Most banks will be faced at some point with the need to investigate suspected employee wrongdoing, whether in regard to money laundering, garden variety theft, or sexual harassment. Investigating employee misconduct is complex, requiring both good judgment and an understanding of the legal framework in which the investigation is conducted. At the very least, a mishandled investigation may result in failure to cure a problem before it develops into a major headache; at worst, it may expose the bank to a raft of legal claims.
There is no single right way to conduct an employee investigation. Each case will present different challenges and will require sensitive handling. However, your bank can improve its legal position and the likelihood of a successful investigation by having appropriate policies in place from the outset; by careful selection of the investigative personnel, investigation targets and techniques; and by thoughtful handling of the information uncovered during the investigation.
Who should conduct the investigation?
Perhaps the first issue for any bank contemplating an internal investigation is selection of the investigator. There are several possibilities: internal legal or human resources staff, outside counsel, or an outside consultant.
Whoever is selected to conduct the investigation must be well versed in the general legal issues surrounding the investigation, and must be familiar with any relevant policies of the bank. Equally important, the investigator must be a credible potential witness for the bank in the event of subsequent litigation.
In considering whether to turn to in-house resources or to look outside, the bank should be aware of the impact of the federal Fair Credit Reporting Act on investigations. Until a very recent amendment to FCRA, the Federal Trade Commission had taken the position that reports of investigations into employee misconduct by third-party experts were "consumer reports" subject to the FCRA's notice, consent, and disclosure requirements. The FTC's position was troublesome, hampering the employer's ability to conduct an investigation using expert resources at a time when employers are under increasing pressure to police their workplaces.
In December 2003, Congress yielded to pressure from the employer community and amended FCRA to clarify that certain investigations of employee wrongdoing fall outside the act's requirements.
While the amendments significantly improve a bank's ability to use third-party investigators, there are still a number of legal hoops the bank must jump through in order to avail itself of the new exclusion.
First, the investigation must concern:
* suspected misconduct related to employment;
* compliance with federal, state or local laws or regulations, or the rules of a self-regulatory organization; or
* compliance with any preexisting written policies of the employer.
Second, the employer will lose the benefit of the exclusion if the investigative report is shared with anyone other than the employer, a government officer or agency, a self-regulatory organization with regulatory authority over the activities of the employer or employee, or as otherwise required by law.
Third, after taking any adverse action against an employee based in whole or in part upon the investigative report, the employer must give the employee a summary of the nature and substance of the report. The employer need not, however, identify the individuals who provided information in the report.
Who should be investigated?
Like any other employment action, the decision to investigate must be made for legitimate business reasons. While in most instances the bank will have an objective reason to select an employee for investigation, such as a complaint by a coworker, the bank must be careful that it does not appear to be singling out the employee for a legally impermissible reason. …