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In the face of increasing regulatory, employee, customer, shareholder or media scrutiny, businesses need to respond quickly to workplace allegations or incidents. They also need to be seen to be acting fairly and independently. Internal investigation may identify shortcomings in past corporate governance or reach conclusions about workplace culture, often centring on sensitive issues such as ESG, diversity and inclusion or safety (both physical and mental). Where the issues under investigation have attracted public interest, the investigation itself will often be viewed as a barometer for how robust the business’ current corporate governance is, and how committed an organisation is to upholding its values.
In recent years, internal investigations have become an essential tool for companies in managing reputational risks, legal compliance and organisational integrity. Prominent brands like Red Bull’s Formula 1 Team, TV show Strictly Come Dancing and Harrods have all recently undertaken internal investigations to address issues and allegations ranging from misconduct, poor workplace culture and harassment to public relations concerns.
Practically, internal investigations are often overseen or carried out by legal professionals (solicitors or barristers) whilst the business also seek legal advice in relation to potential costs and liabilities. For example, Red Bull F1 instructed an external barrister to conduct the initial internal investigation into misconduct allegations made against a senior leader. This is not uncommon and whilst it was (presumably) at least partly motivated to demonstrate measures of “independence” and “rigour”, it raises some interesting questions over whether the instructions provided, documents created or collated during the investigation and the findings (crucially, the investigation report) are protected by legal professional privilege. Broadly speaking, confidential communications with a lawyer attract legal professional privilege and are protected from public disclosure, even in court unless that privilege is waived.
The increasing number of reports about “internal investigations” in the media serves as an important reminder for boards of directors to consider several key factors when conducting their own investigations, including the potential benefits of legal professional privilege.
1. Internal investigations typically begin after an allegation of misconduct or in response to a workplace incident or accident. The company must first assess whether an investigation is necessary.
Relevant factors to consider include:
- the seriousness of the allegations or incident,
- who allegations are against (and their seniority if an individual),
- any consequent regulatory obligations (such as self-reporting) or the risk of regulatory scrutiny/intervention generally,
- whether civil litigation, criminal prosecution or other proceedings could ensue (such as whistle-blowing related employment tribunal claims), and
- the potential impact and exposure to the company (financially or reputationally, in the media or otherwise).
2. If a decision is taken that an internal investigation is warranted, consideration (at a very early stage) needs to be given as to whether the investigation is, or should be as far as possible, protected by legal professional privilege.
Legal professional privilege is notoriously complicated, and legal advice should always be sought if the protection of privilege is desired. The determining factors as to whether lawyers are instructed to conduct or manage the investigation is likely to depend on the risk of litigation, regulatory scrutiny or other proceedings, and reputational impact. However, a board needs to be aware that following an open investigation, it is entirely possible that any documents created during the investigation may be disclosable to regulators or criminal investigators as wells as to parties in civil litigation. Whereas, if privilege applies, material produced is unlikely to be disclosable unless privilege is waived (see below).
3. The two types of privilege that may apply to communications and documents created during internal investigations are (i) legal advice privilege, and (ii) litigation privilege.
- Legal advice privilege protects communications between a lawyer and client that are made for the sole or dominant purpose of giving or receiving of legal advice.
- Litigation privilege protects communications between lawyers or their clients and any third party for the purpose of obtaining advice or information in connection with existing or reasonably contemplated litigation.
Whether privilege applies is fact sensitive and often dependent on technical legal principles, particularly when collating witness evidence and producing investigation reports. There is a great deal of case law on the application of privilege and therefore legal advice should always be sought when considering the remit of legal privilege. It should also be highlighted that legal privilege can be lost (waived), either accidentally or deliberately, which can impact the confidentiality of communications in internal investigations.
4. In conjunction with assessing privilege, the board need to be clear on:
- who is conducting the investigation and whether they are (or should be) independent,
- the purpose and scope of the investigation,
- what evidence will be collated and considered (including witnesses), and how evidence will be preserved, including any data protection issues,
- who will have access to the findings before further action is taken (if necessary), and
- what internal and external communications will be given.
There is no template or set of rules for internal investigations, so the approach needs to be carefully thought through by the board (and any relevant HR, PR or legal advisors). Ultimately, the scope and parameters of the investigation will be fact sensitive and will be informed by the context and by the potential impact on the company. When conducted properly, internal investigations give the board critical insights on how to address alleged misconduct or prevent future incidents. However, they also pose considerable legal risks if not carefully planned and structured. A well-executed investigation can guide the board’s next steps, while poor execution can lead to legal complications and compromise the company’s position.
In summary, investing time, thought, and setting up clear investigation parameters will likely pay dividends in the long run, including setting up the right team for the investigation. Boards should be prepared and have procedures in place to govern its response to allegations of wrongdoing, or in response to workplace incidents or accidents, including whistleblowing. Whilst openness and transparency may be what is required, legal professional privilege can be a powerful tool assisting boards to navigate potentially damaging crises by controlling the flow and timing of information so boards should be aware of what it is, when it is required and its benefits.
If you need to discuss allegations of company wrongdoing, regulatory scrutiny, or a workplace incident or accident, including issues around legal professional privilege, please get in touch with the Commercial and Regulatory Disputes team at Michelmores. We combine expertise in commercial litigation, insurance coverage, employment law, regulatory and criminal law, and reputation management. The team provide comprehensive support, ensuring all legal, regulatory, and financial aspects are covered. We have advised companies on the internal steps to take following workplace accidents, regulatory investigations, and misconduct allegations, with insurance often playing a key role in these processes.
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