Responding to Regulatory Agency Complaints

Since America's inception, business owners and government entities have engaged in a balancing act of regulation and free enterprise. Lately, due to increasing government intervention in private sector business operations, and due to our economy's shortcomings, this balancing act seems swayed in government's and big business' favor. Big business has an advantage because small- to medium-sized businesses usually do not have the same resources (money, manpower, time, energy) to devote to responding to these complaints and charges. Consequently, some of the most important questions for smaller business owners and managers include:

• Are we being judged guilty before being proven innocent?
• How do we respond to a regulatory agency complaint?
• What information is necessary to give them without jeopardizing our operations or finances?

What to Do

When a business receives a complaint, it must first determine whether the complaint is official, i.e., real. Many complaints are unofficial threatening letters or allegations, not sent by the controlling agency, but sent by the actual employee or his/her representative. If the complaint is not sent from the actual agency, it may not be official; therefore, a response may be unnecessary. Often, these unofficial complaints are “shakedowns” because it is evident that the complainant, or representative, is just looking for some easy money. (These unofficial complaints are similar to nuisance lawsuits.)

Once it is determined that the complaint is official, the business owner must ascertain the nature of the allegation. That is, what law or regulation is cited in the complaint? Also, what is the potential punishment or the amount of damages that can be awarded if the company loses the investigation? After this has been determined, it will be easier for the company to figure out how to respond and what evidence should be included with the response.

A third factor to consider is the deadline for response. Obviously, a company does not want to miss a deadline, but if pressed for time, some agencies (not all) permit additional time for a response. Note that a request for additional time has to be made by the company ' it is never implied or otherwise understood that the company needs additional time to respond.

The 'Statement of Position'

Generally, the company's response is an informal statement of its position on the allegation (often called a “position statement” or a “statement of position”). The statement is informal because it is usually not written in a legalistic or official format similar to court filings. However, this does not mean that the business should be casual about its response. In a very detailed and organized fashion, the company should explain the what, why, when, who, where and how of what transpired.

Regarding the position statement: In addition to providing a written narrative of what occurred, the company should include any documents, recordings and files (i.e., exhibits) that support its contentions. All exhibits should be referred to in the statement. If there are more than a few exhibits, or if exhibits have numerous pages or subparts, it is helpful to include some sort of index or table of contents. Essentially, anything that helps an average reader understand the position statement, and anything that clearly and completely explains the company's position, should be included or referred to in the statement. It is acceptable to remove any privileged or confidential information such as attorney-client communications, Social Security numbers and birth dates. However, it is essential not to appear as if you are hiding something. Consequently, the reasons for redacting information should be explained if they are not obvious (e.g., why the redacted information is protected or proprietary business information, personal employee information, patented or trademarked information).

In addition, sending a very detailed response is better than sending a general and bureaucratic-sounding one. With recent advances in communications and technology, transparency (i.e., openness, honesty, forthrightness) is a hot topic and an important consideration when responding to an agency. The less it looks as if you are trying to hide something, and the more you appear to be taking a respectful, problem solving approach to the matter, without admitting guilt or being overly aggressive, the better the chance that the agency will rule in your favor. Otherwise, the agency or decision-maker, at this first level of dispute resolution, will summarily kick the complaint to the next level or rule against your business.

Disclosure

How much and what to disclose are key considerations. This brief article cannot summarize all of the factors to consider in determining what to reveal in the position statement. Sound business judgment and common sense might help to resolve these concerns. Competent legal or business counsel can also help. As a general rule, stick with the facts, i.e., what can be proven with sufficient and reasonable evidence, and what can be disclosed without compromising any business secrets and other confidential information.

The position statement is used by the agency to decide whether or not to investigate the charges further or whether to pursue some other form of dispute resolution such as mediation, settlement discussions ' or even whether to file a more formal complaint or lawsuit against the company.

The agency representative making the decision is usually an appointed official, who may be an attorney. In many instances, the agency official is an experienced and competent official who is able to comprehend nuanced information. However, there are exceptions; not all decision-makers are experienced or competent. Moreover, the decision-maker may not be making a decision based on all the facts. The decision is usually based either on whatever information is available, or on the decision-maker's perception of the response and evidence.

Often, at the investigatory stage of dispute resolution, the agency may request additional information, beyond that which is indicated in the position statement. Or sometimes, after the submission of the position statement, new information surfaces. In either instance, the company should not hesitate to send additional information to the agency. Think of it as engaging in an ongoing dialogue with the agency about the circumstances surrounding your case. Just make sure that whatever additional information is sent does not contradict anything stated in the position statement and is easily integrated into the statement.

The Next Step

Once the position statement has been ruled upon, the complaint will either be dismissed or will proceed ahead to some sort of trial or other dispute resolution procedure (e.g., mediation or arbitration).

Although it is not always necessary for a responding company to utilize legal or business counsel for the response, if the company is not attuned to the specific regulatory agency's style or the alleged violations, and it does not have the benefit of counsel to assist in its response, it could adversely affect its chance of receiving a favorable ruling. It is not wise to use the position statement as a means to test how whether you are adept at dealing with agency complaints. This is not the time for experimentation or chance because it could cost your business plenty.

Charles Krugel is a management-side labor and employment attorney in the Chicago area and has represented businesses in negotiations and disputes for over 16 years. In addition to his J.D., he has a Master of Arts in Industrial/Organizational Psychology. Krugel is also a published author and a frequent subject of media interviews regarding his field. Phone: 312-804-3851. E-mail: [email protected].

For business owners, one of the most troubling aspects of management is receiving an employment-related complaint from a governmental regulatory agency. Such agencies include the Equal Employment Opportunity Commission (EEOC), the National Labor Relations Board (NLRB), the U.S. Department of Labor (DOL), the Federal Trade Commission (FTC) or any of the similar state, local and municipal equivalents to these agencies.

Preparing a response is an onerous task. The process leaves a business wondering who is really in charge; what exactly are our tax dollars paying for, and why would we ever want to employ someone again?

Questions to Ask

Since America's inception, business owners and government entities have engaged in a balancing act of regulation and free enterprise. Lately, due to increasing government intervention in private sector business operations, and due to our economy's shortcomings, this balancing act seems swayed in government's and big business' favor. Big business has an advantage because small- to medium-sized businesses usually do not have the same resources (money, manpower, time, energy) to devote to responding to these complaints and charges. Consequently, some of the most important questions for smaller business owners and managers include:

• Are we being judged guilty before being proven innocent?
• How do we respond to a regulatory agency complaint?
• What information is necessary to give them without jeopardizing our operations or finances?

What to Do

When a business receives a complaint, it must first determine whether the complaint is official, i.e., real. Many complaints are unofficial threatening letters or allegations, not sent by the controlling agency, but sent by the actual employee or his/her representative. If the complaint is not sent from the actual agency, it may not be official; therefore, a response may be unnecessary. Often, these unofficial complaints are “shakedowns” because it is evident that the complainant, or representative, is just looking for some easy money. (These unofficial complaints are similar to nuisance lawsuits.)

Once it is determined that the complaint is official, the business owner must ascertain the nature of the allegation. That is, what law or regulation is cited in the complaint? Also, what is the potential punishment or the amount of damages that can be awarded if the company loses the investigation? After this has been determined, it will be easier for the company to figure out how to respond and what evidence should be included with the response.

A third factor to consider is the deadline for response. Obviously, a company does not want to miss a deadline, but if pressed for time, some agencies (not all) permit additional time for a response. Note that a request for additional time has to be made by the company ' it is never implied or otherwise understood that the company needs additional time to respond.

The 'Statement of Position'

Generally, the company's response is an informal statement of its position on the allegation (often called a “position statement” or a “statement of position”). The statement is informal because it is usually not written in a legalistic or official format similar to court filings. However, this does not mean that the business should be casual about its response. In a very detailed and organized fashion, the company should explain the what, why, when, who, where and how of what transpired.

Regarding the position statement: In addition to providing a written narrative of what occurred, the company should include any documents, recordings and files (i.e., exhibits) that support its contentions. All exhibits should be referred to in the statement. If there are more than a few exhibits, or if exhibits have numerous pages or subparts, it is helpful to include some sort of index or table of contents. Essentially, anything that helps an average reader understand the position statement, and anything that clearly and completely explains the company's position, should be included or referred to in the statement. It is acceptable to remove any privileged or confidential information such as attorney-client communications, Social Security numbers and birth dates. However, it is essential not to appear as if you are hiding something. Consequently, the reasons for redacting information should be explained if they are not obvious (e.g., why the redacted information is protected or proprietary business information, personal employee information, patented or trademarked information).

In addition, sending a very detailed response is better than sending a general and bureaucratic-sounding one. With recent advances in communications and technology, transparency (i.e., openness, honesty, forthrightness) is a hot topic and an important consideration when responding to an agency. The less it looks as if you are trying to hide something, and the more you appear to be taking a respectful, problem solving approach to the matter, without admitting guilt or being overly aggressive, the better the chance that the agency will rule in your favor. Otherwise, the agency or decision-maker, at this first level of dispute resolution, will summarily kick the complaint to the next level or rule against your business.

Disclosure

How much and what to disclose are key considerations. This brief article cannot summarize all of the factors to consider in determining what to reveal in the position statement. Sound business judgment and common sense might help to resolve these concerns. Competent legal or business counsel can also help. As a general rule, stick with the facts, i.e., what can be proven with sufficient and reasonable evidence, and what can be disclosed without compromising any business secrets and other confidential information.

The position statement is used by the agency to decide whether or not to investigate the charges further or whether to pursue some other form of dispute resolution such as mediation, settlement discussions ' or even whether to file a more formal complaint or lawsuit against the company.

The agency representative making the decision is usually an appointed official, who may be an attorney. In many instances, the agency official is an experienced and competent official who is able to comprehend nuanced information. However, there are exceptions; not all decision-makers are experienced or competent. Moreover, the decision-maker may not be making a decision based on all the facts. The decision is usually based either on whatever information is available, or on the decision-maker's perception of the response and evidence.

Often, at the investigatory stage of dispute resolution, the agency may request additional information, beyond that which is indicated in the position statement. Or sometimes, after the submission of the position statement, new information surfaces. In either instance, the company should not hesitate to send additional information to the agency. Think of it as engaging in an ongoing dialogue with the agency about the circumstances surrounding your case. Just make sure that whatever additional information is sent does not contradict anything stated in the position statement and is easily integrated into the statement.

The Next Step

Once the position statement has been ruled upon, the complaint will either be dismissed or will proceed ahead to some sort of trial or other dispute resolution procedure (e.g., mediation or arbitration).

Although it is not always necessary for a responding company to utilize legal or business counsel for the response, if the company is not attuned to the specific regulatory agency's style or the alleged violations, and it does not have the benefit of counsel to assist in its response, it could adversely affect its chance of receiving a favorable ruling. It is not wise to use the position statement as a means to test how whether you are adept at dealing with agency complaints. This is not the time for experimentation or chance because it could cost your business plenty.

Charles Krugel is a management-side labor and employment attorney in the Chicago area and has represented businesses in negotiations and disputes for over 16 years. In addition to his J.D., he has a Master of Arts in Industrial/Organizational Psychology. Krugel is also a published author and a frequent subject of media interviews regarding his field. Phone: 312-804-3851. E-mail: [email protected].