Investigating Misconduct Under Foreign Law Poses Challenges

By Pamela Babcock Nov 11, 2014
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NEW YORK—Most countries outside the U.S. do not have at-will employment, which creates challenges when suspending, investigating and disciplining employees.

U.S. multinationals investigating allegations of employee misconduct under foreign law can use U.S. best practices as a launching point, but they need to navigate unique issues relating to employment law, data privacy and blocking statutes that limit or bar the production of discovery abroad for use in U.S. litigation, experts said during a Nov. 3, 2014, seminar on the topic.

Donald C. Dowling Jr., an international employment law partner at White & Case LLP in New York City, summed up the topic with a quote from an in-house attorney at a major U.S. multinational: “One of the biggest mistakes an investigator can bring to a foreign investigation is an American mindset.”

Dowling said U.S. multinationals that aren’t on top of unique international issues run the risk of violating local law and getting charged with a crime in the course of conducting investigations.

Kathleen Hamann, a former U.S. Department of Justice prosecutor who is now a partner in White & Case’s Washington, D.C., office, noted that generally, government investigators have expectations about evidence—that it be preserved and accessible during the investigation and that employees be made available for interviews—but that most investigators (especially those outside the U.S. and U.K.) have limited understanding of foreign data privacy and employment laws.

“You’re going to have to be able to explain it to them,” Hamann said, adding that having a framework that outlines the investigation process can make it “a lot easier to educate your investigators so that, hopefully, the whole process runs more smoothly.”

Responding to an Allegation or Suspicion

The first step is to appoint an investigator or investigation team and decide whether it will be independent and what specialties will be covered, such as legal, forensics, security and accountancy.

Consider how many countries might need to be involved. After all, bribery and anti-corruption cases rarely involve only one government. U.S. headquarters may investigate an Asian subcontractor, but the investigation might also require U.K. experts or experts in the Asian country, Hamann said.

It’s also important to have a multinational team or to get multinational advice when dealing with an unfamiliar jurisdiction, she added. “There are some laws out there that you are never going to expect,” Hamann said. For example, in Greece there’s a crime known as “offense against the personality,” which basically means you can’t insult people. That creates problems, particularly for investigators.

Data privacy issues can come up in many countries, especially nations with omnibus data protection laws, such as Argentina, Israel, Mexico, the Philippines and South Korea, so first make sure it’s legal to get that data, Dowling said.

Stephen Ravenscroft, an employment and benefits partner with White & Case in London, said in the U.K., it helps to have employee contracts that give express consent for personal data to be processed and sent to affiliate companies, whether in the U.K. or “further afield.” In addition, be sure to comply with investigatory procedure laws. Laws in the U.K. cover surveillance, intercepting communications and monitoring IT use. Be aware of data privacy issues, particularly when reviewing or monitoring e-mails, telephone records, contact lists, travel, accommodation and business expense records. Research not only substantive law but also your organization’s own rules and what its policies prohibit.

Interviewing Witnesses and Securing Evidence

When interviewing witnesses, verify sources and “demilitarize” questioning by avoiding strong words such as “interrogation” and “evidence,” which can cause witnesses to clam up, experts advised.

“If you’re doing an international investigation, try not to be so American,” Hamann said. “They already feel that pain of ‘headquarters is here stomping around.’ ” To put people more at ease, consider working with someone in-country to facilitate your visit, she said.

Be sure to comply with consultation and representation rules. In the U.K., employees have the right to be accompanied to a disciplinary meeting by a colleague or trade union official. Notify the target of the investigation and witnesses of their rights. Give Upjohn warnings, which clarify that the attorney represents the company and not the employee as an individual and may disclose what is said to law enforcement. Demand witness confidentiality. Lastly, impose an enforceable litigation hold on evidence, secure evidence within management’s physical custody and gather evidence outside physical custody.

‘Garden Leave’ Can Be Your Friend

Impose immediate discipline, if necessary, or take interim steps. In the U.K., check what can be done under the contract of employment and whether the employee should be suspended with or without pay or removed from directorship or offices.

You’ll need to be familiar with discipline rules. In Belgium, an organization can fire someone for good cause only if it dismisses that person within three working days from “the moment the facts are known,” Dowling said. In Iraq, you have 24 hours to dismiss the person and must go to the police if it’s a criminal offense, he added.

Speakers agreed that in the U.K. and elsewhere, sometimes a good option is “garden leave.” Rather than dismiss the employee, suspend him or her for a period of time with pay so that the individual can be useful to the investigation but no longer poses any risk of engaging in misconduct.

When the investigation is concluded, involve the audit function and ensure that internal and external communications about the matter comply with the law, including obligations to inform regulatory bodies or other governmental agencies (the Financial Conduct Authority and the Serious Fraud Office in the U.K., for example).

Be careful about turning criminal evidence over to authorities, Dowling said. In the Slovak Republic, if a nongovernment entity has criminal evidence, the evidence must be turned over to police. But in France, doing so in many contexts, such as a petty cash theft of $100, would be an employment law violation.

Pamela Babcock is a freelance writer based in the New York City area.

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