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Delay workplace investigations at your peril

Feature Articles

Cite as: (2008) 82(9) LIJ, p. 40

Employers and lawyers must avoid workplace claims of bullying, harassment and the like falling into the “too hard basket” or face serious consequences.

By Grevis Beard and Rose Bryant-Smith

Recent cases have highlighted the consequences for employers and lawyers who do not properly conduct (or advise about)
workplace investigations. This article examines this case law, notes the pitfalls and suggests how to reduce the likelihood of an investigation “going pear shaped”.

The case law highlights three key points for employers:

  • inadequate investigations can increase employee stress;
  • flawed investigations can lead to flawed decision-making; and
  • the independence (and any perceived independence) of the investigator is crucial.

Inadequate investigations increase employee stress

A supervisor or HR manager who turns a blind eye to a situation warranting an investigation or fails to follow internal policies about handling grievances can make a delicate situation much worse.

A good example is Hohn v Q-Comp1 in which the Queensland Industrial Relations Commission, hearing an employee’s appeal against the rejection of his worker’s compensation claim, found the employer’s investigation into the employee’s allegations of physical assault and verbal abuse to be inadequate. The employer’s failure to investigate properly was held in itself to be a major stressor in the worker’s compensation claim for an anxiety disorder, which succeeded on appeal.2

Mr Hohn was employed as a casual plant operator. An incident occurred in the workplace between him and his supervisor, Mr Goldspink. Mr Goldspink verbally abused Mr Hohn, grabbed his hand, pulled him to the ground and threatened him with dismissal. He also gave Mr Hohn a warning for “chit chat” and unsafe truck driving. The next day Mr Hohn attempted to provide a letter of complaint to Mr Beddow, the production assistant, about Mr Goldspink’s actions. Mr Beddow did not wish to take Mr Hohn’s letter of complaint, and so Mr Hohn read out the contents to Mr Beddow, who allegedly “smirked” at the allegations that Mr Hohn had made. Mr Hohn then tried to contact Ms Burey, the project manager, three times over the next day or two, but without success. He wrote a second letter complaining about Mr Goldspink’s behaviour which he tried unsuccessfully to leave with Mr Beddow.

Some days later, with Mr Hohn then absent on sick leave, Ms Burey interviewed Mr Goldspink about allegations of verbal abuse towards Mr Hohn, but was not informed by Mr Beddow of the allegation of physical assault. Ms Burey did not interview Mr Hohn.

By way of findings, Commissioner Asbury of the QIRC found that Mr Hohn’s injury was caused by Mr Goldspink’s conduct and – importantly for all those who are involved in or advise about internal complaint-handling – that Mr Hohn’s injury was significantly contributed to by the employer’s delay and the lack of procedural fairness in responding to his complaint about the incident. Commissioner Asbury found that the allegations by Mr Hohn against Mr Goldspink “were serious and involved bullying, harassment, intimidation and assault” and that “the difficulties encountered by Mr Hohn in having his complaints about Mr Goldspink dealt with and investigated, significantly contributed to Mr Hohn’s injury”.3 Commissioner Asbury found that:

“The flaws in the investigative process and the timing of the warning given to Mr Hohn should have sounded alarm bells when Ms Burey came to investigate Mr Hohn’s allegations. Marshalls is a company large enough to have several layers of management. A senior manager, Mr Beddow, was confronted with a situation which would have placed a reasonable manager on notice that further investigation was warranted. That information should have been relayed to Ms Burey to inform her investigations. This did not occur and the entire investigation process was tainted. This is clear from the letter sent to Mr Hohn on 16 June 2006 making it clear a view had been formed that the altercation was verbal, not physical as reported by Mr Hohn, and that it had occurred in the context of Mr Goldspink disciplining Mr Hohn. These conclusions were contrary to the allegations made by Mr Hohn and they were reached without any discussion with Mr Hohn”.4

As a result of the reluctance of Mr Beddow to deal with Mr Hohn’s complaints of verbal and physical abuse, and the lack of communication between Mr Hohn and the internal investigator, the investigation was flawed and caused further injury to Mr Hohn. Mr Beddow did not respond appropriately and reasonably to Mr Hohn’s allegations.

Similar issues arose in the well-publicised case of Nikolich v Goldman Sachs JB Were Services Pty Ltd,5 which was largely upheld in Goldman Sachs JB Were Services Pty Ltd v Nikolich.6 Mr Nikolich had complained about the manner in which client work was allocated to employees at the respondent firm where he worked. His employer’s handling of his complaints was characterised by delays, cursory responses and inadequate investigations. Mr Nikolich alleged his complaint had not been adequately dealt with or investigated, and that he suffered psychological illness as a result of the stressful situation created.

The inadequacy of the firm’s response to Mr Nikolich’s complaints was demonstrated by both time delays and a continuing failure to engage properly with the issues Mr Nikolich raised. Nearly a month elapsed before the HR manager showed Mr Nikolich’s letter of complaint to the supervisor, Mr Sutherland, who was responsible for the allocation of client work. Furthermore, the HR manager had failed to interview relevant staff named in the complaint letter. In addition, more than two months after receiving the letter, and without having taken any meaningful action to establish the truth or otherwise of his allegations, the HR manager met Mr Nikolich – not to deal with the concerns he had raised, but to counsel him about his stress. The Court stated that, at this point, “instead of responding to a plea for justice . . . [the HR manager], no doubt with good intentions, treated him as the problem – this response was inappropriate” (at [145]).

After that meeting, a further six weeks elapsed before the HR manager formally responded to Mr Nikolich’s complaint. The Court observed that the HR manager “missed the main point of his complaint. She failed to deal with his allegations of abuse of power, except by the bland statement that Mr Sutherland’s allocation decisions ‘were appropriate having regard to the needs of the firm’s clients’, a matter about which she had made no inquiry” (at [146]).

Mr Nikolich was dissatisfied with this response, and asked that his complaint be referred to two other senior managers. The timeliness and effectiveness of the firm’s response diminished even further, as these managers “were even less active in ascertaining the merit of his complaints; they seem to have made no investigation at all. Instead, and once again no doubt with good intentions, they set about counselling Mr Nikolich; once again, he was treated as the problem” (at 147]).

Mr Nikolich’s claims under the Trade Practices Act 1974 (Cth) and the Workplace Relations Act 1996 (Cth) failed, but he successfully argued that the company’s policies formed part of his employment contract, and that Goldman Sachs JB Were had breached that contract by failing to adhere to them.

Wilcox J of the Federal Court held that Mr Nikolich’s illness was a result of the firm breaching its own internal policies and procedures regarding the provision of a safe and healthy workplace for employees, preventing conflicts of interest, preventing harassment and handling grievances. Such policies formed part of Mr Nikolich’s employment contract.

As these two cases show, inadequate investigation of an employee’s concerns can become a major cause of stress for that employee. Ironically, a botched investigation can become an additional potential source of illness for the employee, adding to the employee’s initial concerns and the employer’s risk.

Many people are nervous about dealing with conflict. Perhaps for this reason some advisers and employers fear that they will increase their risk by creating internal grievance mechanisms that support workplace policies. The Hohn and Nikolich decisions are timely reminders that a proactive and responsible approach requires that employee complaints are dealt with properly and fairly.

Any in-house investigation that the employer conducts needs to be timely, rigorous and relevant. Employers must also avoid the temptation of “treating the complainant as the problem” – whether that occurs by attempting to “re-package” an investigation as complainant counselling, or disciplining or sacking anyone who dares to raise concerns. The latter may, depending on the circumstances, amount to breach of an array of workplace relations laws, including unfair dismissal, discrimination, breach of contract, occupational health and safety and workers’ compensation.

This is particularly so in the light of recent amendments to what constitutes unlawful discrimination in Victorian law, implemented by the state government after the introduction of WorkChoices. The Equal Opportunity Act 1995 (Vic) now makes it unlawful for any employee to be treated less favourably (such as having their hours cut or being denied training) because they made a reasonable request and/or communicated concerns about their employment entitlements. This gives employees a further ground of legal action – breach of equal opportunity law – if their employer fails to promptly investigate and resolve a complaint about employment entitlements.

The potential for legal action is only one reason employers should promptly and effectively deal with employee complaints. If employers try to manage the symptom (the complainant) instead of dealing with the underlying problems, they will leave the damaging conduct unchecked, allowing the bully, harasser or inequitable manager to behave badly again.

Inadequate investigations lead to flawed decision-making

Procedural fairness is a fundamental requirement of a fair termination of employment. In Rowley v EDI Rail Pty Ltd,7 the Australian Industrial Relations Commission (AIRC) reinstated a warehouse supervisor who had been sacked because the company’s internal investigation of the employee’s alleged misconduct was lacking.

Mr Rowley, a supervisor, was given a first and final warning after a sexual harassment incident in August 2006 and subsequently sacked. He argued in the AIRC that the warning had not been justified because his comments towards the two other employees had been friendly banter and did not constitute sexual harassment.

AIRC Senior Deputy President Hamberger found that EDI had accepted the accusations against Mr Rowley at face value and had failed to conduct a proper investigation. SDP Hamberger found that:

  • the internal investigation had been undertaken in a “cavalier fashion”;
  • the employee the supervisor had allegedly harassed had been unwell at the time she was interviewed and her comments were “rambling and incoherent”;
  • the “precise nature” of the allegations was not put to the supervisor for his response, nor was he afforded an appropriate opportunity to respond; and
  • the investigation had not made proper findings of fact.

As a result of the “significant deficiencies” in the investigation, the AIRC decided that the final warning that the supervisor had received was not justified. Consequently, the subsequent termination of his employment was not soundly based. Mr Rowley was reinstated and EDI Rail Pty Ltd was ordered to pay him lost earnings.

The intellectual rigour and rules of fairness that are applied in conducting an in-house investigation are crucial to making reliable, justifiable conclusions in relation to employee discipline.

Perceptions of investigative “independence”

In Perananthasivam v Telstra Corporation Limited,8 Telstra used the same lawyers to both conduct an investigation into an employee’s allegations of bullying and then later oppose that same employee’s unfair dismissal and discrimination claims in the Federal Court.

In hearing an application by the employee against a partial strike-out of his discrimination claims, Sackville J criticised Telstra and its lawyers over a “so-called independent investigation” into the employee’s allegations of bullying. While the employee’s application failed, his Honour commented that Telstra’s decision to use the same lawyers was not particularly sensitive to the employee’s position and he had some sympathy with the employee’s sense of grievance. Sackville J noted that the solicitors described the investigation as independent to the employee and to Telstra, but that the same solicitors then acted for Telstra in opposing the employee’s unfair dismissal claim under the Workplace Relations Act 1996 (Cth) and discrimination claims under the Disability Discrimination Act 1992 (Cth).

Sackville J’s comments are a reminder that any relationship between an investigator and the employer may affect the perceptions of all participants regarding the investigation’s transparency, independence and validity. The credibility and integrity of an investigation can be damaged simply by the identity of the investigator, even where procedural fairness is rigorously applied.9

Many employers would prefer that the investigation process and all the documents produced, supplied or created during the investigation were covered by legal professional privilege, to avoid having those documents discovered in any subsequent litigation. Sackville J’s comments are a warning that the independence of the investigation should not be compromised in the quest for legal professional privilege. External providers of investigation services other than the employer’s own lawyers are available.

Conclusion

Allegations of sexual harassment, conflict of interest and other misconduct often go straight into the “too hard basket”, and are dealt with in a rushed and cursory manner. This is not surprising – these issues are difficult and time-consuming. They can be highly personal, complicated and unpleasant, and have serious consequences for the people involved.

However, if they are not dealt with properly, such issues may result in continuing workplace problems and unnecessary costs to organisations. Employee health may suffer, which could lead to increased absenteeism, WorkCover claims and litigation.

When employers receive an internal complaint from an employee, or they wish to investigate a possible breach of discipline, they must turn their minds to:

  • the internal policies that apply;
  • the seriousness of the allegations;
  • the possible consequences for the organisation and the employees (for example, is it possible that the respondent’s employment will be terminated? Is the respondent on a final warning?);
  • the likelihood of any future challenges to the integrity of the investigation or its findings;
  • whether the investigation should be conducted in-house, by lawyers or by external consultants;
  • legal professional privilege; and
  • whether there is any prospect of industrial issues or litigation in the future.

A competent and thorough investigation will assist greatly in managing and resolving employee stress – rather than exacerbating it – and give the employer confidence that its decisions are valid and defensible.


GREVIS BEARD and ROSE BRYANT-SMITH, with Deanne McLennan, are former lawyers who now run Worklogic Consulting. Worklogic Consulting (http://www.worklogic.com.au) provides a range of discrimination and dispute resolution services, including the investigation and mediation of workplace complaints.

Numbers in square brackets in the text refer to the paragraph numbers in the judgment.

1. (2007) 186 QGIG 656 (31 October 2007).

2. The failed appeal is Q-COMP v Hohn [2008] QIC 56 (26 March 2008).

3. Note 1 above, at 668-669.

4. Note 3 above.

5. [2006] FCA 784 (23 June 2006).

6. [2007] FCAFC 120 (7 August 2007).

7. [2007] AIRC 753 (22 October 2007).

8. [2007] FCA 1584 (16 October 2007).

9. Courts and tribunals have held that, just as employers must conduct procedurally fair and timely investigations, employees have a corresponding obligation to engage honestly and respectfully with any investigation at their workplace. Employees who do not act in a trustworthy or appropriate manner may taint evidence gathered and impact on the reliability of the investigation’s results. They may also damage their own ability to run a legal challenge to the employer’s subsequent disciplinary action. See Streeter v Telstra Corporation Ltd [2007] AIRC 679 (10 August 2007) and Judson v The City of Sydney Council [2008] AIRC 13 (10 January 2008).

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