Concurrent employment and criminal investigations

  • Opinion

    25 May 2016

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A question often asked by employers is whether they can conduct an employment investigation into an employee’s conduct at the same time as a criminal investigation is underway into the same conduct. A related issue is the extent to which the employee can be required to participate in the employer’s investigation in such circumstances.

We outline below the basis for the employee’s “right to silence”, and the options open to the employer when faced with alleged misconduct which may form (or which has formed) the basis of a criminal investigation.

Right to silence/privilege against self-incrimination

It is generally accepted that the most fundamental aspect of the “right to silence” is the privilege against self-incrimination, i.e. a person’s right to resist being compelled to provide information that incriminates them.

The basis of the employee’s privilege against self-incrimination was outlined in Russell v Wanganui City College [1998] 3 ERNZ 1076. In this case, the extent of the privilege against self-incrimination was examined in the context of a disciplinary investigation. The Employment Court held that in order for it to intervene in an employer’s investigation there must be a real and appreciable peril of an interference with this privilege, as opposed to a merely imaginary or fanciful one.

In Russell, the College was required to delay disciplinary proceedings and retain the employee on pay until the Police decided whether to prosecute or not.

This is now a well-established approach in an employment forum. Notwithstanding the case by case approach endorsed in Russell, the privilege against self-incrimination is now generally considered to be available to an employee (who might otherwise be obliged by his or her employer to answer questions which may incriminate him or her), where criminal proceedings are imminent. This is because a confession by an employee to an employer in such circumstances would be admissible as a statement against interest in a criminal trial. That said, developments since Russell have provided employers with some options in these cases.

The employer’s right to conduct an investigation was further explored in Wackrow v Fonterra Co-operative Group Ltd [2004] 1 ERNZ 350. In Wackrow, a wide range of conduct was subject to a disciplinary investigation by the employer, and some of the conduct was subject to criminal charges. The employee sought an injunction to restrain the disciplinary investigation until the criminal proceedings were concluded. The employee relied on his right to avoid self incrimination by compulsion, both at common law and as provided for in section 25(d) of the New Zealand Bill of Rights Act 1990.

The Court examined the extent to which the employee’s right to silence in criminal proceedings should properly limit the employer’s right to conduct a disciplinary investigation. The Court declined to grant the broad injunction sought by Mr Wackrow, which would have prevented the employer from being able to hold a disciplinary inquiry. Instead, an injunction was issued to restrain the employer from asking questions directly relating to the particular criminal charges faced by the employee, when the answers to the questions could potentially incriminate the employee. Interestingly, the Court also endorsed Fonterra’s plan to ask Mr Wackrow a number of specific questions, in writing.

Another issue noted by the Court in Wackrow was that no adverse inference can be drawn from the employee’s refusal to answer questions. This principle has been confirmed again, in Singh v Department of Labour [2005] 1 ERNZ 569. In Singh, the employee refused to answer some of the employer’s questions on the basis that it might prejudice a fair trial in the criminal proceedings. The employer drew an adverse inference from the employee’s failure to answer certain questions, and the employee sought an interim injunction to restrain his employer from taking disciplinary action against him.

The Court held that the employer had formed an adverse view of Mr Singh as a result of his refusal to answer certain questions in the investigation and that the whole investigation was tainted as a result. On that basis, the Court issued an interim injunction restraining the employer from continuing with the investigation or taking disciplinary action until the criminal proceedings were concluded.

Possibility of criminal investigations not enough

An employee is not entitled to have an employer’s investigation stayed because of the possibility of criminal proceedings. An injunction can only be granted where there is strong evidence that it would be necessary to protect the employee’s rights. The burden is on the employee to show that their fundamental rights would be infringed. This threshold is significant. On the one hand, the courts recognise that employers can be summonsed and thereby required to divulge any statements made by the employee against their interest.

However, on the other hand, the courts recognise that an injunction will often mean that the employee will remain in paid employment for months, or even years, if their employment status cannot be resolved while the criminal matter is progressing.

Other employees

The Court may also grant an injunction preventing an employer from conducting a disciplinary investigation where there is more than one employee involved, and only one of the employees is subject to a Police investigation. This is on the grounds that one of the employee’s answers might compromise the other employee’s right to silence.

In Sotheran v Ansett New Zealand [1999] 1 ERNZ 548, the Employment Court granted an injunction preventing Ansett from conducting an employment investigation into two employees involved in plane crash, where only one of the pilots was criminally charged. Both employees sought injunctions restraining the company from requiring them to participate in an employment investigation. The Court applied the principles in Russell, and found it necessary to injunct Ansett from proceeding against either pilot because the information revealed in an employment investigation into the second pilot could potentially affect the first pilot’s employment. The injunction also prevented the employer from dismissing or disciplining both pilots until the criminal proceedings had concluded.

Proceedings arising out of disciplinary action

Another issue which may arise is where an employee has been dismissed, and has brought proceedings in an employment forum, and there is a criminal investigation underway into the same conduct which the employee was dismissed for. This issue was addressed in Mann v Alpinewear (NZ) Ltd [1996] 1 ERNZ 248. In this case, the employer sought to have the hearing in the Tribunal postponed until the criminal proceeding had occurred. However, this was opposed by the employee.

The Employment Court held that there was no rule of law that the adjudication in the Tribunal should not precede the criminal proceeding. It was held to be a matter of discretion in each case. The Court took into account a number of factors including the employee’s right to silence, which was held to be a “particularly strong factor where the applicant for the stay is the person being charged in the criminal proceedings.” The Court held that the principles developed in the ordinary courts in responses to applications for stay of civil proceedings where there are overlapping criminal proceedings pending are equally applicable in the Employment jurisdiction.

Options for the employer

The decisions in Russell and Wackrow raise a number of interesting and perplexing issues for employers faced with allegations of criminal conduct by employees, including:

  • Should the conduct be reported to the authorities?
  • Should the conduct be reported to any third party, including clients that might be affected?
  • What employment disciplinary action can be taken against the employee?
  • What steps can be taken to recover any losses?

There is no simple answer to these questions; each case is going to need to be assessed on its own facts and circumstances, and a strategy will need to be developed that will achieve the best result for the employer, whilst at the same time ensuring any legal or commercial obligations are met. It is essential for the employer to seek advice when matters of concurrent criminal and employment investigations arise, although in general, there are a number of options open to the employer to follow.

Delay (or avoid) a Police complaint

There is no general legal obligation for an employer to report suspected criminal conduct to the authorities. However, there may be a presumption that an employer will report such actions to the Police – there is the potential for the employer to receive public criticism if it does not, particularly in the case of a public sector employer. If the Police are not yet aware of the employee’s conduct, generally (and subject to any provision in the employer’s disciplinary policy) the employer would be wise to postpone laying a complaint with the Police until the employer has concluded its investigation.

However, in situations where the employer does delay making a complaint to the Police, the employee may still decline to answer the employer’s questions because of the risk of self-incrimination. In addition, the employer may be at risk of the employee bringing a claim in the Authority for a breach of good faith, where the employer made a deliberate decision to refrain from making a complaint to the authorities for the time being, simply to enable them a clearer path to take disciplinary action. In these situations the employer also needs to be careful that its actions do not amount to or could not be construed as amounting to blackmail. For example, by offering not to make a complaint to the Police in return for the employee agreeing to resign or enter into a settlement agreement.

Another option open to the employer is to continue with their investigation and wait and see if the employee raises an objection. If the employee was caught red-handed and there is clear evidence of the misconduct, then the employer may be able to rely on the evidence before it, and not have to obtain a response from the employee. However, the employer will need to be very cautious in taking this approach.

Wait until completion of criminal process

Another option is to suspend the employee until the criminal investigation has been concluded. However, this may be time consuming and costly for the employer. Employers who have taken this approach often find that the criminal process may take many months, or even years, to see out, and the costs of having an employee on paid suspension for this period of time can be significant. Furthermore, if the employee is found not guilty, or the charges are dropped, a lengthy period of suspension can give rise to difficulties if the employee needs to be reintegrated into the workforce.

Finally, both parties could agree to halt an employment investigation until a concurrent criminal investigation has been concluded. Any agreement should be in writing, and should address whether the employee will remain working for the employer during this period or be suspended on pay while the criminal investigations proceed. Any agreement should also address the issue of an employee bringing a personal grievance claim in the future and in particular, prevent the employee claiming that a subsequent dismissal is unjustified because of undue delay.

Investigate non-criminal conduct

Sometimes there may be a middle ground open to an employer – namely to investigate (and reach a decision on) allegations that could not amount to potential criminal conduct. Whether this is an option will be highly fact dependent, but there can be situations where several allegations arise at the same time, or where there are several ways to frame an allegation.

Taking this approach can allow the employer to avoid the “right to silence” issue entirely. A related approach can be to “park” any potentially criminal conduct (ideally with the employee’s agreement) but continue to investigate non-criminal conduct. If that conduct is sufficiently serious, an employer may have grounds to dismiss the employee without taking the alleged criminal conduct into account at all.

Investigation where employee has already been convicted

There can be other occasions where the employee’s conduct only comes to the employer’s attention after (and/or as a result of) the employee being convicted of, or pleading guilty to, a criminal offence.

Where this is the case, the privilege against self-incrimination is no longer relevant. In addition, the employer can use the fact of conviction/the guilty plea as evidence in its investigation.

A potential issue in this context relates to name suppression where the Police have already laid charges and there is an order forbidding publication of information. The Court of Appeal recently held in ASG v Hayne, Vice-Chancellor of The University of Otago [2016] NZCA 203 that a person would not breach a suppression order by disclosing information to that person’s employer where the employer has a genuine interest in the information. An additional interesting point to watch is the Court’s comment that the duty of good faith in section 4 of the Employment Relations Act 2000 required the employee to inform his employer of the offending.

In any event, in order to ensure that conduct of this type comes to the employer’s attention, employers should consider making the reporting of a criminal charge, conviction and/or guilty plea a requirement of employees under the employer’s code of conduct. Similarly, employers should consider making a conviction and/or guilty plea an example of serious misconduct under the code of conduct.