Employer’s Duty to Investigate

When it comes to the workplace and an employer’s potential liability to its employees, and even the public, ignorance is not bliss. When an employer catches wind of a possible issue, it might be tricky to determine when the company has a duty to investigate the potential problem. Some statutes and regulations impose a duty on employers to investigate certain matters, but an employer may have a duty to investigate even if statutes and regulations are silent about the matter.

Statutory/Regulatory Obligations to Investigate

If an employer has a statutory or regulatory duty to investigate, in-house counsel should be especially cautious that it doesn’t inadvertently destroy the attorney-client privilege by conducting the investigation too commonly. More specifically, since activities conducted in the normal course of business are not covered by the attorney-client privilege and an investigation often happens in the ordinary course of business, in-house counsel must be careful about treating particularly sensitive investigations differently. If certain information needs to remain confidential because of actual or potential litigation when the statutes or regulations require an investigation, the company and its counsel must discuss the best manner to proceed.

Below is a brief discussion of regulations that trigger a workplace investigation:

  • OSHA – Applies to every workplace. Even if your workplace isn’t an obviously dangerous site, such as an oil rig or a factory, the Occupational Safety and Health Act (OSHA) is still applicable. Section 5(a)(1) of OSHA states that every workplace must be free from recognized hazards. This is commonly called OSHA’s “general duty of care.”
    • Physical hazards – Even the most sedate office environment could harbor physical hazards such as weak stair rails, an uneven floor that causes people to stumble, or even mold that causes respiratory illness. Employers must investigate potential hazards and address any hazards identified. The best practice is to document your efforts to maintain a physically safe environment for your employees, any investigations conducted, and the modifications or remediations you put in place if you find any potential hazards.
    • Workplace violence – In a 2011 directive, OSHA observed that workplace violence is a potential hazard. In 1996, OSHA set out general guidance about how employers should approach the threat of workplace violence. OSHA explained that the OSHA general duty clause is interpreted by OSHA to mean that an employer has a legal obligation to provide a safe workplace. This means that if you have reason to suspect that workplace violence is a potential threat, you have the same statutory obligation to investigate and implement corrective measures as you would if you became aware of a physical hazard in the workplace. Additionally, if an employer is aware that an employee is the victim of domestic abuse, it has the obligation to keep all employees safe from that abuser’s action at its workplace.
  • Fair Credit Reporting Act – Not every employer is aware of how easy it is to violate the FCRA when obtaining information about employees or potential employees. The FCRA applies to more than financial credit issues. It applies to all background information about a person. If any of that information is allegedly false, an employer has an obligation to investigate the accuracy of the information. This most often comes up when employers use credit information to make employment decisions.
  • Professional requirements – Certain employers face statutory and regulatory obligations to investigate potential and current employees because of the business they conduct. For example, Financial Industry Regulatory Authority (FINRA) requires brokers/dealers to investigate employees activities as they may influence their behavior in the workplace.
  • Fraud, embezzlement, and other financial crimes – It seems obvious that it is in the company’s best interest to promptly investigate any alleged fraud, embezzlement, or other financial dishonesty. Unfortunately, leadership sometimes worries more about public relations problems than they do about future legal problems if the company doesn’t investigate alleged crimes. Without an appropriate investigatory response, the company might be at more risk for lawsuits from customers, investors, or even the government. Not only that, but as with any wrongdoing that leadership fails to address, employee morale will plummet, and the company is at increased risk that other employees will decide that rules are optional. Most organizations self-create the obligation to report and investigate fraud within their employment agreements and company policies.

Protecting Legal Defenses for the Company

By promptly responding to alleged misconduct (or workplace hazards) with a proper investigation, the company limits its liability significantly. This is especially true for OSHA and harassment complaints.

Responsibility to Shareholders or Other Owners (For-Profit Company) or the Public (Government and Non-Profit Organizations)

There are many reasons that all companies should be prepared to initiate a prompt and fair investigation at any time. All of the reasons ultimately come down to the bottom line. Although a proper investigation may at first glance appear to be more expensive than the alternative, leadership must always remember the long-term costs of failing to uphold their duty to investigate. Increased legal liability, increased governmental oversight, and even increased employee turnover will hurt the company in the future if investigations don’t happen or if they are poorly handled. All companies have certain fiscal responsibilities. The owners/shareholders of for-profit companies expect leadership to spend money wisely so that future risk and cost is limited. Non-profit companies owe certain responsibilities to the public and their donors to make sure they are able to continue pursuing the mission. Increased financial risk and legal liability certainly have the potential to threaten non-profit missions.

Cite as: Reck, Jennifer (2016). Employer’s Duty to Investigate. Retrieved from http://lynchsc.com/insights/employers-duty/


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