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Jessica Anderson, Graduate Associate

The Fair Work Commission has identified that it may be prudent for employers to engage an independent third party to conduct a workplace investigation where an employee vigorously asserts that an internal investigation into bullying allegations will lack transparency or independence.

Background

In a Buy Yellow Xanax Bars of the Fair Work Commission, an employee claimed she had been bullied at work by her manager, against whom she had made a number of complaints previously. The allegations were the subject of two internal investigations that found the manager had acted reasonably. However the employee insisted that the investigations produced an unfair result.

Deputy President Sams was satisfied with the employer’s internal investigations, finding that they were “sound, appropriate and responsive” and allowed the employee “every opportunity” to present her version of events, and noted that it was the employee who was acting unreasonably.

In making his determination, Deputy President Sams said that “no matter what the result of any investigation of her complaints, particularly those conducted by the employer” the employee was “not prepared to accept any outcome, unless it unequivocally vindicated her complaints”. He then went on to recommend an external investigation where it is clear that the employee will not accept the findings of an internal investigation.

Lessons for employers

  • Consider engaging an independent third party to conduct an investigation where it is apparent that an employee will not accept the findings of an internal investigation.
  • Be mindful where an employee’s focus appears to be on exacting revenge or retaliation. That is not the intent of the bullying jurisdiction.
  • A best practice investigation will be “sound, appropriate and responsive” and will provide the employee with every opportunity to present their version of events.
  • Even though an employee is asserting that they are being bullied, this does not mean that they are insulated from any disciplinary action. For example, it may be appropriate for an employee to be disciplined where there is a constant refusal to comply with the reasonable directions of their manager.
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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 Alprazolam Online Paypal, 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:

  1. a lack of pre-investigation planning;
  2. a morphing of the investigation and disciplinary steps;
  3. relying on “untested” information, unduly favouring one account and ignoring discrepancies;
  4. failing to establish a process that is perceived as independent and free of bias; and
  5. 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 [2014] 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 [2014] 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

Confidence

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).

Confidentiality

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.

Key Takeaways

  • Mistakes in investigations can be very costly for employers and employees. There is a need to consider what the best approach is to conducting workplace investigations taking into account the needs of the business. 
  • One of the most significant considerations for employers is whether to engage an external investigator. 
  • While not appropriate in every circumstance, there are a variety of benefits attaching to engaging an external investigator to conduct workplace investigations, including that participants in the investigation process are likely to be more confident that the findings of an external investigator are unbiased, and accordingly may be less likely to challenge them.
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It’s a gloomy, grey Monday morning. You arrive at your desk to find a long document sitting at the top of your in-tray - it’s a complaint lodged against one of your Executive Team. The complaint is flagged for urgent attention, with a note from your 2IC recommending that an investigation be held as soon as possible.

You pick up the phone to call your HR manager. Then you look at the complaint more closely: the alleged perpetrator is a member of your HR team. What do you do?

The above is an increasingly common scenario. Workplace investigations are becoming increasingly prevalent, in part due to the introduction of the Fair Work Act anti-bullying regime and as part of a general increase in cases (complaints and grievances) relating to workplace behaviour. The fact that performance management can be a genuine (or not) source of grievance means that complaints related to alleged bullying in this arena often include reference to the HR professionals conducting, or involved in, the process. 

Investigations are typically conducted internally for the purposes of taking remedial or disciplinary action, or for discovering the factual circumstances behind a grievance. 

But what happens when the persons who usually carry out the investigation are also named as alleged perpetrators of the conduct? 

Is an investigation required?

It is important that organisations treat complaints and grievances with necessary seriousness, as a failure to do so may compromise their defence if the matters raised internally progress to bullying claims and/or litigation. Treating complaints and grievances with seriousness requires, at the very least, compliance with any applicable contractual terms, policies or procedures. Those terms, policies or procedures may or may not indicate when an investigation must be conducted (and how).

While each case will turn on its own facts because of the individual nature of the documents governing the process, there are some clear circumstances that may justify the need for an investigation, such as where:

  • the allegations relate to the conduct of another employee for which the employer may be vicariously liable or which may cause a risk to health or safety;
  • the allegations of misconduct are complex, and an investigation is required to clearly establish the relevant facts and circumstances;
  • the allegations relate to “serious” misconduct; 
  • the allegations could cause an organisation reputational and brand damage;
  • the allegations implicate senior executives and managers; or
  • a formal investigation is required by contract or an industrial instrument as part of the disciplinary process.

Who should conduct the investigation?

Employees, particularly when subject to an investigation, like to know that decisions made in the workplace are impartial and free from bias. An effective workplace investigation allows each of the participants to be heard, for evidence to be submitted and for an impartial decision to be made on the facts and merits of each case.

As such, while in many cases it may be appropriate for your HR team to conduct an investigation, there are many scenarios in which an external investigation is prudent, including:

  • where the incident involves sensitive issues in which you need to ensure legal professional privilege, to the extent possible; 
  • where the relevant HR professionals do not have sufficient expertise or confidence to conduct the investigation; 
  • where there is no internal person that is able to undertake an investigation at arm’s length, for example where the relevant internal person has a conflict of interest (because they may be directly or indirectly implicated, or their manager is);
  • where the relevant internal person is going to be the decision maker (as to the outcome in respect of the investigation’s findings); or
  • where the internal investigation has failed to resolve the matter and the aggrieved employee seeks to escalate the matter (whether by way of an appeal against the findings, as an entitlement under the governing documentation or from an organisational viewpoint if that will prevent the employee lodging an anti-bullying application or some form of external complaint). 

In situations like this engagement of a firm, like PCS, with skill and experience in investigations will ensure the process is invested with objectivity, fairness, natural justice and as a consequence the organisation is likely to save on costs, time and possible further litigation.

 

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Elizabeth Magill, Senior Associate

The New South Wales (NSW) Court of Appeal recently handed down its decision in Bibby Financial Services Australia Pty Limited v Sharma (2014) NSWCA 37 confirming Mr Sharma’s entitlement to the payment of a “special bonus” following the termination of his employment.

PCS successfully acted for Mr Sharma in both his proceedings before the Supreme Court of New South Wales and the recent appeal proceedings brought by his former employer, Bibby Financial Services Australia (“Bibby”), in the NSW Court of Appeal. Both decisions highlight the critical importance of undertaking workplace investigations and ensuring that any subsequent decisions made with respect to employees are based on a sound and justifiable decision making process.

Sharma v Bibby Financial Services

The Facts

Proceedings commenced in the Supreme Court arose from the termination of Mr Ashley Sharma’s employment on the grounds of serious misconduct. Mr Sharma was employed as a Sales Director of Bibby from 2002 to 2009. Shortly before Bibby terminated Mr Sharma’s employment allegations were made that Mr Sharma had engaged in sexual harassment including inappropriate touching, inappropriate comments and unwelcome attention. As a result of the allegations Bibby commenced an investigation. The NSW Supreme Court found that a number of features of Bibby’s investigation were remarkable and demonstrated that the investigation was seriously and fatally deficient.

Despite Bibby concluding that Mr Sharma had engaged in conduct that was “unbecoming of a director”, none of the witnesses corroborated the allegations, only one witness gave “some small support” to the allegations and most remarkably, Mr Sharma was not interviewed, the allegations were not put to him and at no time prior to the termination of his employment was he given an opportunity to respond. The Court also noted Bibby’s failure to follow it’s own grievance procedure as a further feature of the investigation that demonstrated its inadequacy.

“Critical importance of undertaking workplace investigations”

Despite the lack of evidence supporting the allegations, Mr Sharma was called into a meeting on 4 February 2009 and advised that his employment was to be terminated on notice. Mr Sharma was invited to consider resigning and sent a deed of release with an offer of notice and a pro-rata amount of his “special bonus” valued at $1.4 million, which was due to be paid shortly after the termination of his employment. Following discussions regarding Mr Sharma’s termination, which ultimately broke down, Bibby then purported to terminate Mr Sharma’s employment for serious misconduct and Mr Sharma was not paid notice or his special bonus.

The Court’s view

At first instance, and reaffirmed on appeal, Bibby was held to have elected to terminate Mr Sharma’s employment with immediate effect at the meeting on 4 February 2009 and therefore, could not later elect to terminate Mr Sharma’s employment for serious misconduct. The Court held that Bibby terminated Mr Sharma’s employment in full knowledge of the allegations yet choose not to rely on them, preferring to terminate Mr Sharma’s employment on notice to “save some unpleasantness”. As a result, Mr Sharma was entitled to six months’ notice (his contractual notice period) and payment of the special bonus. The Court of Appeal upheld this finding concluding that the effective date of termination was 4 February 2009 and:

“…what occurred after 4 February 2009 is that Bibby became impatient with Mr Sharma’s failure to accept the offer contained in the draft Deed of Release, which provided for substantial payments to be made by Bibby to Mr Sharma, and then engaged in a purported cl13.5 process in an attempt to disqualify Mr Sharma from any entitlement to the Special Bonus or payment in lieu of notice.”

With respect to Bibby’s argument that regardless of a finding that Mr Sharma was terminated on notice, Bibby was entitled to rely on Mr Sharma’s conduct as constituting serious misconduct justifying termination for cause, this argument was rejected. On appeal the Court held Bibby did not have a valid right of termination. The Court held that Mr Sharma was entitled to procedural fairness before any decision was made by Bibby to terminate his employment for cause, relying upon the allegations of serious misconduct. The Court further held that Bibby was “…obliged to make its final decision in good faith taking into account the factual material before it…”, including Mr Sharma’s response. After considering the specific allegations against Mr Sharma the Court held that two of the allegations had not been proved and the remaining three, even if proved “…did not amount to serious misconduct that would warrant dismissal.”

Key take-aways

The Sharma case is a compelling message to employers about the importance of conducting a proper, full and impartial investigation, and highlights the necessity of ensuring:

  • procedural fairness, interviewing all relevant witnesses and putting allegations to the respondent with a sufficient opportunity to respond;
  • that employers follow their own policies with respect to investigations and disciplinary matters;
  • that there is sufficient evidence to substantiate any allegations made, particularly if they are to be relied upon to justify disciplinary action; and
  • that disciplinary decisions are a fair and proportionate response to the conduct and based on a sound decision making process that considers all the evidence.

With employers increasingly called upon to justify disciplinary decision, the case highlights the need for employers to have evidence and a clear and cogent decision making process that will withstand scrutiny.