U.S. Workplace Investigation Practices Raise Concerns Overseas

By Donald C. Dowling May 6, 2013
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In the U.S., internal workplace investigations into suspicions and allegations of employee misconduct follow an increasingly well-defined approach. But exporting U.S. investigatory best practices raises unexpected conflicts with foreign workplace laws. American investigation practices need to be adapted for the international context and comply with foreign workplace laws.

How It’s Done in the U.S.

The highest-profile corporate workplace investigations in the U.S. tend to be complex, drawn out and expensive. Stakes are high when an allegation involves millions of dollars and serious charges—bribery, sabotage, embezzlement, tax fraud, insider trading, antitrust collusion, workplace violence, environmental crime, audit/accounting fraud and conflict of interests.

That said, mammoth internal investigations are the exception. Most workplace investigations are fairly streamlined, inexpensive and completed quickly. Investigations into, say, run-of-the-mill claims of petty theft, bullying, harassment, workplace accidents and expense-account fraud often get wrapped up quickly and at a small cost. But in this era of Sarbanes-Oxley, Dodd-Frank and close scrutiny into corporate compliance and ethics, an internal investigation—be it slow and expensive or fast and streamlined—needs to be done right. And wrongdoers must be punished.

Legal Challenges of Cross-Border Investigations

U.S. multinationals conducting cross-border internal investigations inevitably want to export and use their sophisticated toolkit of American investigatory strategies, which they see as vital in confronting a cross-border criminal prosecution or civil lawsuit. Investigations could arise from charges under extraterritorial U.S. federal laws, such as the Foreign Corrupt Practices Act, terrorism-financing rules, trade-sanctions laws, the Alien Tort Claims statute, international-context violations of Sarbanes-Oxley and Dodd-Frank, extraterritorial provisions of U.S. discrimination laws—even the U.K. Bribery Act 2010, which can apply to U.S.-based employers.

Recent increases in international criminal and civil charges have focused multinationals on the legal challenges to cross-border internal investigations.

Common themes include:

  • Attorney-client privilege abroad, as contrasted with the privilege in the U.S.
  • The effect of foreign “blocking statutes” and foreign data-protection laws on U.S. litigation e-discovery.
  • Contrasts between the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
  • U.S. bank-secrecy laws in the international context.
  • “Suspicious activity reports” of infractions committed abroad and “self-reporting” to U.S. government agencies.
  • Overseas whistle-blower denunciations under the U.S. Dodd-Frank whistle-blower bounty program and the extraterritorial reach of U.S. Sarbanes-Oxley report-procedure provisions.
  • U.S. “deferred prosecution” and “nonprosecution” agreements in the cross-border context.
  • Prosecutorial cooperation among enforcement authorities, parallel criminal proceedings in foreign jurisdictions, and cross-jurisdictional settlements of criminal charges.
  • Credit for foreign corporate compliance programs under U.S. criminal sentencing guidelines.

These issues can be vital when investigating cross-border charges that implicate U.S. criminal or civil laws and litigation. But because the issues are all anchored in U.S. law, they are distinct from the separate challenge, in a cross-border or foreign-domestic internal investigation, of complying with the local domestic law of the overseas workplace. Of course, a U.S. multinational conducting a local investigation abroad needs to comply with local host-country law as well as U.S. law.

Indeed, U.S. headquarters may have to investigate not only the occasional extraterritorial charge under U.S. federal law but also far more common claims under foreign local laws. These foreign domestic investigations are becoming increasingly common.

Exporting U.S. Investigatory Practices

Because American investigatory tools were forged in the uniquely American environment of at-will employment, U.S. multinationals exporting and using these tools in overseas investigations run into problems. The law of the U.S. workplace imposes fairly few constraints on how American employers may investigate suspicions of employee wrongdoing.

Overseas, though, especially in Europe, the environment differs greatly. Internal investigations abroad are subject to a panoply of restrictions under the local law and culture of the foreign workplace. Put simply: One of the biggest mistakes an investigator can make in a foreign investigation is to bring an American mindset.

So a U.S.-based multinational conducting an internal investigation across borders needs to retool American-made investigatory practices for the very different workplace regulatory environment abroad. Because foreign workplace laws that apply to internal investigations tend to have no counterpart under U.S. employment at will, they often spring up and catch American investigators off-guard. In this respect, lawyers and investigators based overseas actually wield an advantage over their U.S. counterparts because they escape the counterproductive American mindset.

J.P. Armstrong, a London solicitor addressing American lawyers about internal investigations outside the U.S., in the NY State Bar Int’l Chapter News, explains:

“Most corporations that have faced a significant [international] investigation will be familiar with the need to balance the thoroughness of the investigation with the need to respect the [overseas] suspect and the informant’s data protection rights. Increasingly we are seeing [overseas employee] suspects and their advisors seek to exercise these rights to slow down or halt an investigation [outside the U.S.]. In at least one case where I have been involved, injunction proceedings were threatened [to stop the U.S.-driven internal investigation].”

Having to retrofit investigatory tools for more regulated overseas environments can frustrate an American investigator reluctant to tamper with effective strategies and unwilling to compromise best investigatory practices. But failing to modify U.S. investigatory practices abroad when necessary threatens a serious consequence: It exposes an investigator to a charge of breaking the law. Investigators may be denounced (perhaps over a company whistle-blower hotline) for breaking the local law of the workplace if they investigate illegally.

Then another investigatory team may have to investigate the original investigators. Just as no police detective ever wants to face charges of violating suspects’ rights in a criminal investigation, no corporate internal investigator ever wants to be charged with breaking the law.

Here is a 30-point checklist for adapting domestic American investigatory practices and tools for overseas investigations. The 30 points fall into the four stages of a thorough U.S.-style internal investigation.

Donald C. Dowling is a partner in the New York office of White & Case. Republished with permission. © 2013 White & Case. All rights reserved.

Related Article:

U.S. ‘Zero Tolerance’ Anti-Harassment Policies Need Global Tweaking, SHRM Online Global HR, March 2013

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