Industry Workplace Misconduct Investigations

Beyond the financial and regulatory risks this type of case demonstrates, it highlights the reputational damage companies, boards and executives face if they do not adequately handle allegations of workplace misconduct. Reputational damage can be substantial, and negatively affect a range of important relationships involving customers, regulators, employees and potential employees.

In this new environment, employee misconduct issues cannot be viewed only through the prism of employment law. Instead, they should be seen as potentially putting the entire enterprise at risk.

Of course, employment law experience is essential in these matters. Understanding a company's potential legal exposure under relevant laws, such as the Title VII of the 1964 federal Civil Rights Act and state Human Rights Law and ensuring the employer protects the rights of accuser and accused during the pendency of the investigation are critical. Employment attorneys also have relevant and significant experience speaking with victims and evaluating their credibility as well as advising employers.

Nevertheless, employee misconduct issues have taken on new salience. As women-and men in the entertainment industry are empowered to come forward with allegations of workplace misconduct, the potential for more systemic problems to be revealed will increase. These issues will involve not only the facts of the particular allegation but also who at the company knew about the alleged behavior, what they knew and when they knew it.

Regulators are more attuned than ever to these issues. The New York State Attorney General Office's Civil Rights Bureau, for example, has the authority to investigate — and often brings civil actions — against companies for patterns and practices of harassment or discrimination that often affect large groups of people. The bureau recently updated its guidance about laws that protect New Yorkers from sexual harassment in the workplace.

When allegations of employee misconduct surface within a company, the most prudent response in many cases will be to conduct an internal investigation to determine the facts, including whether the underlying conduct is part of a broader pattern at the company. Further, under Title VII and similar state civil rights laws, investigations are not only wise, but required as part of the employer's obligation to prevent and promptly correct discrimination or harassment.

Internal investigations, however, can cause unforeseen damage if not done correctly. Two fundamentals are worth highlighting. Historically, many companies have chosen to handle their own internal investigations of employee misconduct issues. The degree of in-house expertise and the quality of their investigations vary from excellent to nonexistent. In the new climate, however, in-house investigations, regardless of the quality of the investigators, could be particularly vulnerable to criticism, especially when high-profile employees are involved. An internal investigation attacked (legitimately or not) as a whitewash could make matters worse for the company by potentially damaging its credibility with key stakeholders, such as an alleged victim of misconduct, triers of fact, prosecutors, and rank-and-file employees. By engaging outside counsel with sufficient independence and credibility, companies can blunt this kind of criticism.

It is also critical to know what type of final work product will result from the internal investigation and for whom it is intended. Initially, it is prudent to decide whether a privileged report will be produced that can be withheld from both the accuser and the accused, with the option of waiving privilege as needed. Throughout an investigation, lawyers will need to make many complex decisions about what kind of information they are willing to share with other third parties, including opposing parties in litigation and regulators or prosecutors, implicating other questions about work product and attorney-client privilege. Accordingly, lawyers must carefully consider whether there should be a final report and, if so, whether it should be written or oral.

After months of news about employee misconduct across many industries, it appears that our culture has reached an inflection point. It is imperative that the entertainment-business community demonstrates that it understands the gravity of this moment. *****

Carri H. Cohen is a partner in Morrison & Foerster's securities litigation enforcement and white-collar defense practice in New York. Janie F. Schulman is the co-chair of the firm's global employment and labor group in Los Angeles. Joshua Hill leads the firm's white-collar defense practice in San Francisco. A version of this article also appeared in the New York Law Journal, an ALM sibling of Entertainment Law & Finance.