Investigating Misconduct
The National Law Journal, August 14, 2000

By Michael Starr and Jordan Lippner

You have received information that two of your non-union employees may be engaged in fraudulent transactions that, in your view, may well subject the company to civil liabilities to third parties and even criminal penalties. It appears that one employee, Ivan, is the mastermind behind this scheme and the other, Lenny, is his weak-willed and unsophisticated accomplice. You decide to confront Lenny, hoping that he will come clean and give you evidence against Ivan. Perhaps, in this way you will learn enough to correct the problem before it spins out of control, and besides, Ivan has a written employment contract with stock options and a golden parachute that will all vest if he is fired without provable just cause.

But when you try to interview Lenny, he tells you he will not participate unless Ivan is allowed to be present as his representative. You tell Lenny that he is being insubordinate and will be fired if he fails to cooperate with the investigation; yet, he persists in his demand, prompting you to fire him on the spot. Have you violated any laws?

An NLRB Decision Changes the Rules

Until last month, the answer would have been no. Now that has changed: employers with non-unionized workforces must heed a new decision under the National Labor Relations Act (NLRA), which is generally thought to be inapplicable to employer-employee relations outside the labor union context. That is not entirely so. According to a 3 to 2 decision of the National Labor Relations Board (NLRB) in Epilepsy Foundation of Northeast Ohio, 331 N.L.R.B. No. 92 (July 10, 2000), even non-unionized employees, if subjected to what they reasonably believe to be a disciplinary investigation, have a right, upon request, to be represented by a co-worker when being questioned by their employer. Refusing to honor that request may very well constitute an unfair labor practice, violating the NLRA. As one of the dissenting Board members decried, the new rule "take[s] away from a nonunion employer its heretofore unfettered right under the Act to deal individually with its employees." Union rights have come to the non-union workplace.

Extending 'Weingarten' to Nonunion Employees

Twenty-five years ago, the U.S. Supreme Court ruled that an employer may not conduct an investigatory interview of one of its unionized employees in the absence of a union representative to aid the employee if the employee requests such representation and reasonably believes the interview will result in his discipline. See NLRB v. J. Weingarten, Inc., 420 U.S. 251 (1975).

If the employer does not want to grant that request, all it can do is present the employee with the Hobson's choice of participating in the interview without a union representative or having no interview and forgoing any attendant benefits (e.g., the chance to tell his side of the story). Of course, should the employee call the employer's "bluff," it may very well be the employer who is faced with a dilemma: interview the employee with a co-worker present or try to conduct an investigation without an essential witness. Though the Supreme Court did temper its holding by stating that an employee's exercise of this right "may not interfere with legitimate employer prerogatives," the Court failed to elaborate what those prerogatives might be.

The Weingarten decision was grounded in � 7 of the NLRA, which provides that "employees shall have the right to . . . engage in other concerted activities for the purpose of collective bargaining or other mutual aid and protection" The Supreme Court undertook a literal reading of that language and stressed that the participation of union representative "safeguard[s] not only the particular employee's interest, but also the interests of the entire bargaining unit by exercising vigilance to make certain that the employer does not initiate or continue a practice of imposing punishment unjustly." Id. at 260. The representative's presence is, the Supreme Court believed, "an assurance to other employees in the bargaining unit that they, too, can obtain his aid and protection if called upon to attend a like interview." Id.

Seven years after the Supreme Court established what are now called Weingarten rights, the NLRB (then dominated by appointees of President Carter) extended those rights to nonunion employees (by a 3-to-2 vote), reasoning that the� 7 rights applied by their terms to "employees," not just those who are represented by a union. See Material Research Corp., 262 NLRB 1010 (1982).

This ruling proved to be short-lived. Just three years later, the NLRB (now firmly controlled by Republicans appointed by President Reagan) over-ruled Material Research, concluding that "to place a Weingarten representative in a nonunion setting is to require the employer to recognize and deal with the equivalent of a union representative, contrary to the Act's exclusivity principle." Sears, Roebuck & Co., 274 N.L.R.B. 230 (1985).; see also E.I. DuPont & Co., 289 NLRB 627 (1988). That is where things stood until a few weeks ago with yet another board reversal in Epilepsy Foundation.

How the 'Weingarten' Case has Been Applied

Although there are relatively few cases construing Weingarten rights, there are some. Exactly what Weingarten has so far been held to require, and what it has not, is something that counsel for nonunionized employees must now know.

Not all employees are protected. The NLRA does not apply to literally all employees. Certain classifications of employees -- notably, agricultural workers, supervisors and managerial employees -- are excluded from its scope by statute or Supreme Court gloss. But, these exclusions may not be as sweeping as they appear. Managerial employees, for these purposes, are those who formulate and effectuate management policies and exercise discretion within or even independently of established employer policy. Supervisors must have actual or effective authority over hiring, firing, discipline or other terms and conditions of employment. Some highly skilled and well-compensated executives may not fall into either of these two exclusions, but some will.

Weingarten is not Miranda. Employers should keep in mind that it is incumbent upon the employee to invoke his Weingarten rights and request a representative. At least for now, Weingarten does not require any Miranda-type warning. Consequently, employers may conduct investigatory interviews without the participation of an employee representative if one is not requested.

There is no right to counsel. The NLRB has held that an employee's right to have a representative present at an investigatory interview does not include the right to be represented at the interview by a private attorney. McLean Hospital, 264 N.L.R.B. 459, 474 (1982). This ruling has particular import for companies who cooperate in investigations by, for example, the Securities Exchange Commission and the Justice Department, since effectively interviewing employees who are sitting at the interview table with their attorneys may be well-nigh impossible.

A Weingarten representative cannot play Perry Mason. In Weingarten, the Supreme Court expressly stated that the representative's role is to assist the employee and "may do so by attempting to clarify the facts or suggest other employees who may have knowledge of them." 420 U.S. at 260. The Court made clear, however, that the employer may "insist" on hearing only the employee's own account of the incident under investigation. Id. Consistent with this principle, a Weingarten representative oversteps the bounds when he directs the subject of the interview not to answer questions or only to answer questions once. New Jersey Bell Telephone Co., 308 N.L.R.B. 277 (1992). An employer who ejects the representative who engages in such obstructionist tactics acts lawfully because "it is within an employer's legitimate prerogative to investigate employee misconduct in its facilities without interference from union officials." Id.

The employer may proceed without delay. Although an employee has a right to demand the presence of a representative, the employer is not required to unreasonably delay its investigation. If the requested representative is "unavailable either for personal or other reasons for which the employer is not responsible," and if another representative whose presence could be requested is available, the employer is not obligated to postpone the interview. Coca-Cola Bottling, 227 N.L.R.B. 1276 (1977). Rather, because "the right to hold interviews without delay is a legitimate employer prerogative," the burden remains on the employee to request the presence of an alternative representative. Of course, if the requested representative is not then available, but would be shortly, the NLRB would likely find that no legitimate employer interest is impaired by delaying the interview until the chosen representative can attend.

Continuing Impediments to Effective Investigation

Although certain understandable concerns have been allayed by caselaw, other problems remain. It is, for example, unclear what right the employer has to exclude a representative if, as in the hypothetical above, the chosen representative is perceived by the employer to be part of the problem being investigated. The NLRB has stated that "[n]owhere in Weingarten does the Court state or suggest that an employee's interest can only be safeguarded by the presence of a specific representative sought by the employee, as opposed to being accompanied by any union representative." Roadway Express, 246 N.L.R.B. 1127 (1979). That case, however, arose where another union shop steward was available and the employee's choice was not. See also, Pacific Gas & Electric Co., 253 NLRB 1143 (1981) (employee cannot insist on presence of off-site person when on-site representatives are available).

The Future Under the NLRB is Far From Clear

How the Board will apply these principles if there is no union is anything but clear. It is surely not a good omen for employers that in Epilepsy Foundation itself, the requested representative was the other employee who participated in or, perhaps, spearheaded the conduct the employer found objectionable. But because the employer appears not to have raised the issue, it was never addressed.

In addition, maintaining the confidentiality of an investigatory interview is typically of paramount consideration, whether the company is investigating a claim of sexual harassment or insider trading.

Moreover, where the investigation concerns sexual harassment, the risk of the alleged victim's being retaliated against will increase once word of the investigation spreads. This may place the employer in a worse position than it was before it conducted the interviews. This puts employers in a bind because, short of accepting the victim's allegations and firing the alleged harasser, an employer's most effective legal defense against liability is to conduct a prompt investigation and take appropriate corrective action. Conceivably, both the employee and the representative can be warned not to discuss the investigation and threatened with discipline if they do. But there is no way of knowing whether such a threat would, in and of itself, be held to interfere with employees' right to "mutual aid and protection" and thus independently violate the NLRA.

Employers that do not comply with the new NLRB rule face administrative cease-and-desist orders plus certain prospective make-whole remedies, most commonly reinstatement with back pay, for acting in derogation of an employee's Weingarten rights. With that in mind, it ill- behooves employers to cavalierly deny requests for a Weingarten representative.

Understanding the scope of Weingarten rights, however, will allow employers to make informed judgments about how to conduct investigatory interviews. In today's litigious environment and with the current board composition, that is perhaps the only solace employers can take.

Michael Starr is a partner in the Labor and Employment Group of Hogan & Hartson L.L.P.

This article is reprinted with permission from the August 14, 2000 edition of the National Law Journal. � Copyright 2000 NLP IP Company.

¹ 189 A.D. 556, 179 N.Y.S. 325 (App. Div. 4th Dept. 1919).
² Eastman Kodak, 189 A.D. at 559, 179 N.Y.S. at 328.
³ Eastman Kodak, 189 A.D. at 561, 179 N.Y.S. at 330 (emphasis added).
⁴ See, e.g.,Reed, Roberts Assoc. v. Strauman, 386 N.Y.S.2d 677 (1976); Columbia Ribbon and Carbon MFG. Co. v. A-1-A Corp., 398 N.Y.S.2d 1004 (1977).
⁵ See International Paper Co. v. Suwyn, 966 F.Supp. 246 (S.D.N.Y. 1997) (court�s search found "no New York case has been found where enforcement [of a restrictive covenant] has been granted . . . solely on the basis of the uniqueness of the services"). The court�s search in International Paper was off by one case, see Malby v. Harlow Meyer Savage, Inc., 223 A.D.2d 516, 637 N.Y.S.2d 110 (App. Div. 1996), affirming, 633 N.Y.S.2d 926 (Sup. Ct. NY Cty 1995), in which an employee�s services were found to be unique.
⁶ 919 F. Supp. 624 (E.D.N.Y. 1996).
⁷ Id. at 629 (some internal quotes omitted.)
⁸ Id.
⁹ The Lumex decision was foreshadowed by other decisions. See Continental Group v. Kinsley, 422 F. Supp. 838, 845 (D. Conn. 1976) (applying New York law to enforce restrictive covenant where "second employer�s work is sufficiently similar to that of first employer to make likely the risk of disclosure by the employee in the course of his subsequent employment"); Business Intelligence Services, Inc. v. Hudson, 580 F. Supp. 1068 (S.D.N.Y. 1984); National Starch and Chemical Corp. v. Parker Chemical Corp., 219 N.J. Super. 158, 530 A.2d 31 (App. Div. 1987); Teradyna, Inc. v. Clear Communication, 707 F. Supp. 353, 356 (N.D. Ill. 1989) (under Illinois� Uniform Trade Secrets Act, injunction for "threatened" misappropriation available � though not there granted � where "high degree of probability of inevitable and immediate" use of trade secrets).
¹⁰ 580 F.Supp. 1068 (S.D.N.Y. 1984). See also Continental Group, Inc. v. Kinsley, 422 F. Supp. 838 (D.Conn. 1976).
¹¹ 966 F. Supp. 246 (S.D.N.Y. 1997). See also PSC, Inc. v. Reiss, 111 F. Supp.2d 252 (W.D.N.Y. 2000). ¹² 1997 WL 731413 (N.Y. Sup. 1997) (denying injunction, in part because the defendant was not "a scientist, an engineer, or a computer specialist. He sells the product as is with little knowledge or [sic] �how� it works.")
¹³ See also EarthWeb Inc. v,Schlack, 71 F. Supp.2d 299 (S.D.N.Y. 1999), aff�d, 2000 WL 1093320 (2d Cir. 2000) (denying enforcement of a restrictive covenant holding "in the internet environment, a one year hiatus from the work force is several generations, if not an eternity.") But see Business Intelligence, supra (enforcing full 1-year restriction against computer software consultant).
¹⁴ See, e.g., Byrne v. Barrett, 268 N.Y. 199, 206-07, 197 N.E. 217, 218-19 (1935); ABKCO Music, Inc. v. Harrisongs Music Ltd., 772 F.2d 988, 994 (2d Cir. 1983); Churchill Communications Corp. v. Demyanovich, 668 F. Supp. 207, 211 (S.D.NY. 1987).
¹⁵ Leo Silfen, Inc. v. Cream, 29 N.Y.2d 387, 391, 278 N.E.2d 636, 639 (1972).
¹⁶ 54 F.3d 1262 (7th Cir. 1995) (applying the Illinois Trade Secret Act, which provides that a court may enjoin the actual or threatened misappropriation of a trade secret.)
¹⁷ Id. at 1269.
¹⁸ Id. at 1270.
¹⁹ Id. at 1271.
²⁰ 1997 WL 731413.
²¹ While both former employees had signed a confidentiality agreement, only one had signed a non-competition agreement. All three agreements were with DoubleClick’s former corporate home prior to its having been spun-off as a free-standing business and, thus, not obviously enforceable by DoubleClick.
²²  See id. at *4, n.3. Under New York law, it must be remembered, even highly valuable proprietary information is not protectible as a trade secret unless it is maintained as a secret by the company. Schriptek Marketing, Inc. v. Columbus McKinnon Corp., 187 A.D.2d 800, 589 N.Y.S.2d 656 (App. Div. 1992).
²³ Id. at *5.
²⁴ 71 F. Supp.2d 299 (S.D.N.Y. 1999), aff'd., 2000 WL 1093320 (2d Cir. 2000).
²⁵ Id. at 310
²⁶ Id. at 309.
²⁷ See PSC v. Reiss, 111 F.Supp.2d at 257.
²⁸ See Lumex, supra. See generally, Michael Starr, Paying for Protection: Linking Noncompete Agreements to Severance, The Corporate Counsellor, Oct. 1996.