31 August 2016
Alison Spivey, Associate Director
With increased scrutiny surrounding workplace investigations, the importance of getting investigations ‘right’ has never been greater. In the wake of the launch of People + Culture Strategies’ White Paper on Workplace Investigations, this article will explore how engaging an independent external investigator can minimise the financial, legal and reputational risks associated with poor investigation practices.
Workplace investigations are becoming increasingly important due to the proliferation of cases arising from allegations of unacceptable workplace behaviour and the expectations that are placed on employers in terms of how they manage those allegations. Often, issues that are taken into account by a court or tribunal during employment-related litigation will have first been investigated internally for the purposes of taking remedial or disciplinary action, or for discovering the factual circumstances behind a grievance. It is therefore important that organisations carry out investigations properly, as a failure to do so can, amongst other things, compromise how they defend the matter if it progresses to litigation.
The White Paper, which was released in August 2016, provides an analysis of the responses of 110 PCS clients and partner organisations to a survey directed at identifying the circumstances in which workplace investigations are undertaken. Respondents represented a variety of industries, ranging from professional services and banking to hospitality and manufacturing. The respondents also varied with regards to the size of the organisations (ranging from 1 to 1,000+ employees) and their annual turnover (ranging from $500,000 to $100 million+ per annum).
The responses to the survey reflected in the White Paper not only reinforce the risks for employers that may arise from poor investigation practices, but also highlight the need for employers to perform a cost/benefit analysis in determining how to best approach workplace investigations more generally.
Key mistakes in internal investigations and the potential risks
The risks associated with poor investigation practices are not insignificant, and mistakes can expose employers to significant financial, legal and reputational risks. And with 40% of respondents to the White Paper survey answering “yes” to having legal proceedings commenced at least once following an internal investigation, it is imperative that employers consider whether the risks of investigating internally outweigh the benefits. Key mistakes that employers often make during the course of an internal workplace investigation include:
- a lack of pre-investigation planning;
- a morphing of the investigation and disciplinary steps;
- relying on “untested” information, unduly favouring one account and ignoring discrepancies;
- failing to establish a process that is perceived as independent and free of bias; and
- delay in undertaking an investigation that fuels speculation and gossip and can jeopardise appropriate disciplinary action.
More often than not, these mistakes are the result of a lack of experience and skill on the part of the internal investigator appointed by the employer. The potential consequences of utilising an inexperienced internal resource to conduct a workplace investigation were made clear in Francis v Patrick Stevedores Holdings Pty Ltd  FWC 7775:
“Ms Green had never conducted a disciplinary investigation into allegations of physical assault at the workplace. Her inexperience and lack of forensic skills as to the assessment of witness evidence, was a major contributory factor to the weaknesses exposed in the respondent’s evidentiary case. This should not be seen as a criticism, per se of Ms Green, but rather it demonstrates a failure of senior management to recognise the seriousness of the issues and their causes and a failure to independently assess the investigator’s findings and recommendations. Ms Green should not be blamed for these failures.”
The employee’s dismissal was overturned by the Fair Work Commission due to the flaws in the investigation that led to it.
The case of Richardson v Oracle Corporation Australia Pty Ltd  FCAFC 82 also highlighted the significant financial liabilities employers expose themselves to when failing to properly investigate complaints. In that case, the Court criticised Oracle for requiring the complainant to maintain contact with her colleague (who was ultimately found to have sexually harassed her) during the investigation process. Only once the investigation had been completed were the two separated at work. The Court was satisfied that the requirement to remain in contact during the investigation contributed in part to the complainant’s psychological injury for which she was awarded $130,000 in damages.
What are the advantages of an external investigation?
While external investigations can involve an upfront cost for an organisation (in terms of engaging an investigator to conduct the investigation and provide a report), this needs to be weighed up against the significant costs involved in upskilling internal personnel sufficiently to conduct appropriate workplace investigations, the potentially greater risk of having to defend the internal process in any subsequent legal proceedings and the payment of any compensation that may be ordered.
In this regard, we note that the respondents to the White Paper survey indicated that they were investing an average of one-five days per year per staff member in training their staff on how to conduct investigations. However, when this figure is considered in the context of how many respondents have had legal proceedings commenced against them following an internal investigation, the question arises as to whether the training that is being provided to train staff in conducting workplace investigations internally is sufficient or whether those resources could be better allocated.
There are also significant benefits associated with engaging an external investigator to conduct workplace investigations. Two of the more significant of those benefits (confidence and confidentiality) are discussed further below
One of the benefits of engaging an external investigator to conduct workplace investigations is that it may provide all participants in the investigation process with greater confidence in the process and its outcomes. The responses to the White Paper survey:
- confirmed the importance of maintaining perceptions of impartiality and due process to maintaining the integrity of a workplace investigation;
- revealed that respondents remained concerned about the capabilities of internal personnel conducting investigations despite almost 69% of respondents investing in at least one day’s training for such personnel;
- disclosed that respondent organisations which conduct only internal investigations were nearly two and a half times more likely to cite concerns around legal proceedings as a reason preventing them from implementing recommendations arising from an investigation. They were also 56% more likely to be uncertain about how to implement any recommendations following an investigation; and
- confirmed that respondents to investigations are more likely to commence legal proceedings in circumstances where they have concerns about the manner in which the investigation process was conducted and its overall fairness.
These findings from the White Paper survey (in isolation) reflect a potential lack of confidence in internal investigations and the manner in which they are conducted, the outcomes of the investigations (and implementing those outcomes) and an increased likelihood of legal proceedings in response to the investigation outcomes.
While it is acknowledged that there are advantages in having internal personnel understand the investigation process and managing investigations into minor or “everyday” workplace issues, employers ought to consider whether it may be a better investment to engage an experienced external investigator in relation to issues that have potentially significant consequences for their organisation.
In engaging an external investigator to conduct workplace investigations an employer is also “buying” access to the benefit of the external investigator’s skills and experience, not only in terms of ensuring that the investigation process is conducted in an appropriate way, but also in terms of any recommendations that are made as to what may be appropriate action by the employer in response to the investigation findings (assuming that the investigator is also requested to provide recommendations following the investigation).
A further benefit of engaging an external investigator to conduct workplace investigations is the additional confidentiality, or perception of confidentiality, attaching to an external investigator’s involvement in that process. This too may also enhance the perceived integrity of the investigation process with the investigation participants, in turn reducing the risk of disputes in relation to the investigation outcomes.
The use of an external investigator may enhance the perception that the matter will be investigated at “arm’s length” and it is more likely that the subject matter of the investigation (and the investigation itself) will remain confidential. Further, an external investigation is less likely to impact upon ongoing workplace relationships (to the extent that the investigator will not remain in the workplace on completion of the investigation process), which is particularly important if the investigation relates to personal or sensitive matters.
Additional benefits in respect of confidentiality can also be achieved if an employer engages a lawyer as an external investigator, to the extent that the employer may be able to claim legal professional privilege in respect of the workplace investigation. This privilege protects certain oral and written communications between lawyers and their clients which are prepared for the dominant purpose of providing legal advice or services relating to litigation (actual or contemplated). This facilitates a free exchange of information between the lawyer and client, so that the client can be properly advised, without fear of potentially prejudicial information being disclosed at a later date.
While legal professional privilege will not automatically attach to an investigation report prepared by a legal practitioner, it can be of significant benefit to an organisation if it is established. The obvious benefit of legal professional privilege is that communications and documents attracting privilege retain their confidentiality and need not be disclosed, unless privilege is waived. This is particularly important in circumstances where documents contain information about matters that could bring the organisation into disrepute, or if information is of a highly sensitive nature, such as pertaining to sexual harassment investigations.
The case of Bowker and Ors v DP World and Ors demonstrates the value of legal professional privilege for organisations. In this case, Ms Bowker and others sought access to a number of documents, including an investigation report, in connection with their bullying proceedings commenced against DP World. DP World’s lawyers had engaged an independent investigator to provide them with advice in relation to the bullying complaints. DP World attached a summary document outlining the findings of the independent investigation to one of the witness statements it had filed with the Fair Work Commission (“Commission”). The applicants submitted that legal professional privilege and client legal privilege had been waived by attaching this summary document. The Commission held that the investigation report and associated documents were privileged and that this had not been waived in the course of the bullying proceedings. In particular, the Commission determined that the documents “came into existence for the purpose of enabling the solicitors for DP World to provide legal advice”. Accordingly, DP World’s investigation report remained confidential.
What other factors need to be considered?
The decision as to who will conduct an investigation is crucial to the success of that process. Ultimately, a range of factors will influence an employer’s decision as to whether to appoint an internal or external investigator. Central to that decision will be whether the employer considers that it has the appropriate resources to conduct the investigation internally, having regard to:
- the nature and seriousness of the matters the subject of the complaint (including any sensitive matters);
- the seniority of the employees involved in the investigation;
- the degree of bias that may be perceived if the investigation were to be conducted internally;
- the skill and experience within the employer’s business for conducting the level of investigation required;
- the timing or urgency of the investigation, including whether the complaint has been raised during a peak period for the employer, or if there is a risk to health and safety; and/or
- the extent of the resources (time and personnel) that would need to be dedicated to the investigation when compared with the costs of an external investigator.