblower claims against their organizations.  In preparation, they should look to enhance their “speak-up” policies and other reporting channels; examine their investigation protocols; review their audit procedures to ensure there is a clear process for identifying red flags; and invest in training with respect to these types of issues.  Training is especially important with respect to front-line managers who play a critical role in responding to concerns raised and ensuring that there is no subsequent retaliation as a result.

Under federal law, retaliation is prohibited against whistleblowers and can include any action that affects the terms and conditions of the employee’s employment, including discipline, reduction in pay, suspension, demotion, or termination, among other things.  Several states, including New York, New Jersey, Virginia, and California have broader protections against retaliation for whistleblowers, so if an employer has employees in these states, additional efforts should be made to ensure compliance with the applicable laws.

It is important to note that the SEC and other federal agencies have taken the position that employees may be able to disclose what the employer believes is confidential information if they are doing so in the context of reporting and/or investigating unlawful conduct, such as money laundering.  This appears to be the case even if the employer has internal policies strictly indicating otherwise.    

To discuss ways to improve the policies in your organization, effectively roll out training, and minimize potential exposure to whistleblower claims under the new law, please contact a Jackson Lewis attorney.

Over the years, the Securities and Exchange Commission has taken aim at common language in settlement and severance agreements regarding nondisclosure and confidentiality. It has been relatively commonplace for such agreements to include language that requires, for example, the settling or departing employee to agree not to disclose the employer’s confidential information or trade secrets, and/or that, when disclosures are required by the employee by law, the employee will notify the company’s legal department in writing.  This is no longer permitted.

The SEC also forecloses language in the agreements that permit the filing of a charge with the federal agency, but attached to that a waiver by the employee of a right to any monetary recovery in connection with such a complaint or charge.

Rule 21F-17, which followed the passage of the Dodd- Frank Wall Street Reform and Consumer Protection Act, provides the SEC with its rationale. The Rule states that “[n]o person may take any action to impede an individual from communicating directly with commission staff about possible securities law violations, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.”  Both the NLRB and EEOC have taken similar stances. Language such as that cited above can be and in some cases have been viewed as an illegal impediment to the right of individuals to communicate with these regulatory agencies.

The SEC assessed a monetary penalty of $265,000 against a publicly traded company in 2016 where its severance agreement required employees to waive their rights to monetary recovery if they filed a charge or complaint with the SEC or other federal agencies, and prohibited the disclosure of confidential employer information except under compulsion by law, after first notifying the company and obtaining its written consent. The SEC noted that in part, these provisions removed financial incentives that could encourage employees to communicate with the commission.

In a separate enforcement action involving another publicly-traded company, the SEC assessed a monetary penalty of $340,000 for the inclusion in the severance agreement of provisions that employees could freely participate in investigations or proceedings before any agency, but that they waived any individual monetary recovery. Again, the commission found that the agreement removed “critically important financial incentives that are intended to encourage persons to communicate directly” with commission staff about violations of securities law.

The SEC has not targeted closely- held businesses to date, but the possibility exists that a private company that contracts with publicly traded firms could be subject to scrutiny for these provisions. Further, even privately held companies may find themselves the subject of scrutiny by agencies such as the NLRB and EEOC.

Jackson Lewis attorneys can assist employers get prepared for 2023 by reviewing and updating employment-related agreements particularly given the changing landscape. The firm has a nationwide presence and stands ready to assist employers with these and other labor and employment concerns.

The Biden Administration recently announced increased coordination between EEOC, the US DOL and the NLRB to strengthen an intra-agency approach focused on combatting unlawful workplace retaliation.  The approach will raise awareness and engage not only workers and the public, but also other key stakeholders, including employers.

Given the Administration’s focus, employers should anticipate aggressive coordination and joint enforcement efforts which will take advantage of the full range of resources and tools available within the government as the agencies work to secure workers’ rights because workplace experience issues in multiple, intersecting dimensions of their employment may not be completely covered by any single agency’s jurisdiction.

Prudent employers want to do the right thing – prevent retaliatory actions and behavior in their workplace.  But, acknowledging human nature, we know that the impulse to “get even” exists.  What can be done to show that an employer has taken every reasonable measure to mitigate the risks of a “bad actor” creating legal and brand risk for the organization?

Several practical steps exist, each of which must be tailored to suit the organization, ranging from the most benign, to the most severe approach.  Some of those steps include:

  • Put in place a written, widely circulated and easily understood – in layperson’s language – policy prohibiting retaliation.
  • Distribute the policy both to new hires when onboarding, and to incumbent employees at every level within the organization.  Senior-level leaders absolutely must consistently show that the policy applies to all within the organization, including to themselves.
  • Make clear that the policy applies to all employees, is linked directly to the organization’s values, and that violations will be dealt with sharply and consistently.
  • The policy should appear in the organization’s practices and procedures manual, handbooks and code of business ethics.
  • Require signed acknowledgments of receipt and understanding should be maintained and should be renewed/revisited annually.
  • Evaluate the risk attached to mid- and senior-level leaders, and influential individual contributors who may become the focus of claims or an investigation, and in the event of a claim, make clear that the burden of persuasion will fall on them individually or jointly to show that they played no part in any retaliatory behavior.
  • Make clear to all complainants and cooperating witnesses that the organization needs to hear about any concern that the individual might view as hostile within their work environment, and put in place routine, periodic, and systematic check-in’s to be certain that no complainant or witness has been subjected to retaliatory or unfair treatment.
  • Put in place a close, arm’s length review protocol for any employment actions affecting any complainant or witness prior to execution of any employment action using decisionmakers who played no role in and ideally are ignorant of the underlying claims.
  • Where heightened risk warrants doing so with senior-level leaders, in the event of a claim, present senior leaders with mandatory alternatives of [i] accepting a paid leave of absence until resolution, or [ii] remaining in role and entering into an agreement that allows for “Detrimental Conduct”-based claw back of compensation, with warning that finding of retaliatory conduct will result in termination for “Cause”, and ineligibility for rehire.
  • As permitted by law, consider a fee-shifting agreement under which an individual credibly accused of and determined by the organization to have engaged in retaliatory behavior or conduct, is in any action brought against the organization by the target or by a regulatory agency, responsible for payment to the organization’s defense costs.

There are more practical and effective solutions.  We can help you find them.  If you have any questions, please speak with a Jackson Lewis attorney.

As companies plan and strategize about next steps regarding the  “S” of ESG, i.e., Social initiatives, we are often asked about best practices in promoting Diversity, Equity, and Inclusion (DEI)  goals in the workplace.   Companies increasingly are seeking to tie compensation to DEI goals. Doing so demonstrates the company’s commitment to DEI, and rewards positive efforts. Of course, as any prudent lawyer would say, one needs to tread carefully and understand the path chosen.  Jackson Lewis principal Michael Hatcher, who regularly counsels employers in this area, advises that companies need to be careful not to tie compensation to any specific “hire” or “promotion” decision.   Such a practice could lead to claims that the company is incentivizing unlawful race/gender-based employment decisions, despite a laudable goal.

Instead, there are a variety of ways to carefully design a lawful compensation strategy to minimize exposure to litigation.  Such programs typically take into account the “big picture” of what the company is trying to achieve, rather than tie awards to “numbers.” Accordingly, Hatcher recommends relying upon a broader array of factors when creating the appropriate compensation program. Examples include, but are not limited to:

  • Manager evaluations, where the company can develop concrete examples that would be applied across the board, such as attendance at implicit bias training or actively mentoring others across racial, gender, or other boundaries.
  • Team-approach to bonuses, where for example, a particular level of company leadership is eligible to receive the reward based upon “team performance,” not individual effort, against appropriate benchmarks.  Benchmarks are typically goals a company strives for in their DEI efforts, and they need to be carefully crafted to avoid claims of bias.

The strong support of DEI initiatives by leadership and corporate culture play an important role in developing and carrying out these programs. 

Once the appropriate incentive program is developed, careful communication, both internal and external, will be paramount to its success. Internal communications will help educate and train stakeholders on the company’s DEI’s initiatives, as well as the limitations imposed by laws such as Title VII’s prohibition against discrimination, which includes so-called “reverse discrimination” against whites and men.  External communications can help enhance the success of the company’s DEI efforts.  Training to reinforce what company management can do to lawfully promote DEI initiatives within the bounds of antidiscrimination laws should be complemented by a strong communications program.

As this remains an evolving area, it is always important to seek legal counsel before tying compensation to DEI goals.  Please contact the Jackson Lewis attorney you regularly work with if you have any questions.

Introduction

Picture this: you are on-site at a new client’s headquarters for a weeklong hostile work environment investigation into several internal complaints made against the CEO and CFO. This is the first engagement for the client so you want to do as comprehensive a job as possible to leave a positive first impression (which will hopefully also lead to significant additional work). Importantly, your recommendations at the conclusion may lead to terminations, as well as subsequent lawsuits from either the purported victims and/or the terminated executives. There’s clearly a lot at stake here.

As of now, you have at least 15 witnesses to interview, but there will likely be many more that organically grow out of the investigation, which often happens. As you start your marathon of interviews and feverishly jot down every pertinent word the witnesses tell you, you can rest assured that future opposing counsel, jurors, and plaintiffs will never see your notes, right? Certainly, they would never be turned over in discovery or become a deposition or trial exhibit, would they? Well, as the typical lawyer response goes – it depends.

Attorney Work Product Doctrine

The basic rule, largely codified in Federal Rule of Civil Procedure 26(b)(3), is that the attorney work product doctrine generally prohibits the discoverability of materials an adversary prepares in “anticipation of litigation”. This makes sense considering the doctrine aims to provide lawyers with the privacy we need to think, plan, weigh facts and evidence, candidly assess a client’s case, and devise legal theories.

There are two types of work product: fact or “non-core,” which contains factual information resulting from a factual investigation; and “opinion,” which includes the lawyer’s mental impressions, conclusions, opinions, or legal theories. The latter receives virtually absolute protection and is typically discoverable only when a party shows “extraordinary justification.”  Conversely, fact work product may be discoverable if it (1) contains only non-privileged facts, and (2) the requesting party satisfies the substantial need and undue hardship elements.

Facts and Opinions Intertwined: Are My Notes Discoverable?

You might be wondering, “What happens if my notes contain both facts and my opinions?” In that scenario, a court must privately examine whether the facts may be disclosed in a redacted version without revealing your opinions.  Notably, at least one court has stated that “where the factual and opinion work product are so intertwined . . . that it is impossible to segregate and disclose the purely factual part,” the document should be protected as opinion work product.  While this isn’t the law of the land, it’s important to periodically review your note-taking as you conduct witness interviews.

Conclusion

Let’s return to your investigation of the client’s CEO. If you are taking down contemporaneous notes of a witness’ recollection and/or responses to questioning  – without including your opinions, these factual notes are likely discoverable. However, if a court determines that the facts are sufficiently intertwined with your opinions, mental impression, etc. (i.e., a statement such as “this witness is being inconsistent and would not be credible during deposition or trial)  such that it’s impossible to separate the two, then the attorney work product doctrine would likely protect your notes from disclosure. At the same time, however, one state’s Supreme Court (North Carolina) has recently held that some communications between an attorney and client regarding an internal investigation may not be privileged if those communications reflect “business” advice as opposed to “legal advice.” As one can see, note-taking and navigating legal privilege is both an art and a skill.

A recent Seventh Circuit decision interpreting Illinois law affirmed the district court’s ruling that an employee’s refusal to engage in activity illegal in New York, but not in Illinois, was neither protected under the Illinois Whistleblower Act (“IWA”) nor under a common-law retaliatory discharge theory.

In Perez v. Staples Contract & Commercial, LLC, Perez, a sales representative with a documented history of poor performance, worked on an account that involved the sale of laundry detergent in New York.    The supplier recommended a product, but later warned that its sale in New York was illegal due to its chemical makeup.  Perez advised his supervisor that he did not feel comfortable selling an illegal product, and his supervisor told him he would “take care of it.”  Perez was terminated a few months later for poor sales production.

Perez then sued, alleging various claims including: (1) retaliation under the IWA; and (2) common-law retaliatory discharge.  The district court ruled that the New York regulation prohibiting the sale of products containing the chemical did not trigger an IWA retaliatory discharge claim.  Rather, such a claim arises only when a “clearly established policy of Illinois” is at issue.  Further, the district court found no genuine issue of material fact as to whether Perez had participated in any protected activity under the IWA, as well as insufficient evidence of retaliatory motive to defeat summary judgment.

The Seventh Circuit affirmed the district court’s summary judgment ruling, holding that Perez did not engage in a protected activity.  First, under the IWA, “an employer may not retaliate against an employee for refusing to participate in an activity that would result in a violation of a State or federal law, rule, or regulation.”  740 ILCS 174/20.  There are two aspects to such a claim: (1) the refusal to participate; and (2) the violation of a statute, rule, or regulation.  There was no dispute that the detergent’s sale in New York violated a New York state regulation.  However, Perez’s whistleblower claim did not involve “Illinois” law, as required by the use of the term “State” in the IWA, which refers to Illinois, not any other state such as New York.  Since the sale of the product did not violate Illinois law, Perez’s actions were not protected.

Second, Illinois common law prohibits an employer from terminating an employee if the termination violates a clear mandate of public policy.  A clear mandate is something that “strikes at the heart of a citizen’s social rights, duties, and responsibilities.”  Palmateer v. Int’l Harvester Co., 421 N.E.2d 876, 878-79 (Ill. 1981).  Perez argued that Illinois environmental law also regulates the sale of detergents, so it is a matter of public policy in Illinois.  However, the Seventh Circuit rejected this contention, because “there is no analog to the New York regulation within the Illinois statutory and regulatory regime.”  Consequently, Perez’s termination did not violate a clear mandate of public policy, because refusing to violate New York environmental law “did not implicate any interest related to ‘a social duty or responsibility’ or the ‘health and welfare’ of Illinois citizens.”  And, the Seventh Circuit noted, that even if the district court’s reasoning was not correct, there was still insufficient evidence to support an inference of a retaliatory motive given that Perez had a track record of failing to meet performance expectations.