Investigating an incident of misconduct that has occurred in the workplace, or which is otherwise related to employees, may essentially seem to be a straightforward task. However, when one considers the contractual and statutory rights that employees have, conducting the investigation can be a minefield which, if not navigated successfully, will give rise to expensive and damaging employment claims.
Whether the investigation relates to suspicion of theft or fraud, or allegations of bullying or harassment the principles of employment law mean that the same fair processes must be followed.
Preparing to Investigate
Tempting as it is to jump straight in, particularly where the allegations are serious and require urgent investigation, before starting any investigation, it is vital to consider how the chain of events it triggers may end. Employees may (particularly if the workforce is unionised) have contractual rights relating to the way the investigation is to be conducted and in some circumstances contractual disciplinary procedures that must be followed. If contractual rights are breached, claims arising from the breach can be substantial – and the employer may loose the benefit of vital contractual protections in relation to confidential information or the non solicitation of clients by the employee once employment ends.
In a breach of contract claim damages awarded are the losses that flow from the breach. This will include payment of salary during contractual notice (or the remainder of the term if the contract is a fixed term contract – which in the financial services sector is not uncommon), loss of equity participation rights, bonus etc all of which can be substantial. In addition, the breach may give rise to the employee pursuing a statutory claim, such as a claim for unfair dismissal. Indeed, even without breach of contractual rights the failure to treat employees in an appropriate and correct manner, following established case law principles, in relation to the investigation of disciplinary offences will give rise to claims of unfair dismissal (if the employee is dismissed appropriate procedures were not followed), constructive unfair dismissal (where the employee treats the employer’s conduct is tantamount dismissal), and, almost certainly, additional claims of discrimination.
Whilst there is a cap on the level of compensation that applies to awards for unfair dismissal, no such cap applies in relation to discrimination claims and/or whistle-blowing claims – making them attractive additional claims, even if just to put pressure on the employer. The fear of an uncapped claim can be sufficient to encourage an employer to increase settlement proposals substantively – particularly as discrimination claims etc can be hard to disprove.
The implied duty of Trust and Confidence
The implied duty of trust and confidence is a vital element of the employer-employee relationship. It forms an essential component of the contractual relationship. Overzealous investigation of an employee suspected of misconduct could damage or break the relationship of trust and confidence – giving rise to claims of constructive unfair dismissal and breach of contract. Often one of the strongest arguments an employee can run will be that the actions of the employer (or investigator) have demonstrated lack of trust and confidence meaning that the contractual nexus between employer and employee is at an end. In such circumstances the employee may metaphorically have a gun to the employer’s head, particularly if he is a key employee with provisions in his contract that prevent solicitation of clients and staff and protect confidential information and / or IP rights after the employment relationship ends. Breach the duty of trust and confidence and contractual protections fall away.
In some instances covert surveillance of employees suspected of misconduct may well, if discovered, be alleged (and found) to damage or break the relationship of trust and confidence – after all is one not innocent until proven guilty? The covert surveillance of one employee as opposed to others may be taken to imply an inherent belief in that individual’s guilt. If surveillance is to be used, cast the net appropriate wide and make sure you can justify a) the decision to use it and b) the employees placed under it.
If an employee is to claim of unfair dismissal, he must usually satisfy the ‘minimum service requirement’ (one year’s service if employed before April 2012, and two if employed thereafter). Compensatory awards for unfair dismissal are capped – the maximum compensatory award (over and above the basic award which is calculated in the same way as the statutory redundancy payment) is fixed at £72,300 (increasing annually). Consequently unfair dismissal claims are often coupled with other claims were there is no such cap in order to increase pressure on the employer – claims for discrimination or relating to whistleblowing have no minimum service requirement and no cap on compensation.
In order to avoid a successful claim for unfair dismissal an employer must have a fair reason dismissal (misconduct being one) but, and almost more importantly, must follow a fair procedure. Procedural breaches alone, even if there is a fair reason for the dismissal, are sufficient for employees to bring successful claims. Whilst our focus here is not the disciplinary procedure (where procedural requirements are ignored at your peril), flawed investigations can result in successful unfair dismissal claims, even where the employee is guilty of misconduct. Whilst the misconduct may reduce the level of compensation awarded, it will not change the fact of unfair dismissal – something which can be critical. In some circumstances – particularly where there are equity participation rights, the fact of a technical finding of unfair dismissal, even in circumstances where the employee is guilty of the misconduct can trigger substantially more advantageous terms for the employee’s exit from the scheme. Such terms are designed to protect employees from unlawful dismissals and can therefore often come into play on even the seemingly most unimportant technical breaches. Consider the executive whose contract contains equity rights designed to lock him in for a period of time. Such rights may provide for a substantially increased share buy back price value, say, a two year window. Useful from the employer’s perspective as it provides the individual with a financial incentive to remain in employment. Such provisions will, in order to properly protect the employee, provide that dismissal without cause (the Americanised shorthand for a fair reason), or a finding of unfair dismissal, will result in the higher price being paid if the employee is dismissed earlier. Lack of cause (i.e. a fair reason for dismissal) or, failure to comply with a procedural technicality could be costly!
The Three Stage Test
In order to establish that an employee has not been dismissed unfairly, an employer must satisfy the three stage test:
- Firstly it must establish that it believed the employee to be guilty of misconduct;
- Secondly, it must show that it had reasonable grounds for believing that the employee was guilty of that misconduct; and
- Finally it must demonstrate that at the time it held that belief, it had carried out as much investigation at was reasonable (rather raising the question of how much investigation is too much investigation?).
When considering what investigation is required, there are a number of factors that should be considered. The investigation must be reasonable, appropriate and proportionate. One must consider the gravity of the allegations versus the effect could be had on the employee in the event subsequent disciplinary proceedings (or the investigation itself) establish that the employee is blameless. Investigation must be even-handed, in particular if suspension is involved and the investigator must avoid undermining the employee’s position. If an individual is suspended for a substantial period of time one creates the “no smoke without fire” syndrome. Even if the employee is blameless a return to work may be impossible – a constructive dismissal. In addition, investigators need to ensuring the investigation does not destabilise the workforce generally by being heavy-handed or overly intrusive and suggesting a ‘witch-hunt’ which can do substantial damage to the employer through loss of staff, loss of morale and loss of productivity.
Burden of Proof
An employer does not need to prove guilt beyond reasonable doubt, it simply needs to behave as a reasonable employer would. If you were at the receiving end, would you believe the investigation was fair, reasonable, proportionate and appropriate? Or, would you feel it was oppressive and searching only for proof of guilt, rather than also trying to establish innocence. The tone of the investigation can set tone for the entire chain of events that follows.
One needs a clear distinction between the investigation stage of any procedure and the disciplinary stage. Consider at the outset who, from within the employers organisation will be responsible for the investigatory stage, who will conduct the first stage of any disciplinary proceedings, and who will hear any appeal. Guilt must not be predetermined. Even the fact of a confession does not obfuscate the need for reasonable investigation and proper disciplinary procedures. Even if an employee confesses during the investigation, the failure to hold a formal disciplinary hearing can prove fatal to the fairness of any dismissal. Yes, really!
Suspension suggests guilt. Simple as that. It shouldn’t but it does and colleagues will almost certainly view a suspension as an indication of an employee’s guilt. Suspension should therefore only be imposed where necessary, for example where not suspending individual could undermine the investigation or could threaten the safety of colleagues or members of the public, and should be kept as short as possible. Consider the implications of suspension if an employee is innocent of wrongdoing? Any investigator must also carefully consider whether the employer has the contractual right to suspend. In the event there is no contractual right of suspension, doing so may well amount to a constructive dismissal, with all of the consequences outlined above. Yes, claims can be created before the investigation even begins. Suspension should never be without pay and should last only as long as is absolutely necessary. Out of sight is often out of mind, but the employee must be kept appraised of the investigation’s progress and the likely duration of their suspension.
Proportionality and Privacy
Throughout the investigation process an employer must ask whether the evidence being gathered is necessary and whether the way in which is being obtained, used and disclosed to others is reasonable and proportionate. Personal e-mails should not be read. Employees’ telephone calls should not normally be recorded without employees being notified and information should be disclosed to witnesses only to the extent that it is necessary for them to comment upon. When considering the appropriate number of witnesses is vital to act proportionately – do you really need 5 employees saying the same thing, where two would do? One must consider the impact of having spoken to the suspected employee’s colleagues if he is innocent of wrongdoing.
Witness statements can be kept confidential (to an extent) but ultimately total anonymity is not usually possible. Whilst the knowledge of the identity of persons making allegations is not a prerequisite of the fair disciplinary hearing – the identity of witnesses will almost certainly come out if the matter proceeds to a claim for unfair dismissal in the Employment Tribunal. Be careful not to make promises you cannot keep.
Irrespective of any belief in relation to an individual’s guilt, as an employee the individual has a whole host of rights. In addition to contractual rights and the potential for claims of discrimination or whistle blowing detriment, reasonable adjustments to usual processes may be required for employees with a disability (at the investigation stage as well as during the disciplinary process). Employees also have the right to be accompanied to a disciplinary hearing (one at which a disciplinary sanction may be imposed, as opposed to investigatory meeting) by a colleague or Trade Union representative. That right does not apply at the investigation stage – despite the assertion of many an employee. It is not a requirement permit an employee to have legal representation at the disciplinary stage of an internal disciplinary process (save in exceptional circumstances – such as the recent cases involving the GMC and doctors, where dismissal for misconduct is tantamount to the end of their career) and should usually be resisted.
In order to establish the fairness of the process it is imperative that the investigation is appropriately recorded. Contemporaneous notes should be kept, and these must be accurate – it is advisable for the employee to be given the opportunity to review them. Bear in mind that the investigation will provide the ultimate justification for subsequent decisions, the first domino as it were, and therefore it is advisable not just to record the facts, but also why decisions are taken.
Minimising the Risk of Claims
In addition to ensuring the fairness of the investigation and subsequent disciplinary proceedings, it is vital that the risk of other claims, such as those for discrimination or that the employee has suffered a detriment as a result of whistleblowing, are minimised.
Perception is reality – if an individual perceives a process as transparent and inherently fair the risk of claims is minimised. Any departure from a standard procedure applicable to others will almost certainly be cited as evidence of discrimination. Consistency is the key.
Employees subject to disciplinary proceedings will often claim stress and be signed off work, hampering the investigation and any disciplinary process. If the employer’s sickness absence procedure is properly drafted it will provide that any company sick pay will not be paid to an employee who is subject to disciplinary proceedings prior to becoming “ill”.
It is all About Risk Management
Any investigation carries the risk of claims from employees, but provided the investigation is proportionate and fair and due process followed in relation to any disciplinary proceedings the risk of successful claims should be minimised. Consider at the outset where the process may end, sometimes working back from your likely statements in the witness box at the Tribunal defending a claim of unfair dismissal (coupled with whisteblowing and discrimination for good measure) and the evidence you will give there in relation to the fairness of the procedure, is actually the best place to start!
First published in Fraud Intelligence – www.counter-fraud.com – February 2013