Richard A. Schwartz
Vorys, Sater, Seymour and Pease LLP
If you investigate, can you keep the investigation report private? Yes. Can you keep the substance of the employee interviews private? Yes. Can you keep prevent employees from talking about the events? It depends.
Employers must be careful about imposing confidentiality on employees related to internal investigations. Operating company officials would be well advised to keep some of the key considerations, outlined below, in mind if they wish to keep an investigation private.
Most notably, there have been recent efforts by the National Labor Relations Board (NLRB) and Securities and Exchange Commission (SEC) to preclude employers from requiring confidentiality in internal investigations.
Investigations provide the company with a means to privately assess what went wrong and why; potential remedial actions; and possible liability and damages to others. They are also a potential road map for making a case against the company. Consequently, if the company conducts an investigation, it should first determine if it intends for the investigation to be privileged.
To keep an internal investigation confidential, keep in mind these four basic principles.
First, privileged investigations must be conducted by or under the direction of an attorney.
Second, the investigator (preferably an attorney) must know (and realize) who their client is. Communications between a lawyer and someone who is not a client are not protected. Who the client is could vary based on the applicable law. For fixed platforms on the outer continental shelf, the law of the adjacent state applies. For maritime claims in state court, state privilege law applies. For maritime claims in federal court, federal privilege law applies.
Generally, in the corporate context, the client is an employee who is being interviewed at the direction of his or her corporate supervisors about matters within the scope of the employee’s corporate duties. This includes upper-level management, mid-level management, and non-management. It does not include contractors. It does not include experts who testify. It may not include insurers, partners, and joint venturers.
Third, if privileged communications are shared with non-clients, the privilege may be lost. This can occur by sharing the details of the investigation or the investigation report with persons other than the key decision makers.
Fourth, the attorney/client privilege extends only to communications and not to facts. Except in rare circumstances, a client cannot be compelled to talk about communication with his or her attorney. This does not prevent an employee from being questioned about the facts of an incident.
Often, a company will be asked to give its privileged investigation report to a governmental agency. Clearly, this constitutes a waiver of confidentiality of whatever is in the report. It is less clear whether this constitutes a waiver of all information and every document related to the same subject matter of the documents actually disclosed. For now, this depends on the jurisdiction that governs the dispute.
Recently, some governmental agencies such as the NLRB and SEC have taken positions which create a very real tension between the protections of the attorney client privilege and the rights of employees. For years, it was common for attorneys conducting corporate investigations to advise interviewees that the discussions were privileged and should not be disclosed to anyone else, and the employee should not to talk to others about the events. Recent developments suggest an evaluation needs to be made in each case regarding whether confidentiality may be demanded, and whether companies must advise employees of certain rights.
The NLRB has interpreted Section 7 of the National Labor Relations Act to provide employees, whether unionized or not, with the right to discuss disciplinary investigations involving themselves and coworkers. An employer may restrict an employee from discussions only when the employer shows it has a legitimate and substantial business justification that outweighs the employees’ Section 7 rights.
It is the employer’s responsibility to determine if, in each investigation, a witnesses needs protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover-up. Only if the employer determines that such corruption of the investigation would likely occur without confidentiality, is the employer free to prohibit employees from discussing the subject matter of the investigation among themselves.
Similarly, the SEC has a rule that prohibits any action that impedes an individual from communicating directly with the Commission about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement with respect to such communications. Consequently, a confidentiality agreement prohibiting an employee from discussing the particulars of an investigation interview and the subject matter discussed during the interview without law department approval was recently held to be unlawful.
So, what can a company tell its employees regarding confidentiality during an investigation? In the appropriate case, the employee may be told not to talk to others and keep the interview confidential. Additionally, based upon the amended confidentiality statement approved in the SEC enforcement action discussed above, employees should be informed that nothing prohibits the employee from reporting possible violations of federal law or regulation to any government agency or entity, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation; and that the employee is not required to notify the company of such reports or disclosures.
The attorney/client privilege gives companies the ability to conduct investigations in private. However, this protection has its limitations. The best practice is for companies to have legal advice in advance of the investigation. Otherwise, privilege may not exist or may be lost; or the investigation could run afoul of federal law.
Richard A. Schwartz is a partner in the Houston office of the law firm of Vorys, Sater, Seymour and Pease LLP. He has tried more than 60 cases in many forums in the United States, and has investigated and handled significant matters arising from refinery fires and explosions and well control events at drilling locations. Schwartz has taken industry courses in refining, refinery economics, and well control, and holds the IADC certification for well control at the supervisor level. He can be reached at firstname.lastname@example.org.