Is Your Investigation Illegal?

Businesses that do not have an in-house human resources department or professionally trained staff often contract with third-party consultants to provide human resources services on a regular or as needed basis (“HR consultants”). The professionals who provide these services have usually received various designations such as PHR, SHRP, PHR-CA or SPHR-CA. The services provided are generally cost effective and of a high quality. At times HR consultants are called upon to perform a variety of duties including workplace investigations.

Likewise, consultants in other areas who have years of experience in a specific, specialized field (e.g., law enforcement) are at times called upon to conduct a variety of duties. These duties can include training, preparation of policies and procedures and, at times, workplace investigations, otherwise known as internal affairs investigations.

Recently I learned of a workplace investigation that had been performed by an HR consultant for a client and another that had been performed by a non-HR consultant who had retired after many years of experience and was doing, among other things, internal affairs investigations. This information concerned me because such investigations may in fact be illegal under California law and expose the consultants and their clients to criminal and civil penalties.

“Workplace investigations” generally involve obtaining and reporting “information concerning [an] employer’s employees involving questions of integrity, honesty, breach of rules, or other standards of performance of job duties.” (Cal. Business and Professions Code § 7521.) While these types of investigations are conducted by individuals with a variety of qualifications, under California law unless the person is a licensed private investigator or qualifies for an exemption conducting such an investigation is prohibited by law. (Cal. B&P Code § 7523, et seq.) These requirements apply to investigations performed by both private and public employers.

There are two categories of exemptions that have application to workplace investigations. The first is attorneys. Under the law, attorneys “performing his or her duties as an attorney at law” are exempt from having to be licensed private investigators. (Cal. B&P Code § 7522(e).) Thus, attorneys, performing their duty as an attorney, are authorized by law to conduct investigations, including workplace investigations.

Another group that is exempt from obtaining a private investigator’s license is employees who conduct internal investigations for their employer. For example, a human resources professional (or anyone else) who is employed of John Doe, Inc. may perform workplace investigations involving John Doe, Inc. employees. In short, as long as the investigation is internal and done by an employee it complies with the law.

However, third-party consultants who are not licensed private investigators or licensed attorneys are not authorized by law to conduct workplace investigations for public or private employers. A violation of the licensing requirements can have dire consequences for both the person conducting the investigation and the person who “knowingly engages a nonexempt unlicensed person” to conduct an investigation.

Any person who is not exempt and not licensed and conducts an investigation is “guilty of a misdemeanor punishable by a fine of five thousand dollars ($5,000) or by imprisonment in the county jail not to exceed one year, or by both that fine and imprisonment.” (Cal. B&P Code § 7523(b).) Furthermore, a person who “knowingly engages a nonexempt unlicensed person” to conduct an investigation can be subjected to the same criminal punishment. (Id.) In addition to the potential criminal penalties, a person who engages in this conduct can have an injunction issued against them and a civil fine of up to $10,000 imposed. (Cal. B&P Code § 7523.5)

In addition to the potential criminal and civil penalties, if the matter that is the subject of the investigation results in a grievance, civil service appeal or civil lawsuit, there is the risk that the results of the investigation will be invalidated because of the “illegal” nature of the investigation. The invalidation of an investigation can have significant consequences.

For example, if an investigation finds that an employee had engaged in sexual harassment and, based on the results of the investigation, the employee was terminated, the employer can defend a lawsuit brought by the terminated employees if the investigation was “adequate” and the employer reasonably and in good faith relies upon the investigation in making its disciplinary decision. (Cotran v. Rollins Hudig Hall Internat. Inc. (1998) 17 Cal.4th 93). Thus, if a court excludes the investigation because it was illegal there is no investigation upon which the employer can rely. Such a decision could result in an employer being subjected to a significant adverse judgment.[1]

While HR and other consultants may be willing and able to perform workplace investigations, the law prohibits them from doing so. In addition, such investigations expose the investigator and their client to potential criminal and civil liability. Furthermore, if disputes arise regarding or out of the investigation the client is at risk that the investigation will be invalidated because it was conducted by someone who was not authorized to perform such investigations. To avoid these risks, if you have a need for an outside workplace investigation you should hire a licensed private investigator or attorney who specializes in conducting workplace investigations.

by Dan Rowley

[1] Likewise under Federal law a proper and adequate investigation that is part of an employer’s anti-harassment policy can provide a defense in cases alleging illegal harassment. (Faragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998).)