From Lawyer to Employer: Season 4, Episode 10 | Workplace Investigations: When to Call in Outside Counsel (and When Not To)

Dan Schwartz: Yeah. So I thought we'd bring you back today to talk about a topic that comes up constantly in our practice, which is really when and how organizations should bring in outside council to conduct workplace investigations. And Sarah, I think this is probably one of those areas where HR leaders and in-house counsel sometimes feel uncertain about the best practices, right?

Sarah Westby: Yeah, absolutely. There's a lot of factors that go into the decision about when to bring in outside counsel, and if you do go that route, who you bring in and what the scope of that investigation is.

Dan Schwartz: Yeah, it so, you know, I think we can walk through some of the guidance a little bit, or at least things to think about for retaining outside counsel for investigations. So why don't we set the stage a little bit more. We're, we're talking primarily, HR leaders in-house counsel, fellow employment law practitioners, and you know, I think we'll get into some of the weeds regarding privilege considerations and practical strategy. But you know, I think in order to make this sort of understandable to those, what are some things at the outset, Sarah, that people should keep in mind?

Sarah Westby: So, I think the first major question is, when should you retain outside counsel as opposed to using your chief human resources officer or your HR director?

Another big thing that people making these decisions within the organization need to think about is what type of investigation do you want your outside investigator to conduct? Is it going to be purely factual? Are you looking for legal advice? Most are a hybrid of both, but there's a lot of gray area within that decision.

Another big decision that organizations will need to contend with is if you do bring in outside counsel, who is that outside counsel? Is it your regular employment council? Is it a large national firm? Is it someone who you've never used before because you're looking for complete independence? So that's an important question too.

Then you want to talk about the scope of the investigation. You know, what claims are you looking at? How broad does that go? Do you want to define it narrowly? Are you looking for issues more broadly within the organization? And then finally. We'll talk about and, and organizations should think about what do you want the deliverable to look like from that investigation?

Is it going to be a written report? Is it going to be an email summary, or is it just going to be some verbal findings and advice?

Dan Schwartz: I know what I'm voting for, which is verbal reports, just because I know you and I have spent enough time doing the written reports, but I joke, but there are, there are some very good reasons why you may want a written report, but let's save that for a little later.

So, let's go back to your first question, which I really like thinking about, which is when should companies think about retaining an outside counsel to conduct an investigation?

Sarah Westby: So, this I think, is the threshold question when you determine that an investigation is needed. So, there's three or four scenarios that we commonly see where it's advisable to retain outside counsel.

So even if you have an excellent HR leader, if senior leaders in your organization are involved in the underlying claims, so they're either the subject of a complaint. Or they're the person bringing the complaint. It's a good idea to consider bringing in outside counsel so that your HR leader or whomever would conduct the investigation, doesn't feel pressure to find in one direction or another based on the seniority of the people who are involved in the investigation.

Dan Schwartz: Yeah, no. I think if, if HR is investigating its own, that's going to present a potential conflict of interest in that, I think appearance of impropriety can be just as, uh, just as damaging.

What's another category that we think about here? Would it be like, I would think something that's maybe a little sensitive would be something we would think about a company having outside counsel.

Sarah Westby: Yeah, this, this might be a less obvious type of scenario, but when you have a particularly sensitive issue like sexual harassment or when you have some type of political or PR issue that you're concerned about, if you have a situation that we sometimes see where you have, you know, old guard versus new guard, and you're concerned that people might feel like they need to take a side or that if they find a certain way, they're going to be viewed as taking a side. That's another situation where it might be worthwhile to bring in outside counsel.

Dan Schwartz: Yeah. I know we've got a few people who work at some state agencies and government contractors who have listened to this. I suspect they've got some, and I know frankly from our experience, they've got some of those challenges as well. When should they think about hiring independent outside counsel?

Sarah Westby: Yeah, and, and I think you alluded to this, Dan, but state agencies in particular will want to look at outside counsel as an option in a lot of cases, I think because of the nature of the business of the state and the politics involved, and all of the scrutiny and regulations that they need to abide by. So, for example, if there's a, a government contracting question, if there's allegations of financial mismanagement or fraud, any type of sensitive issue like a sexual harassment state agencies in particular will want to think about hiring outside counsel to ensure that they have that appearance of integrity and propriety to the investigation.

Dan Schwartz: Yeah, and I would think that sort of notion of appearance of impropriety or even protecting sort of your internal team from the pressure, that can apply to businesses as well, right?

Sarah Westby: Absolutely.

Dan Schwartz: Yeah. So any other types of situations when bringing in an outside counsel makes some sense here.

Sarah Westby: Well, this one's pretty obvious, but if your HR people are involved in the complaint themselves, then clearly in that situation you would want to bring in outside counsel.

Dan Schwartz: Yeah. And sometimes an outside counsel can have a privilege attached to it. Right? Is that something to, to think about as well?

Sarah Westby: Sure. So I, I think what you mean is even if you're retaining outside counsel, the investigation could potentially be privileged, even though, you know, you're bringing in someone who is independent, and I think that gets into a little bit of our next category in terms of how do you define this investigation? And what are you looking for from the investigation?

Dan Schwartz: Yeah, so maybe that's a good segue to think about, you know, what type of investigation should be conducted by outside counsel, because I, I do think that's an area where privilege considerations become important, and I see some confusion.

Sarah Westby: Yeah, sure. So, I think in any investigation you're going to have factual findings and legal conclusions, and generally speaking, both are going to be intertwined. You know, it's hard to draw any legal conclusions without making findings of fact, but an organization may want an investigation simply to find the facts to, to determine what happened. And that's something that you may want someone who's truly independent, not your regular counsel to conduct, but most of the time, an organization is going to want legal advice based upon the investigation's findings. So not only what happened, but does this constitute a violation of the law? And if so, what should we do next?

Dan Schwartz: Yeah, and I would think, I mean this is really where counsel is providing their professional legal judgment and sort of advising the client on the legal exposure based on determinations that it makes. And not every case, but I think there are certainly some cases right where you need both the factual investigation and the legal analysis.

Sarah Westby: Yeah, absolutely. And most investigations come with, you know, not only legal conclusions, but recommendations about how the organization can mitigate the risk and what measures it might take going forward.

Dan Schwartz: So, we've gotta analyze and maybe maximize privilege considerations. So obviously there's the attorney client privilege, which is, you know, one of our more fundamental type privileges in our legal system.

What are some of the key elements to think about there?

Sarah Westby: So, the attorney-client privilege is pretty narrowly defined, and so it protects communications, whether those are oral or written between the client and counsel. And those communications have to be confidential in nature and must be made for the purpose of either seeking or conveying legal advice.

And I think how we define legal advice is where the rubber meets the road, but that, that privilege is fairly narrowly defined in the law. And so, when we're thinking about an investigation, the communications that may be protected could involve meetings with clients, emails about the investigation report.

But within the investigation report, you may have privileged and non-privileged material. And then, I think we can, we'll get into the second privilege. We'll talk a little bit about any notes from the investigation.

Dan Schwartz: Yeah. And that second privilege, I think that you're, you're alluding to is sort of the work product protection, which protects materials prepared by or for a party, and anticipation of litigation. So, you know, the way I think about it is sort of that classic legal memorandum and analyzing the strengths and weaknesses of a potential claim. But I suppose it could also extend to interview notes prepared by counsel while investigating certain facts, right?

Sarah Westby: Definitely. And I think the report again here is a question whether that would be covered by the work product protection. So the, the key question is, is this report created in anticipation of litigation? And that is going to depend on the circumstances, but I think, you know, one thing that, that would not be protected by the work product protection is, you know, underlying emails or documents that the lawyer might have considered in the investigation, so that's something to keep in mind too.

Dan Schwartz: Yeah. So thinking one or two steps ahead on this, what does it mean practically for how we, we might structure, or companies might think about structuring their investigative reports.

Sarah Westby: So, one option they can take is to request two separate reports. One that contains just purely factual findings, which would not be privileged, and another that contains legal advice.

So that is a little bit more work. It might be a little bit more cumbersome, but it's much easier to differentiate what you're going to claim privilege over later on if that becomes an issue. If the factual findings and the legal conclusions are intertwined in one report, it might read a little bit more easily, might be a little more useful.

But there is risk that it's difficult to untangle what's privileged and what's not, and you may end up having to disclose material that you think is legal advice or that you'd rather not disclose, but that a court may find is primarily not legal advice.

Dan Schwartz: Yeah, we could talk about this all day, but I, I, there were a couple other W’s that I really want to hit on in this.

The next question was really, who should you retain to perform the investigation? And we were talking with about this beforehand, it's a little more nuanced than it might seem. So, what are the, some of the considerations to think about here?

Sarah Westby: Sure. So one is, familiarity and trust. If you have a relationship with a firm who you use as regular employment counsel or regular business counsel, that firm will likely know the players, they'll know your business, they'll know what you need from this investigation, and you know, have that 360 view of how this might look, you know, from a public relations perspective, and what risks might be involved.

On the other hand, your regular counsel may not be truly independent. It may be difficult for them to be unbiased in terms of - they may want to reach a result that they think the client wants in order to keep them happy. So, there's certainly trade-offs there. I think if you were concerned about optics, public relations, or any appearance of impropriety, then you might wanna use a firm or a lawyer, you know, a different lawyer than your typical employment counsel.

Dan Schwartz: Yeah, those are definitely some of the trade-offs as well. And I think there's probably another one, which is the potential conflicts which can affect subsequent litigation representation, right, because - can you explain why that's a problem?

Sarah Westby: Yes. And that that is a problem because our legal rules of ethics prevent lawyers from both representing a client in litigation and being a necessary witness in that litigation. So, for example, if I conduct an investigation for an organization and they're later sued over the same subject matter, let's say a claim of discrimination, and I were to represent them in that litigation, I could potentially be called as a witness.

Because I may be in possession of knowledge or facts that no one else has because I've looked at all the evidence. I've interviewed the witnesses. I made credibility determinations, and so the other side might want to take my deposition, and that would certainly pose a conflict for the organization.

Dan Schwartz: So it may be that you want to preserve your regular employment counsel to handle litigation, but hire another firm to conduct the investigation. Maybe work with your outside counsel or be under the supervision of that, but at least preserve your regular outside counsel for the litigation. Right?  

You know, when you think about who to retain, is it always the case that you want to hire the biggest and best for every investigation?

Sarah Westby: No, I think it certainly is a very case specific determination, and as we talked about, you know, you may want someone who knows your business and who knows some of the considerations at issue. You may want someone who has no prior, existing relationship with your firm and, and won't going forward to have that complete independence.

But I think it really comes down to what the scope of the investigation is, what the issues are, what your budget is. Because if you hire a big national firm, you know, you may have a lot of, you know, knowledge and resources in that firm, but the price may be much higher. And you know, if the issues are fairly straightforward, that may not be necessary.

Dan Schwartz: Yeah, you just mentioned something that I don't wanna lose sight of, which is scope of the investigation because really that is the, the ball game there and you know, from my experience it, it's really important to get that right at the outset. Can you explain what the thinking is on the scope part of this?

Sarah Westby: Sure. So, I've never conducted an investigation where new issues beyond the scope didn't come up in the interviews. So in my experience, you know, witnesses are generally willing to talk and don't hold back if there's issues with the company. But a lot of times those issues that they raise may have nothing to do with what you've been retained to investigate.

And so it's important to have a thorough. Clear understanding of what the issues are that the organization wants you to investigate so that you don't spend unnecessary time or resources on subsidiary issues and you know, you don't stray off into topics that are, are really not a problem for the organization.

Dan, I know you've done a lot of investigations, so I'm interested to hear your take on the importance of defining the scope too.

Dan Schwartz: Well, you know, I think scope drives conclusions, right? If you define the scope narrowly or too narrowly, you may miss important context. But if you define the scope too broadly, the investigations can go off on tangents and really become unwieldy and expensive and prolongs and, and that really creates its own problems because for things like sexual harassment investigations, prompt remedial action is sort of the standard by which employers are going to be judged. So, it's really walking that fine line when it comes to the scope part.

Sarah Westby: And I think there's a way to alert the client to issues that may not be on their radar that come up in the investigation without altering the scope and expanding it unnecessarily, or creating a new investigation that you can say, you know, in, in the context of a privileged discussion.

Hey, you know, this issue was raised or look, I was reviewing your contract and I think that this may need to be addressed. It's not part of the scope of this investigation, but I thought it was important to flag it for you.

Dan Schwartz: Yeah. Before we run out of time, I want to hit the last of the big topics you mentioned at the outset, and that is sort of written versus oral reports there.

And you know, I think that's a decision that has a number of different factors in it, right?

Sarah Westby: Absolutely, and I think one of those factors is how can this report be used? Will it be distributed? If there are particularly sensitive concerns and you are afraid that the report could be leaked or later sought in litigation or through a FOIA request, an oral report might be a good option.

But if you're conducting an extensive investigation with some detailed findings and many interviews, you may want that written deliverable report. If you want to rely on the findings of an investigation as evidence that you know the organization took prompt, remedial measures, or took a complaint seriously, you may want to have a written report to rely on and even use later on in litigation.

There are a lot of considerations that go into it, and I think one thing we talked about earlier that might be a good option is having, uh, two written reports, one that contains factual conclusions and one that contains legal conclusions to address those privileged concerns.

Dan Schwartz: Yeah, in a written report, at least preserves the institutional memory, right?

Because the employees may leave and if litigation happens as a result, you know, a year, two years, three years later, which we've seen, at least, there's some documentation at the time that sort of indicates why. By the same token, it also creates an avenue where the report can be attacked for the perhaps missteps or perceived missteps of the investigator as well, right?

Sarah Westby: Right. Absolutely.

Dan Schwartz: All right, so like I said, we could go on all day on investigations and obviously if you need investigations, I know we've been, uh, doing quite a few of them, but is there any particular emerging issue or hot topic that you'd want to leave people with today?

Sarah Westby: I think that organizations really need to be familiar with the applicable laws and regulations and their own internal policies for conducting investigations and making sure that they follow those so certain agencies may have reporting different reporting requirements if it's a sexual harassment complaint versus a discrimination complaint, and the lawyers who are investigating those claims need to be familiar with those laws, regulations, and policies. But the organization itself needs to ensure that it has those processes in place and that it's following the process based on the type of complaint involved.

Dan Schwartz: Yeah. I think one of the topics that hasn't been explored enough is sort of the use of these AI tools in the investigations now…

Sarah Westby: I knew you're going to bring up AI Dan.

Dan Schwartz: I know that's my, one of my favorite topics and you know, I think the, just the recording of these interviews now has become so commonplace, but yet there might be reasons why investigation.

Interviews should not be recorded and things, so I think there's a balancing act for the investigations as well, right.

Sarah Westby: And I think what organizations need to be aware of in terms of AI is that many of these tools are publicly available. And so anything that you feed into them is going into the public domain.

And so you cannot presume anything that is part of that, you know, gets put through an AI tool, unless it's a, a private, confidential license tool of your organization is going to remain confidential.

Dan Schwartz: Uh, great point. So, any final takeaways for our listeners out there?

Sarah Westby: I think just if you have a claim that you think merits an investigation, internal or external take a look through our, our five W’s that we covered today and don't hesitate to reach out to your trusted counsel for advice.

Dan Schwartz: Yeah, and obviously not every investigation requires it. But certainly certain circumstances make it a better call than not you know, I think always call your friendly lawyer is something we'll count on for many of these podcasts and certainly for investigations. So, Sarah, thank you for coming back on the podcast.

Well, that wraps up another episode of From Lawyer to Employer. As always, you can subscribe to this podcast wherever you get your podcast, whether that's on Apple Podcast or Spotify. You can also leave us a review that helps others find us as well. And lastly, if you have a comment or a question or a suggestion for us, feel free to email me at dSchwartz@goodwin.com.

As always, we really appreciate you listening. Keep listening for another episode in the near future. Take care.

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