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Due process needed in tackling errant staff

Published on Saturday, 11 Oct 2014
Julia Gorham

Companies are coming under increased regulatory and corporate governance scrutiny, meaning they need to identify and manage potential issues, not just at an institutional level, but routinely to identify potential employee misconduct.  

Managing an internal investigation of employee conduct requires consider8ation of a number of difficult issues, including due process; legal privilege; regulatory, compliance and risk issues; and often disciplinary action.  

The Options

Internal investigations are often complicated, time-consuming and can be highly emotional for both the employee under investigation and the staff involved in managing the investigation process and determining any outcome.  

Because of this, some employers steer clear of a full investigation and opt to remove an employee by giving notice to and/or paying out terminal payments, or by allowing the employee to “resign” from their employment.  

However, opting for an exit instead of fully investigating a potential misconduct matter can adversely affect the corporate culture and reputation of the company. It can prove difficult to explain to a regulator or on an audit review, can create a perception among employees that sanctions for misconduct will not be applied, and can discourage individuals from coming forward with concerns in the future.  

Many companies are therefore turning to internal processes to ensure employee misconduct is fully investigated and properly dealt with.  

The Process 

An employer faced with investigating potential employee misconduct should, at the earliest opportunity, consider and decide on the scope of the investigation and whether  it has broader legal or reputational ramifications for the company requiring legal advice.  

In many cases there will be a number of competing issues to be investigated and the company will need to prioritise those issues according to their severity, and other compelling factors relevant in the circumstances. 

Occasionally, some issues may need to be held in abeyance pending the investigation of other aspects and then resumed at a slightly later stage. 

Once the decision is made to proceed with an investigation, the employer then needs to decide the appropriate process, including timing of interviews; interview subjects; review of documents; how any decision on disciplinary action will be taken; and internal or external reporting requirements. 

In some Asian jurisdictions, such as Japan and Korea, an employer is legally required to undergo a fair investigation process before any ultimate decision as to potential disciplinary measures can be taken. 

As there is no “unfair dismissal” regime in Hong Kong, there is no statutory requirement with regard to a fair procedure prior to disciplinary action such as dismissal in the case of employee misconduct. However, this does not mean employers can do as they please during an internal investigation process.  

Following the identification of potential misconduct, a decision to terminate or take other disciplinary measures which is made in an unfair manner could still be challenged in the Labour Tribunal or in court on grounds the employer is in breach of its duty not to undermine the trust and confidence of the employment relationship. 

There is no “one size fits all” approach to internal investigations. Good clear processes are critical, in case the company needs to evidence what steps it took to investigate at a later stage, but what needs to be done depends on the particular circumstances of the case. However, there are certain issues that employers need to consider.  

An investigation should commence as soon as reasonably practicable, so that the memories of key witnesses are still fresh. Steps should also be taken to prevent destruction of relevant evidence, including emails and audio recordings.  

The company should decide on those in charge of the investigation. In many cases, the investigator(s) will be impartial or independent to provide objectivity as they have no involvement in the matter and no conflict of interest.  

However, in some cases it may be important to have someone involved in or leading the investigation who understands the subject matter and the characters involved. In most organisations, the role of investigator can be filled by an HR officer, internal legal or compliance officer, a manager from another department, or an external third party.  

During the investigation, employers should put any concerns and allegations to the employee in question, and provide an opportunity for the employee to explain their position. Employers should also ensure that internal investigations are conducted with confidentiality in mind and all employees involved should be reminded of the need to maintain confidentiality in order to safeguard against retaliation, protect the reputation of those involved and reduce the risk of disruption in the workplace. That said, given that the results of the investigation may need to be reported internally within the company and potentially externally if a regulator or other authority is involved, it is usually not possible to guarantee individual employees absolute confidentiality. 

The Safeguard  

As with all instances of employee discipline, employers should record  the process and key findings of the investi8gation. Proper documentation allows an employer to justify its disciplinary decision should the employee challenge that decision at the Labour Tribunal. 

The company should decide before the investigation commences, if any investigation and the record of it needs to be covered by legal privilege.  

Internal investigations can be costly and time-consuming, but failing to review and respond to an incident of employee misconduct appropriately can create serious issues for an organisation. A well-established internal investigation procedure is critical for upholding the culture and reputation of the company. The rights of both the company and the individual should be continuously balanced in the process. 

Julia Gorham is a partner and head of DLA Piper’s Asia employment practice. She has a particular focus on contentious employment disputes, as well as conducting internal and regulatory investigations for clients. DLA Piper is a global law firm with 4,200 lawyers located in more than 30 countries throughout the Americas, Asia, Europe and the Middle East

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