One of your law firm’s clients is an ‘on-the-verge-of-success’ biotech Company preparing an IPO.
The President of the Company calls you in a panic. JANE, a sales representative, claims her boss, DAVID, the star sales manager, has been hitting on her at sales conferences, inviting her on his boat during business hours and not giving her the same opportunities to develop new clients as the men in the department. The President tells you, “I don’t want to lose David. We need him to get our numbers up for the IPO. BETTY, the CFO who also moonlights as our HR department, told me we need to investigate Jane’s complaint. I guess I will just have Betty do it and get it over with so we can get back to business. What do you think?”
This call is chock-full of issues, sexual harassment and discrimination to start. Not to mention the opportunity to educate the President about the Company’s tremendous potential liability and cultural issues.
To protect against or limit liability under the Farragher-Ellerth defense, the Company should launch a speedy investigation to show “the employer took reasonable care to prevent and promptly address the harassing behavior”. But who is best suited to conduct the investigation? Betty or should the Company hire an independent investigator? As the firm’s attorney, you and the President should consider:
1. What are the risks to the Company? What claims are being raised, and how serious are they? Is Jane likely to take these claims to litigation? Will an internal or an independent investigator lend more credibility to any defense? Has Jane hired an attorney? What is the cost-benefit analysis of an independent investigator versus Betty doing the internal investigation?
2. How much time and resources can the Company devote to the investigation? Thorough investigations take a lot of time and focus and detract from the business. Does the Company have the resources to devote to the investigation?
3. The experience of the HR Department. Some companies have limited or inexperienced HR staff. Does the HR team have the skills to perform the investigation in a professional, unbiased manner?
4. Confidentiality. Will Betty be able to keep the information confidential? Will she be pressured to give some “scoop” to her friends at work or the President? An independent investigator is not subject to office dynamics and should have an easier time keeping the investigation confidential.
5. Minimize Retaliation Claims. There is a risk that Jane may claim that she was retaliated against after the investigation. Betty may be coerced into sharing information that is then used against Jane. An independent investigator is less likely to be coerced.
6. Lack of Bias. A good independent investigator has no preconceived notion of what has occurred. There is no bias based on past experiences with the parties or office politics to consider.
7. Credibility with Employees. Hiring an independent investigator lends credibility to the investigation. It shows employees that the Company is taking the matter seriously, creating a culture that does not tolerate improper behavior. This may also deter future misconduct.
8. Heightened Scrutiny. In an era of increased focus on harassment and equality claims, some courts focus on what constitutes a competent investigation. California courts, for example, are developing a body of law that defines a competent investigation focusing on thoroughness, bias, the experience of the investigator etc.
What Should be Your Recommendation to the President?
Betty is the CFO preparing for the IPO, she is very busy. She does not have the training to investigate this matter. Based on the President’s desire to sweep this under the rug and get back to the IPO, it is likely that he would pressure Betty to make the “right” decision.
An independent investigator would not be influenced by such concerns and would be better able to protect the Company but can be costly and time consuming.