How to Protect Your Company with Outside-Counsel Investigations

October 21, 2019 by

As litigators, too often we see employers wait to get us involved until someone files a lawsuit. However, we can often prevent problems before they escalate to the courthouse. When it comes to hiring an attorney to conduct an outside investigation, it’s often money well spent.
By hiring outside counsel to conduct investigations, a business can:

  1. Protect itself from allegations of a discriminatory or retaliatory motive for an adverse employment action;
  2. Limit its exposure to punitive damages;
  3. Establish affirmative defenses to potential claims;
  4. Negate allegations that the employer acted with reckless disregard or willfully as to statutorily protected conduct;
  5. Identify possible areas of risk or sources of future lawsuits and head problems off at the pass; and
  6. Prevent potential claims by giving employees and possible litigants the opportunity to be heard by an independent person.

That’s not just our opinion, judges are saying the same thing when deciding cases. In case after case, courts continue to rule in favor of proactive employers that hire outside counsel to conduct independent investigations.

For example, consider a recent case decided by the United States Firth Circuit Court of Appeals. In Kraft v. University of Texas Medical Branch, an employee sued her former employers alleging sex and age discrimination. The employee’s suit also alleged she was wrongfully terminated in retaliation for complaining about discrimination. While still employed, the plaintiff, Marie Kraft, had complained about alleged age and sex discrimination. In response, her employers wisely hired outside counsel to investigate her complaints. The employers also hired the same outside counsel to investigate a separate complaint involving two other employees.

As it turns out, during the separate investigation, outside counsel received numerous complaints of misconduct by Ms. Kraft. Ultimately, outside counsel issued a report that found Ms. Kraft had committed multiple violations of her employers’ policies and recommended severe disciplinary action, up to and including termination.

In the lawsuit, the employers relied on the outside-counsel report to show they had a non-retaliatory reason to terminate Ms. Kraft. Both the trial court and the court of appeals ruled in favor of the employers. Specifically, the court of appeals held that the employers’ reason for firing Ms. Kraft—because the outside-counsel report found she violated numerous company policies—was not pretext for retaliation.

In particular, employers should note that the court of appeals made the following powerful statement in its decision:

“Whether Kraft actually violated company policy is immaterial. The relevant question is whether Kraft was fired because the report said she violated company policy. If [management] was motivated by the report rather than retaliation, her decision to fire Kraft was not retaliatory regardless of whether the report was accurate.”

The Fifth Circuit stated that whether the employee actually violated company policy was immaterial because the employers relied in good faith on the outside-counsel report.

Yes, you read that right. The Fifth Circuit stated that whether the employee actually violated company policy was immaterial because the employers relied in good faith on the outside-counsel report. By hiring outside counsel to conduct investigations, these employers not only protected themselves from the plaintiff’s lawsuit, but as importantly, prevented other lawsuits by addressing her own violations of the employers’ non-retaliation policies.

Keep this case in mind the next time you need to investigate an employee complaint or a possible issue within your own business. While it might not be “cheap” to talk to a lawyer, an ounce of investigation expense is worth a pound of litigation fees.

Christopher A. Klement

Chris Klement is a litigation associate focused on civil rights litigation, ranging from constitutional to employment discrimination litigation, and business and commercial litigation. He represents and defends a variety of government and private clients. Mr. Klement brings a unique perspective…Read More

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Darrell G-M Noga

Darrell G-M Noga is an experienced trial and appellate attorney with over thirty years of experience representing governmental and corporate clients, along with their individual officers and employees. He has successfully litigated a wide variety of cases, with an emphasis…Read More

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