Workplace Investigations Blog : California Employment Investigation Lawyer & Attorney : Debra Reilly Law Firm : CA Personnel, Sexual Harassment & Equal Employment Opportunity (EEO) Investigator

In deciding whether an employee complaint rises to the level of alleged illegal activity or company policy violations, employers should interpret the incoming complaint very broadly and err on the conservative side by investigating anything that comes remotely close to illegal activity or company policy violations—especially if the allegations are against a supervisor (due to the employer’s risk of strict liability).

What may seem initially to be an innocuous or petty complaint—which perhaps does not use the magical words “harassment,” “discrimination,” or “accommodation”—could actually be a hidden landmine that would have been discovered earlier if the company had conducted at least a preliminary investigation.

If an employer does not investigate and rule out, based on the facts, potentially illegal conduct early on, e.g., by documenting admissions or denials from the claimant in an investigative interview, a plaintiff’s attorney who surfaces later could create the illusion of some form of illegality retroactively, when a lawsuit is filed.  Prudent employers nail down all of the facts in writing at the outset, or otherwise face a changing story.

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Some types of employee complaints must be investigated as a matter of law, e.g., sexual harassment complaints.  Although no statutes regulate how investigations must be conducted, the California Fair Employment and Housing Act (FEHA) (Cal. Gov't Code §§12900–12996) requires an employer to take “immediate and appropriate corrective action” when faced with a covered harassment complaint (see Cal. Gov't Code §12940), and the U.S. Equal Employment Opportunity Commission (EEOC) states:

When an employer receives a complaint or otherwise learns of alleged sexual harassment in the workplace, the employer should investigate promptly and thoroughly.

See EEOC’s Policy Guidance on Current Issues of Sexual Harassment dated March 19, 1990, available at www.eeoc.gov/policy/docs/currentissues.html.

For myriad business reasons, however, wise employers will investigate all complaints alleging any form of illegal activity or company policy violations. A prompt, thorough, and fair investigation conducted in good faith can insulate an employer from liability for wrongful termination (see Cotran v Rollins Hudig Hall Int’l, Inc. (1998) 17 Cal.4th 93; Silva v Lucky Stores, Inc. (1998) 65 Cal.App.4th 256, improve employee morale, and prevent further harassment or discrimination from occurring.

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Because I have received many requests to provide internal training to employees on how to conduct sexual harassment investigations, I will be offering open training on the subject to anyone interested, but the training will be geared towards Human Resources Professionals, Private Investigators, and Attorneys.  Attendees of any background are welcome to attend, but some basic knowledge of sexual harassment law is helpful.  If time is allowed, other types of investigative training will be covered.  Questions and problematic scenarios are welcomed! 

Date:  March 30, 2012

Time:  9:30 a.m. - 12:00 p.m.

Location:  2240 Encinitas Blvd., Suite D-104, Encinitas, CA 92024

Cost:  $105.00

No Walk-ins.  Please make arrangements to prepay by March 28, 2012, by contacting Debra Reilly at debra@wpinvestigations.com

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California Association of Workplace Investigators (CAOWI) members have just voted to change CAOWI's name to the Association of Workplace Investigators (AWI).  

AWI will now begin working to expand its membership to workplace investigators in any geographic location in the country--or world, for that matter.  We greatly look forward to new associations with out-of-state investigators.

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For best investigative results, travel fraud audits should be performed by an employer on at least a yearly basis if possible.  The reason for this is that major hotels routinely purge their systems on a 6-month to yearly basis, so it can be difficult for an investigator to obtain detailed hotel expense information after a year.

This problem came up for me recently when asked to conduct an audit of travel expenses going back several years.  In instances where the employee had submitted a non-itemized hotel receipt more than a year prior to the investigation, it was difficult to ascertain whether the employee had made fraudulent or padded hotel charges, including exorbitant hotel restaurant charges.  Whereas more recent itemized hotel receipts could be obtained and they revealed meals for a spouse, children, and other guests at the hotel restaurant and excessive alcohol charges.  Further, the itemized hotel receipts showed that meal expenses were charged to the hotel bill (which the employer reimbursed) even though the employee requested money back for the same meal in a separate entry on the expense report, and even though the employee had also received an advance "per diem" payment prior to the business trip to cover meals.  In this case, the employee was obtaining a triple recovery for the same meal!

I recently heard a story about an employee somehow obtaining a handful of blank receipts from a restaurant and subsequently handing them out to co-workers who needed forms to submit expense receipts for meals.  Employees have also been known to alter a duplicate copy of a receipt and change the document number, or change the dollar amount, for example, changing a "1" to a "4" or "7", or adding an extra digit to the front of an existing number, or cutting off the top the business name or logo of a document to hide an irregularity. 

Another scam is to charge the employer for coach or business class airplane fare (on an expense receipt or using a company P-Card), obtain a refund on the ticket, then purchase a super-saver ticket for the same flight, and pocket the difference.  Or worse, booking a trip and getting reimbursed for it by the employer, getting a refund from the airline, and not traveling at all.  Or, an employee might claim he is attending a conference out of state, but then the meal receipts he submits (which are sometimes time-stamped by restaurants) reflect that he was dining in the middle of the day at location miles away from the business conference he was supposedly attending.  In these types of cases, an employee has essentially received a full paid vacation out of town (free airfare, free hotel, free meals, plus salary) and is skipping the conference.  

In sum, a strong monthly review and periodic audit process are essential to circumvent travel reimbursement fraud by employees. 

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A "procurement card" or "purchasing card" (also abbreviated as PCard or P-Card) is a form of company charge card that allows goods and services to be procured without utilizing a traditional purchasing process.  P-Cards help employers manage high volumes of small purchases by employees that might otherwise overwhelm accounts payable departments.  P-Cards are an area of great fraud potential in companies, and employers should perform periodic audits to determine if fraud is occurring.  

I recently completed a large investigation involving P-Card abuse by multiple employees.  This blog entry will point out some red flags to look for:

• Employee is typically late turning in (or fails to turn in) monthly reconciliations to support the charges made.
• Employee fails to attach any receipts at all, claiming they were lost.
• Employee attaches a receipt, but not the itemized receipt presented to Employee at the time of purchase.  Employee only submits the receipt showing the total amount charged, so as to avoid showing the specific items purchased.  For example, Employee goes to Office Depot and claims he bought "office supplies", when in reality, Office Depot sells many personal items that Employee could have purchased for personal use at home or school supplies that Employee gives to his children.  If you catch this fraud early enough, the vendor may be able to provide you with the detailed receipt and you can see exactly what was purchased.  If you see Disney DVDs (or similar) on the receipt, then you know you've got a problem.  If you see printer toner cartridges that don't match the model of printers at the employer's business, then Employee is likely using company funds to supply his home office (which may not be allowed by company policy).
• Employee was recently placed on probation or knows he is in danger of termination, which may motivate Employee to cheat the Employer out of money pre-termination.
• Employee presents multiple monthly reconciliations at one time right before the deadline believing that the documentation will undergo very little scrutiny due to the last minute submittal. 
• Employees submits receipt with long list of items hoping to bury personal items in the long list.
• Employee makes purchases at restaurants for multiple people, and you see children's dinners ordered, or alcohol purchases that may be against company policy.
• Employee makes multiple gas or food purchases over the weekend when he is not traveling for business.  
• The person in charge of reviewing the P-Card purchases has a reporting relationship to the Employee submitting the monthly reconciliations, and simply signs off on the reconciliations in fear of retaliation if the reconciliation is scrutinized or questioned.  Similarly, if the Employee submitting the reconciliation is the same person in charge of reviewing the reconciliations, this is a situation of the fox guarding the hen house and must be avoided.   For example, the CEO or CFO should not be in charge of reviewing his own reconciliations.

These are just some examples of potential fraud indicators, and they don't necessarily mean that fraud is actually occurring every time one of these indicators pops up.  Employers can implement controls to prevent this type of abuse, but that is beyond the scope of this entry.  

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In sexual harassment investigations, it is often the case that harassment occurs behind closed doors, with no witnesses, and it becomes a "he said-she said" scenario.  Instead of reaching a finding that the allegations were "sustained", "not sustained", or "unfounded", I have heard of investigators reaching an "inconclusive" conclusion, and in such an instance, the employer (who asked for the investigation to be conducted) and the complainant are no better off after the investigation than they were before the investigation began.  Such a finding puts the employer back to square one, left wondering, "What do we do now?"

What investigators should keep in mind is that they are being asked to reach a well-reasoned conclusion, considering all facts on both sides of the story, weigh the evidence based on a preponderance of the evidence, and make a credibility determination between the complainant's story and that of the alleged wrongdoer.

According to the EEOC's Enforcement Guidance on Vicarious Employer Liability for Unlawful Harassment by Supervisors dated June 18, 1999:

If there are conflicting versions of relevant events, the employer will have to weigh each party’s credibility. Credibility assessments can be critical in determining whether the alleged harassment in fact occurred. Factors to consider include:

Inherent plausibility: Is the testimony believable on its face? Does it make sense?

Demeanor: Did the person seem to be telling the truth or lying?

Motive to falsify: Did the person have a reason to lie?

Corroboration: Is there witness testimony (such as testimony by eye-witnesses, people who saw the person soon after the alleged incidents, or people who discussed the incidents with him or her at around the time that they occurred) or physical evidence (such as written documentation) that corroborates the party’s testimony?

Past record: Did the alleged harasser have a history of similar behavior in the past?

None of the above factors are determinative as to credibility. For example, the fact that there are no eye-witnesses to the alleged harassment by no means necessarily defeats the complainant’s credibility, since harassment often occurs behind closed doors. Furthermore, the fact that the alleged harasser engaged in similar behavior in the past does not necessarily mean that he or she did so again.

It is highly advisable for investigators to discuss these factors in their written reports whenever there are conflicting versions of relevant events.

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Cuiellette v. City of Los Angeles (Case No. B224303, Court of Appeals of California, Second District, Apr. 22, 2011) is a reminder to employers that simply because an employee (in this case, a police officer) has been rated as 100% totally and permanently disabled--for workers’ compensation purposes--the employer is not relieved of its duties under the Americans with Disabilities Act (“ADA”) and Fair Employment and Housing Act (“FEHA”).  A workers’ compensation rating, even 100% disabled, does not mean that the employee cannot be a qualified individual entitled to an individualized assessment of his or her disability through an interactive process and a reasonable accommodation. 

In this case, the LAPD had a policy of offering injured police officers one of 250 permanent “light-duty” positions as an accommodation, but the LAPD fired the plaintiff after he worked five days in the light duty assignment when they learned that he was 100% disabled according to his workers compensation rating.  According to the court, the relevant inquiry should have been for the LAPD to determine whether the employee was a qualified individual who was able to perform the essential functions of the position to which he was, or would be reassigned--not whether he was able to perform the essential duties of his original position.

After his termination, Cuielette filed a lawsuit alleging that the City of Los Angeles violated FEHA by sending him home because of his workers compensation disability rating, failed to engage in the interactive process, and failed to accommodate him.  He received a $1,571,500 jury verdict, and after three appeals, the Court affirmed the jury’s finding that the City had violated FEHA by summarily sending Cuiellette home because of his disability rating and without engaging in the interactive process.

Bottom line, workers comp is a whole other animal, and the ADA and FEHA must be analyzed independently.  

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On October 9, 2011, Governor Jerry Brown signed into law AB 887, which prohibits discrimination based on “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”  The law will take effect on January 1, 2012.

Current California laws already protect employees from discrimination based on gender identity and gender expression because California non-discrimination laws define "gender" to mean sex, including a person's "gender identity" (how they see themselves) and "gender expression" (how other people see them) (Education Code 66260.7 and Penal Code 422.56).  However, "gender identity and expression" do not currently appear as a specific categories within California's various non-discrimination laws, but now AB 887 will place "gender identity and expression" alongisde other protected categories in the state's non-discrimination laws, which should assist employers in effectively addressing discrimination against transgender people.

The bill adds language to several anti-discrimination statutes, including sections of the Fair Employment and Housing Act, to define the term "sex", which includes, but is not limited to, pregnancy, childbirth, or medical conditions related to pregnancy or childbirth; and "sex" also includes, but is not limited to, a person's "gender"; "gender" means sex, and includes a person's "gender identity" and "gender expression"; "gender expression" means a person's gender-related appearance and behavior whether or not stereotypically associated with the person's assigned sex at birth.  Thus, AB 887 will clarify law by directly adding "gender identify" and "gender expression" to the list of protected classes. 

Existing law requires an employer to allow an employee to appear or dress consistently with the employee'’s "gender identity".  This bill would additionally require an employer to allow an employee to appear or dress consistently with the employee'’s "gender expression".

If the claims under investigation so warrant, workplace investigators may want to consider checking employment posters, employee handbooks, etc. as part of making a factual determination during a gender identity or gender expression discrimination investigation post-2011.  

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