Unless required to by contract or subpoena, employees and former employees may decline to provide information or documents in connection with a corporate investigation. However, many employers will insist on employee co-operation and may impose disciplinary measures – up to and including termination – on those employees who refuse. In the absence of contractual protections, employees may have no legal right to refuse to submit to an interview, even if their answers tend to incriminate them. The recent decision of the United States Court of Appeals for the Second Circuit in Gilman v. Marsh & McLennan Companies, Inc is instructive. There, two employees argued that Marsh & McLennan’s demand they submit to an interview in an internal investigation constituted state action that infringed their right against self-incrimination. The court rejected this argument, calling it ‘the legal equivalent of the “Hail Mary pass” in football.’
Although employees generally cannot refuse to participate in investigations without risking their employment, they do possess various rights implicated by corporate investigations. The sources of those rights include the employer and federal and state law. With respect to the employer, many companies have policies and procedures for internal investigations. For instance, employee handbooks, company by-laws, written guidelines and employment agreements often contain provisions regarding employee data and document collection, workplace searches, communication monitoring, privacy and confidentiality. These documents may also provide guidance on an employee’s right to indemnification for legal fees expended during an investigation or related proceedings. In addition, many companies maintain written policies that protect employees from retaliation for participating in an investigation. These documents, and unwritten, established company procedures, should be considered to understand the protection afforded to employees in an investigation.
Federal and state law also govern the rights of employees involved in investigations. These rights, discussed below, can be divided into three general categories: (1) the right to be free from retaliation; (2) the right to representation; and (3) the right to privacy.
14.2 The right to be free from retaliation
Although employees generally have no right to refuse to participate in a corporate investigation, they may be protected from retaliation. A number of federal employment statutes prohibit retaliation against employees who participate in corporate investigations. State and local laws provide similar protection.
Moreover, employees who possess information regarding corporate misconduct have some leverage in that they may become whistleblowers. Whistleblowers are protected from retaliation under federal and state whistleblower laws.
The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) provides for both civil and criminal penalties for employers who retaliate against whistleblowers. Section 806 of the law governs civil penalties. It prohibits publicly traded companies from retaliating against employees who assist or provide information to law enforcement, Congress, or ‘a person with supervisory authority over the employee’ regarding activity the employee reasonably believes is a violation of: (1) federal law regarding mail, wire, securities, or bank fraud; (2) an SEC rule or regulation; or (3) any provision of federal law relating to fraud against shareholders. To bring a Section 806 claim, an employee must first file a complaint with the Department of Labor within 90 days of the employer’s retaliatory action, and must make a prima facie showing that the employee’s protected conduct was a contributing factor in the action taken against him or her. The Occupational Safety and Health Administration, which has been delegated authority to investigate complaints of retaliation, will notify the employer of the complaint, and will decline to conduct an investigation if the employer demonstrates by clear and convincing evidence that it would have taken the same action in the absence of the employee’s whistleblowing conduct.
Section 1107 of Sarbanes-Oxley provides for criminal penalties for retaliation against whistleblowers. Specifically, it criminalises ‘[w]hoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense.’
Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) provides anti-retaliation protection for whistleblowers who report possible securities law violations to the Securities and Exchange Commission (SEC). Similarly, Section 748 of Dodd-Frank protects whisteblowers who report violations of the Commodity Exchange Act to the Commodities Futures Trading Commission. And Section 1057, which codifies the Consumer Financial Protection Act of 2010, forbids retaliation against employees who blow the whistle on possible violations of that statute.
Despite their similarities, there are important differences between the whistleblower protections contained in Sarbanes-Oxley and Dodd-Frank. Procedurally, in contrast to Sarbanes-Oxley’s requirement that complaints be filed with the Department of Labor within 90 days of the retaliatory action, Dodd-Frank permits an employee to bring a private cause of action directly, without having to go through an administrative agency, and allows the employee to do so within six to ten years, depending on the circumstances. In addition, Dodd-Frank provides more attractive financial incentives for whistleblowers. A whistleblowing employee who prevails under Dodd-Frank may receive up to twice the amount of wages lost due to retaliation, as well as attorneys’ fees. Dodd-Frank also allows a whistleblower to receive cash awards of between 10 and 30 per cent of what the SEC recovers based on the whistleblower’s report. This bounty programme has paid out more than $266 million to 55 individuals since 2012.
Under Sarbanes-Oxley, by contrast, a whistleblower’s recovery is limited to the ‘relief necessary to make the employee whole’, including reinstatement, back pay, ‘special damages’ (which includes damages for non-economic harm such as reputational injury, mental anguish and suffering), attorneys’ fees and costs.
Critically, however, whereas Sarbanes-Oxley protects employees who report concerns to supervisors at their company, Dodd-Frank does not. Dodd-Frank defines ‘whistleblower’ to mean a person who provides ‘information relating to a violation of the securities laws to the Commission.’ Despite this narrow definition, in 2011, the SEC promulgated Exchange Act Rule 21F–2, which provided that individuals who reported information to their employer could still avail themselves of Dodd-Frank’s whistleblowing protections. Understandably, this caused confusion and, until 2018, there was a split of authority on whether an employee could qualify as a ‘whistleblower’ under Dodd-Frank if he or she did not provide information to the SEC itself. The Fifth Circuit adopted the literal meaning of the statute and held that employees have to report to the SEC to qualify as whistleblowers. The Second and Ninth Circuits reached the opposite conclusion. The Supreme Court resolved this issue in 2018, agreeing with the Fifth Circuit’s literal interpretation. The Court explained that restricting the definition of ‘whistleblowers’ to those who reported to the SEC was not only required by the plain language of Dodd-Frank, but was also consistent with its purpose. Unlike Sarbanes-Oxley – which reflected Congress’s attempt ‘to disturb the corporate code of silence that discouraged employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally’ – the ‘core objective’ of Dodd-Frank’s whistleblower programme is ‘to motivate people who know of securities law violations to tell the SEC.’
14.3 The right to representation
Employees have no automatic right to counsel during an internal investigation, unless contractually provided under the terms of their employment. Nonetheless, employees may choose to retain counsel, particularly if they face liability.
Concerns over individual criminal liability have increased since September 2015, when then-Deputy Attorney General Sally Yates issued a memorandum titled ‘Individual Accountability for Corporate Wrongdoing.’ The ‘Yates Memo’ stresses the importance of combating corporate misconduct by holding individuals accountable. It lists six steps that should be part of all investigations and prosecutions of corporate misconduct, the first of which is that a corporation’s eligibility for co-operation credit depends on it providing the Department of Justice (DOJ) with all relevant facts about the individuals involved in the alleged misconduct. The Yates Memo also states that all investigations must focus on individuals from the inception of the investigation, and that barring extraordinary circumstances, which must be personally approved in writing by specified DOJ personnel, DOJ attorneys will not agree to any settlement or corporate resolution that dismisses charges or provides immunity for individual officers or employees.
14.3.1 Interviews without employee’s counsel
An employer may seek to conduct an interview of an employee, either with or without company counsel present, before that employee has appointed counsel. Once the employee offers an account of events, it may be difficult to offer a different one later. When counsel for individuals are appointed, they should obtain all information regarding their clients’ prior statements about the subject of the investigation, including requesting any relevant memoranda created in prior interviews. Individual counsel should also request all documents, data and other information pertaining to their clients’ involvement in the subject of the investigation. Requests for such information may be directed to the client, company counsel, law enforcement and other witnesses (or their counsel). Even if counsel is not allowed to participate in a client’s investigatory interview, they should use the acquired information to prepare their clients.
During an interview with no employee counsel, the employee may ask whether he or she should obtain individual counsel. This can place the interviewer in an uncomfortable position. An affirmative answer could have undesirable consequences, including delaying the investigation, chilling the employee’s candour, and risking that individual counsel may approach law enforcement before the employer concludes the internal investigation. A negative answer creates complications and potential claims against the employer and investigating counsel if the employee self-incriminates or compromises future legal positions during the interview. Generally, the prudent course is to politely decline to answer the question.
14.3.2 Upjohn warning
Employers often wish to disclose to the government information obtained from employees during investigatory interviews to obtain co-operation credit or general goodwill. However, in the absence of instructions to the contrary, interviewed employees may believe that their company’s attorneys represent them, and may attempt to assert attorney–client privilege over their communications with company counsel. To avoid this problem, counsel should provide an Upjohn warning at the start of any interview.
An effective Upjohn warning explains that: (1) company counsel is collecting facts for the purpose of providing legal advice to the company; (2) company counsel represents the company and not the employee; (3) the interview is covered by the attorney–client privilege, which belongs to and is controlled by the company, not the employee; and (4) the company may decide, in its sole discretion, whether to waive the privilege and disclose information from the interview to third parties, including the government. Once the warning has been given and the employee has been afforded an opportunity to ask questions, the delivery of the Upjohn warning should be documented by a note-taker as contemporaneous evidence that it was provided.
The importance of Upjohn warnings has been amplified by the guidelines set forth in the Yates Memo. Under the Yates Memo, a company’s eligibility for co-operation credit requires that it discloses all relevant facts about individuals involved in corporate misconduct. In practice, this usually entails revealing what a culpable employee says during an investigatory interview. However, a company can only do this if it controls the attorney–client privilege, which an effective Upjohn warning accomplishes.
14.3.3 Separate representation arranged by the employer
Whether the employer agrees to arrange for counsel can depend on a number of factors, such as the employee’s contractual and indemnification rights, the corporate by-laws, and the potential conflict of interest between the employee and the corporation. Although separate representation of an employee can increase expenses and lengthen the investigation, it can also provide certain advantages to the company. It can reduce any suggestion of improper influence by the company over the employee, which can bolster the company’s credibility with the government when reporting the results of the investigation and increase the company’s co-operation credit. In some circumstances (particularly when individual counsel has a good working relationship with company counsel), it can facilitate communication with the employee. Company and individual counsel should come from different law firms. Further, arranging for individual representation can deter the government from communicating directly with the employee.
When confronted with multiple employees who warrant separate counsel, employers may seek to reduce costs by arranging for ‘pool counsel’ to represent the entire group. However, this pool arrangement must be reassessed if a conflict of interest arises within the group.
14.4 The right to privacy
14.4.1 Workplace searches
In most circumstances, an employer can conduct searches of its workplace and computer system to investigate wrongdoing. Such searches are largely unprotected by personal privacy laws as work spaces, computer systems and company-issued electronic devices are generally considered to be company property. Many companies explicitly address this in written corporate policies and employment agreements. However, unwarranted or unreasonable invasions of privacy during a workplace search may be protected under state law – including state constitutional, statutory and common law.
Employees who use their own personal electronic devices for work should be aware that work-related data stored on those devices belongs to the employer. Therefore, employees are advised to refrain from using their personal devices for work, and instead maintain separate work devices. If an employer seeks to obtain or review work-related data from an employee’s personal device, the employer must be careful to exclude any personal data.
14.4.2 Workplace surveillance
An employer seeking to investigate wrongdoing through electronic surveillance must be mindful of federal and state law.
Title III of the federal Omnibus Crime Control and Safe Streets Act of 1968 criminalises the intentional interception of any wire, oral or electronic communication unless at least one of the parties to the communication has consented to such interception or the employer is monitoring or recording employee telephone calls ‘in the ordinary course of its business’.
Most states (and the District of Columbia) similarly prohibit electronic surveillance of communications unless at least one party to the communication provides consent. Some, but not all, of these jurisdictions provide exemptions for employer monitoring of employee communications. Eleven states – California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Montana, Nevada, New Hampshire, Pennsylvania and Washington – prohibit (either criminally or civilly) surveillance without the consent of all the parties to the communication.
Notably, with respect to email, because employees generally do not possess an expectation of privacy in their work accounts, employers may access personal emails exchanged over these accounts.
14.4.3 Polygraph testing
An employer’s use of polygraph testing in aid of an investigation is limited by the Employee Polygraph Protection Act of 1988. An employer seeking to use a polygraph must: (1) be conducting ‘an ongoing investigation involving economic loss or injury to the employer’s business, such as theft, embezzlement, misappropriation, or an act of unlawful industrial espionage or sabotage’; (2) possess ‘a reasonable suspicion that the employee was involved in the incident or activity under investigation’; (3) show that ‘the employee had access to the property that is the subject of the investigation’; and (4) follow a number of statutorily mandated procedural guidelines. If the employer satisfies these requirements, it can terminate an employee who refuses to take the polygraph test, or takes it and fails, provided there is ‘additional supporting evidence’ justifying the termination.
The Secretary of Labor may bring court action to restrain employers who violate the statute and may assess monetary penalties. In addition, an employer who violates the law may be liable to the employee or prospective employee for appropriate legal and equitable relief, which may include employment, reinstatement, promotion, and payment of lost wages and benefits.
State law may provide additional restrictions on the use of polygraph tests and other tests purporting to determine truth or falsity.
Among the significant issues that may arise from in-house counsel, and often external counsel, representing the company and not the individual is whether the employee has a right to be indemnified. The right to be indemnified may extend to legal fees, advancement of legal fees and for any potential judgment debt or settlement. As discussed above, an employee has a right to have his or her own counsel, even if the company pushes for joint representation by company counsel, but the complicated question of whether the company must indemnify the employee for costs around separate representation may arise. Determining a company’s indemnification obligations requires close review of any agreements and understandings that might give rise to indemnification or advancement of fees. It is critical that an employee communicate closely with company counsel to come to a mutual understanding of the company’s obligations.
14.5.1 Determining whether an individual is indemnified
Employees should ask their counsel to assertively engage in communications with the employer and company counsel to determine whether the company will agree to indemnify the individual employee and to advance fees. This conversation should also specifically discuss the exact scope of any indemnification. If the company agrees to, or must, indemnify from any agreement or source of this right, employee’s counsel should draft and execute a written agreement binding the company. Although the company may seek to impose unfavourable terms, it is generally advisable to reduce the indemnification obligation to writing.
Employees and their counsel should carefully review potential sources of right to indemnification. These sources may include company by-laws, local law in the state of incorporation, company policies and insurance policies of the employer.
14.5.2 Potential sources of right to indemnification
22.214.171.124 Corporate by-laws
Corporate by-laws often delineate the company’s obligation to indemnify an employee’s costs arising out of representation for internal investigations or any matters related to his or her official duties. Employee counsel must carefully review corporate by-laws because, even if indemnification obligations are provided, they are often listed with limitations or releases from obligation. For example, many companies include release provisions releasing the company from its obligations or entitling it to repayment of any indemnified cost if the costs subsequently transpire not to be indemnifiable. If these provisions exist, it is likely that the company will require the employee to sign an undertaking letter, in which the employee agrees to repay any amounts advanced if it is later determined that the employee was not entitled to indemnification. Similarly, there is a difference between the duty of an employer to indemnify an employee of costs incurred and any duty to advance defence costs. Some corporate by-laws regarding indemnification may require advancement of attorneys’ fees. However, such by-laws should be reviewed carefully, because absent such language, the employee has no right to advancement of attorneys’ fees. In practice, more often than not employees will be entitled to have their attorneys’ fees advanced.
Many corporate by-laws also include specific language of which employee categories have a right to indemnification. For example, it is common for company by-laws to indicate that the company must indemnify an officer or director who is successful on the merits or otherwise in the defence of a qualifying claim, but remain silent on the issue of whether other private employees have a right to indemnification. These other employees, or their attorney, should ask for indemnification whenever a claim or investigation arises.
126.96.36.199 Local law in state of incorporation
Employees and their counsel should also review state and local laws in the state of incorporation. Review of state and local laws is often overlooked because employees assume indemnification provisions are exclusively contained in corporate by-laws and any employment or subsequent agreements with the company. However, a number of states impose indemnification obligations on companies in local and state laws for private employees, especially for directors and officers.
Under Delaware corporate law, directors generally have a right to indemnification if they are, or face being, parties to a proceeding or subject to investigation, unless they did not act in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation. Directors and officers who succeed in their defence are indemnified. On the other end of the permissive spectrum, if a director or officer acts in ‘bad faith’, they are not entitled to indemnification. Delaware courts have stated that the ‘boundaries for indemnification’ are ‘success’ and ‘bad faith’. To determine where on the permissive spectrum their situation lies, directors and officers should turn to any governing documents for additional language. Delaware law also allows directors and officers the right to indemnification through advanced costs for pending litigation.
Both Oregon and Washington law also provide for mandatory indemnification of a director who successfully defends, on the merits or otherwise, any proceeding in which the director was made a party due to his or her position as a director with the company, unless the articles of incorporation provide otherwise.
California is an example of a state that extends indemnification protections to any private employee, not only directors or officers. The California Labor Code provides that an employee has a right to reimbursement. The obligation is found in California Labor Code Section 2082, which states:
Any employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.
The California Supreme Court explained the statute’s application to indemnification as a public policy obligation. In Edwards v. Arthur Andersen LLP, the Court stated:
California has a strong public policy that favors the indemnification (and defence) of employees by their employers for claims and liabilities resulting from the employees’ acts within the course and scope of their employment. Labor Code section 2082 codifies this policy and entitles employees to indemnification from their employer.
Employees should also look at company policies and employment contracts or subsequent agreements as sources of indemnification rights. In addition to indemnification required by corporate law, individual employees may have contractual indemnification rights in their employment agreements. Even if the company by-laws do not indicate a right to indemnification, a company must honour any obligations in individual employment agreements. For example, as good business practice and to promote co-operation with an investigation, some companies may decide to expand the scope of indemnity to include employees who might not be covered by the by-laws or state and local laws that are likely to be witnesses or subjects. As a strategic point, employers may expand the scope of indemnity to ensure co-operation of employees, which may show the company in a more favourable light to any regulator or investigative body.
188.8.131.52 Insurance policies of employer
Some employers may choose to purchase directors’ and officers’ (D&O) insurance to supplement or provide an alternative to indemnification. Some indemnification agreements require companies to purchase insurance. If the employer has D&O insurance, the nature of the allegation and the terms of the specific policy may trigger payment of defence costs.
D&O insurance is increasingly important in corporate culture owing to the increase in shareholder, class action, derivative action and other prosecutorial and regulatory investigations targeting not only companies, but also their directors and officers. If any employee is also a director or officer of the company, it is important to understand that D&O insurance policies are not standard and can vary in terms of protection. It is crucial for employees and their counsel to review terms, conditions, provisions and exclusions.
14.5.3 Advocating for indemnification
Despite numerous possible sources giving rise to the right to indemnification, companies are not always eager to indemnify employees for representation or costs incurred during an investigation or defence. However, employees should advocate for the company to indemnify them for incurred costs or advancement of fees. The benefits to both the employer and employee should be emphasised, as indemnification can protect both parties’ interests. When entering an employment or separation agreement, an employee should request and push for a specifically defined indemnification provision.
The employer or company may become more credible and promote efficiency and effectiveness of an internal investigation by ensuring that employees are adequately represented. If company counsel recognises a conflict of interest and the need for the employee to have separate representation, the corporation benefits if the employee is co-operative. Therefore, the company may assess the employee’s involvement and whether failure to pay individual counsel fees or to advance attorneys’ fees will make the employee’s co-operation less likely. While in some instances employees may be required to co-operate by subpoena, it is in the best interest of the corporation to work jointly with the employee to prepare its own defence and receive information in advance through a joint defence agreement.
In addition, regulators and prosecutors cannot take into account during an investigation whether a corporation is advancing or reimbursing attorneys’ fees or providing counsel. Along the same lines, a prosecutor or regulatory body cannot request that a company refrain from taking such action. In 2008, the Department of Justice published the ‘Filip Memo’, which laid out the principles of federal prosecution of business organisations. The guidelines, codified in the US Attorney’s Manual (now called the Justice Manual), state that ‘In evaluating cooperation, however, prosecutors should not take into account whether a corporation is advancing or reimbursing attorneys’ fees or providing counsel to employees, officers, or directors under investigation or indictment.’
14.6 Situations where indemnification may cease
Employees should be aware of the circumstances in which a company’s obligations to indemnify may cease. As mentioned above in Section 14.5, a company’s obligations to indemnify an employee may be contingent on, and circumvented by, any undertaking agreement between the parties. An undertaking agreement requires an employee to repay any advanced or covered costs in the event the costs were untimately not deemed indemnifiable. A company is generally released from its indemnification obligations for any violation of an undertaking agreement (substantive or procedural) and fraud or bad faith.
Failure to co-operate with investigation
In some instances, an employee’s failure to co-operate with a company’s investigation could absolve the company’s obligation to cover individual costs. This can create a difficult decision for an individual employee regarding whether to co-operate where failure to do so will affect indemnification. Even if an employee does not want to co-operate with company counsel – internal or external – and submit to an interview or otherwise co-operate, he or she may still be called to produce testimony or information pursuant to a subpoena. Failure to initially co-operate may preclude an employee from securing indemnification for assumed costs. However, it is still often in the best interest of an employer to offer to indemnify employees who may initially seem unco-operative because in the event they are called to testify, it is still safer for the company if they are represented.
14.7 Privilege concerns for employees
Privilege considerations become central during investigations. Because of the various permutations of attorney-client relationships with both internal and external counsel, it is important for employees to remember that they only enjoy protections over communications with individual counsel. If an employer requests an interview with an employee, employee counsel and company counsel, the communications and testimony at the interview are not privileged.
An employee and his or her counsel should note whether the company counsel issued a proper Upjohn warning and whether it was documented. If an inadequate Upjohn warning was given, an employee’s individual counsel may attempt to prevent or limit disclosure of any statements made by the employee in an interview where individual counsel was not present.
In 2010, the Ninth Circuit in US v. Graf articulated a standard to determine whether a company employee holds a joint privilege with the employer company over communications with corporate counsel. By adopting the Third Circuit’s Bevill test to determine the privilege issue, the Ninth Circuit falls in line with the First, Second, Third and Tenth circuits on this issue. The Bevill standard holds that ‘any privilege that exists as to a corporate officer’s role and functions within a corporation belongs to the corporation, not the officer.’ The Court in Bevill extended the privilege to officers and employees in an individual, personal capacity only when the employee satisfies the following five-factor test: First, they must show that they approached counsel for the purpose of seeking legal advice. Second, they must show that when they approached counsel, they made it clear that they were seeking legal advice in their individual capacity rather than in their representative capacities. Third, they must demonstrate that the counsel saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with counsel were confidential. And fifth, they must show that the substance of their conversations with counsel did not concern matters within the company or the general affairs of the company. Notwithstanding the foregoing, an employee would be ill-advised to confide or speak candidly with company counsel given the subject nature of the standard. Whenever possible, an employee should make efforts to secure personal individual counsel.
Finally, as a practical matter, employees should be aware that communications with other employees or colleagues regarding the investigation are not privileged regardless of whether the colleague is also involved in the investigation or represented by the same counsel. In addition, employees should attempt to communicate with individual counsel on personal and non-company devices to ensure that the privilege is protected.
1 Milton L Williams is a partner, Avni P Patel is a senior associate and Jacob Gardener is an associate at Walden Macht & Haran LLP.
2 See Testimony of Henry W. Asbill, National Association of Criminal Defense Lawyers, to the US Sentencing Commission, at 4 (15 November 2005) (‘Increasingly, companies do not hesitate to fire individual employees who refuse to “cooperate”.’); Sarah Helene Duggin, Internal Corporate Investigations: Legal Ethics, Professionalism, and the Employee Interview, 2003 Colum. Bus. L. Rev. 859, 907 (2003) (‘[I]n most states, [an employee’s] refusal to cooperate with an internal investigation“constitutes a breach of the employee’s duty of loyalty to the corporation and is good grounds” [for dismissal.]’).
3 826 F.3d 69 (2d Cir. 2016).
4 826 F.3d at 76 (internal quotation marks omitted). In exceptional circumstances, where the government exerts overwhelming influence over the internal investigation and the employer’s decision-making, the employer’s actions may be found to constitute state action. See, e.g., United States v. Stein, 541 F.3d 130, 136 (2d Cir. 2008) (holding that ‘KPMG’s adoption and enforcement of a policy under which it conditioned, capped and ultimately ceased advancing legal fees to defendants followed as a direct consequence of the government’s overwhelming influence, and that KPMG’s conduct therefore amounted to state action’).
5 These statutes include Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the National Labor Relations Act, and the Occupational Safety and Health Act.
6 The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the Consumer Financial Protection Act of 2010.
7 See 18 U.S.C. § 1514A(a).
8 See 18 U.S.C. § 1513(e).
9 See 15 U.S.C. § 77a.
10 See 7 U.S.C. § 26.
11 See 12 U.S.C. § 5567.
12 See 15 U.S.C. § 78u-6(h)(1)(B)(i).
13 See 15 U.S.C. § 78u-6(h)(1)(B)(iii)(I)-(II).
14 See 15 U.S.C. § 78u-6(h)(1)(C).
15 See 15 U.S.C. §§ 78u-6(b)(1)(A)-(B). Notably, in June 2018, the SEC announced proposed changes to the whistleblower programme. The SEC explained that ‘[t]he proposed rules would, among other things, provide the Commission with additional tools in making whistleblower awards to ensure that meritorious whistleblowers are appropriately rewarded for their efforts, increase efficiencies in the whistleblower claims review process, and clarify the requirements for anti-retaliation protection under the whistleblower statute.’ Press Release, SEC, ‘SEC Proposes Whistleblower Rule Amendments’ (28 June 2018), https://www.sec.gov/news/press-release/2018-120.
16 See Press Release, SEC, ‘SEC Awards Whistleblower More Than $2.1 Million’ (12 April 2018), https://www.sec.gov/news/press-release/2018-64.
17 See 18 U.S.C. § 1514A(c).
18 See 15 U.S.C. § 78u–6(a)(6) (emphasis added).
19 17 C.F.R. § 240.21F-2.
20 See Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 630 (5th Cir. 2013).
21 See Berman v. Neo@Ogilvy LLC, 801 F.3d 145, 156 (2d Cir. 2015); Somers v. Digital Realty Tr. Inc., 850 F.3d 1045 (9th Cir.).
22 See Digital Realty Tr., Inc. v. Somers, 138 S. Ct. 767 (2018).
23 Somers, 138 S. Ct. at 778.
24 Id. at 777 (quoting S. Rep. No. 111–176, at 38) (original emphasis, internal quotation marks omitted).
25 The Sixth Amendment right to counsel is triggered by a custodial interrogation by law enforcement authorities. See Miranda v. Arizona, 384 U.S. 436, 479 (1966). An internal investigation by a private company does not generally implicate this right.
26 Union employees, however, may insist that a union representative attend any investigatory interview that could lead to the employee’s discipline. See N.L.R.B. v. J. Weingarten, Inc., 420 U.S. 251, 256 (1975). The union representative may not interfere with the interview. New Jersey Bell Tel. Co. & Local 827, Int’l Bhd. of Elec. Workers, Afl-Cio, 308 NLRB 277, 279-80 (1992). Employers have no obligation to inform employees of their right to union representation or to ask if they would like a union representative present during the interview.
27 If individual counsel is retained, company counsel must be cognisant of Model Rule of Professional Conduct 4.2, which states: ‘In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.’
28 If counsel concludes, after reviewing the available information and conferring with the client, that the evidence establishes the client’s guilt, counsel may wish to advise the client to decline an interview to avoid making potentially incriminating statements. Although that may prompt the client’s termination, counsel may reasonably determine that termination is inevitable regardless of the client’s participation in the interview.
29 Upjohn Co. v. United States 449 U.S. 383 (1981).
30 Although company counsel commonly request that the employee keep the interview confidential, it is improper to suggest that the employee must refrain from disclosing the underlying facts to the government. Such a suggestion may run afoul of SEC Rule 21F-17, which forbids any person from taking ‘any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications’.
31 See, e.g., Cal. Const. art. I, § 1 (protecting right to privacy).
32 See, e.g., Cal. Lab. Code § 980 (2012) (prohibiting an employer from requiring or requesting an employee to: (1) ‘[d]isclose a username or password for the purpose of accessing personal social media’, (2) ‘[a]ccess personal social media in the presence of the employer’, or (3) ‘[d]ivulge any personal social media, except’ in response to a request ‘to divulge personal social media reasonably believed to be relevant to an investigation of allegations of employee misconduct or employee violation of applicable laws and regulations, provided that the social media is used solely for purposes of that investigation or a related proceeding’; prohibiting an employer from taking adverse action against an employee or applicant for not complying with a prohibited request or demand for access to social media).
33 See, e.g., claims for invasion of privacy, intentional infliction of emotional distress and negligent infliction of emotional distress.
34 See 18 U.S.C. § 2510 et seq.
35 See 18 U.S.C. § 2510(5)(a).
36 See Cal. Penal Code § 632 (a)-(d); Conn. Gen. Stat. Ann. § 52-570d; Fla. Stat. Ann. §§ 934.01 to .03; 720 Ill. Comp. Stat. ANN. § 5/14-1, -2; Md. Code Ann. Cts. & Jud. Proc. § 10-402; Mass. Gen. Laws Ch. 272, § 99; Mont. Code Ann. § 45-8-213; Nev. Rev. Stat. § 200.620; N.H. Rev Stat. Ann. §§ 570-A:2; 18 Pa. Cons. Stat. §§ 5702, 5704; Wash. Rev. Code §§ 9.73.030 to 9.73.230.
37 See 29 U.S.C. §§ 2001-2009.
38 See 29 U.S.C. § 2006(d).
39 See 29 U.S.C. § 2007.
40 See, e.g., N.Y. Lab. Law §§ 733, 735 (prohibiting employer from using ‘psychological stress evaluator examination’ to determine truth or falsity); Cal. Lab. Code § 432.2 (prohibiting employers from ‘demand[ing] or requir[ing] any applicant for employment or prospective employment or any employee to submit to or take a polygraph, lie detector or similar test or examination as a condition of employment or continued employment’).
41 See 8 Del. C. Section 145(c).
42 Hermelin v. K-V Pharm. Co., 54 A.3d 1093, 1094 (Del. Ch. 2012).
43 See 8 Del. C.§ 145(e).
44 See ORS 60.394 and RCW 23B.08.520.
45 See Cal. Labor Code Section 2802(a).
46 44 Cal. 4th 937, 952 (2008).
47 See generally Matthew L. Jacobs, Julie S. Greenber, Basic Principles of D&O Coverage and Recent Developments, 741 PLI/Lit 29, *35 (2006).
48 Memorandum from Deputy Attorney General Mark Filip to Heads of Department Components and United States Attorneys, Principles of Federal Prosecution of Business Organizations 8 August 2008), available at https://www.justice.gov/sites/default/files/dag/legacy/2008/11/03/dag-memo-08282008.pdf.
49 USAM 9-28-730 Obstructing the Investigation.
50 610 F.3d 1148 (9th Cir. 2010).
51 In re Bevill, Bresler & Schulman Asset Mgmt. Corp. 805 F.2d 120 (3d Cir. 1986).
52 US v. Graf, at 8 (citing Bevill, 805 F.2d 120 (3d Cir. 1986)).