Internal Investigations: KBR, Inc. Fined $130,000 Over Standard Confidentiality Statement

Confidentiality in Internal InvestigationsThe Securities and Exchange Commission (“SEC”) just issued a press release announcing its “first enforcement action against a company for using improperly restrictive language in confidentiality agreements with the potential to stifle the whistleblowing process.”

At issue, was KBR, Inc.’s standard practice of requiring employees interviewed in internal investigations to sign confidentiality statements with the following language:

“I understand that in order to protect the integrity of this review, I am prohibited from discussing any particulars regarding this interview and the subject matter discussed during the interview, without the prior authorization of the Law Department. I understand that the unauthorized disclosure of information may be grounds for disciplinary action up to and including termination of employment.”

The SEC found those terms violated Rule 21F-17, which prohibits companies from taking any action that would impede whistleblowers from reporting possible securities violations to the SEC.

In addition to agreeing to pay a fine of $130,000, KBR, Inc. also agreed to amend its standard confidentiality statement signed by employees interviewed during an internal investigation to read as follows:

“Nothing in this Confidentiality Statement prohibits me from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. I do not need the prior authorization of the Law Department to make any such reports or disclosures and I am not required to notify the company that I have made such reports or disclosures.”

A copy of the complete Cease and Desist Order is available here. 

SEC Not Only Governmental Agency Concerned About Overly Broad Confidentiality Requirements in Internal Investigations

            NLRB on Confidentiality

One of the first blogs I published was about confidentiality in internal investigations. That was July 2012 and the National Labor Relations Board had just held that a blanket approach and policy requiring confidentiality during all internal workplace investigations violates employees’ concerted activity rights under Section 7 of the National Labor Relations Act (NLRA).

In April 2013, the NLRB’s Office of the General Counsel released an Advice Memorandum that I wrote about here. The Advice Memo provided additional clarification on its position on confidentiality in workplace investigations and suggested the following policy language that would be in compliance with Section 7 of the NLRA:

“[Employer] may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence.  If [Employer] reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.”

            EEOC on Confidentiality

It has long been the position of the Equal Employment Opportunity Commission that when investigating complaints of harassment or other inappropriate behavior in the workplace, an employer should keep the matter confidential to the extent possible. This stance was included in its policy guidance issued in 1990 on sexual harassment and again in its 1999 guidance on vicarious employer liability for unlawful harassment by supervisors in which the EEOC stated that an anti-harassment policy and complaint procedure should include “assurance that the employer will protect the confidentiality of harassment complaints to the extent possible.”

The EEOC though is also concerned that overly broad standard confidentiality requirements may be illegal if such policy is so broad that a reasonable employee could conclude from reading it that she could face discipline or charge for making inquiries to the EEOC about harassment if that harassment is being or has been investigated internally by your organization. Here is the blog I wrote about the EEOC’s concern. 

Insights for Employers

Confidentiality continues to be a critical aspect of the vast majority of internal workplace investigations.  It is critical for any number of reasons, including protecting witnesses from harassment, intimidation and retaliation, keeping evidence from being destroyed, ensuring that testimony is not fabricated, and preventing cover-ups. If the internal investigation is being conducted pursuant to the attorney-client privilege in order for an attorney to provide legal advice to the employer, confidentiality is also critical to maintain the protection of the attorney-client privilege as well as under the attorney work product doctrine.

As such, it is imperative that employers be able to lawfully enforce their confidentiality policies and practices when the need arises.

Here are four suggestions for addressing the need for confidentiality in certain internal investigations without running afoul of the SEC, NLRB or EEOC.

1.  Employers are encouraged to review their existing policies and practices and modify the language, as appropriate, to mirror the language approved by the SEC in the Cease and Desist Order with KBR, Inc. and the suggested language provided by the NLRB.

2.  Employers may also wish to implement a practice of documenting, on a case-by-case basis, the reasons for deciding to instruct witnesses to keep an investigation confidential. This is especially important if the investigation is being conducted pursuant to the attorney-client privilege in order to provide legal advice to the employer. In reading the Cease and Desist Order entered with KBR, Inc. the issue of the intersection with the attorney-client privilege and Rule 21F-17 is not addressed. Click here for more tips and templates for preserving the attorney-client privilege in internal investigations. 

3.  For those employers who conduct internal investigations in-house, ensuring that their investigators keep their skills up-to-date is also crucial. Workplace Investigations Group offers training courses in various locations through the year. Customized training for employers and organizations that wish to train larger groups at their own locations is also available.

4.  For employers who do not have professional staff with the experience, knowledge, and expertise to conduct legally defensible workplace investigations, I suggest they proactively identify an outside investigator who possesses these qualifications.  Workplace investigators are kind of akin to plumbers – you hope to never to need one, but when you do need one you need a good one and you need them fast.

One great source for experienced, well-qualified attorney investigators is Workplace Investigations Group. All of the attorney investigators at Workplace       Investigations Group meet or exceed the following qualification criteria:

  • Minimum of 10 years experience in employment law.
  • J.D. from an accredited law school.
  • Have professional liability insurance.
  • Experience in conducting 10+ internal workplace investigations or comparable relevant experience or training.
  • Are an attorney in good standing in at least one jurisdiction.

UPDATE:  For readers interested in other perspectives on the SEC’s Cease and Desist Order entered into with KBR, you may want to read the article in Corporate Counsel:  SEC’s KBR Action Spotlights Whistleblower Confidentiality.  I’m quoted as are attorneys from the law firms of Sherman & Sterling and Gibson, Dunn & Crutcher.  The article is free to read but you will need to sign up for a Corporate Counsel account if you do not already have one.

Is Ellen Pao Just a Gold Digger?

Gold Digger - Ellen Pao v. Kleiner PerkinsThe Pao v. Kleiner Perkins Caufield & Byers (KPCB) lawsuit is now with the jury.

The case pits a single woman – Ellen Pao – against KPCB – one of the largest and most established venture capital firms in the country.

Ellen Pao’s husband is in bankruptcy. Partners at KPCB are clearly not. Founding partner Tom Perkins, for example, is worth over $8 Billion.  General partner, John Doer — $3.4+ Billion.

Yet, despite this huge discrepancy in power and money between the parties, yesterday Kleiner Perkins’ lawyer argued to the jury that Kleiner Perkins is really the victim here – not Ellen Pao.

Essentially, KPCB’s lawyer argued that Pao shouldn’t win because she is nothing but a money grubbing, ungrateful and offensive former employee who they justly fired because she was so hard to get along with no one wanted to work with her.

Thanks to Liz Gannes’ live blog over at Recode, here are a few of the quotes from KPCB’s closing argument:

“[Ellen Pao] made a determined, deliberate, sustained attack on Kleiner, and she made sure the press knew all about it.”

“[Ellen Pao] wanted the eight figures. When Kleiner Perkins refused to pay her, she filed this lawsuit. Not because she wanted an even playing field for women. None of it had anything to do with any woman but Ellen Pao.”

“This twisting of facts isn’t a new development . . . Beginning in the fall of 2011, while her job search wasn’t working out, Ellen Pao wanted the big payout.”

“As happens in a small workplace, [Ellen Pao’s] corrosive pattern of attack alienated her co-workers and led to tension and distrust.”

“The record here is crystal clear about [Ellen Pao’s] conflicts with others despite what you just heard, an attempt to dismiss them.”

Now admittedly Ms. Pao is not without financial resources. She has two graduate degrees from Harvard (including a law degree) as well as bachelors degree from Princeton and her annual compensation when she was fired from KPCB was ~ $560,000. She is currently Interim CEO of Reddit.

But by comparison to KPCB she is still David and KPCB is clearly Goliath.

So, what do you think? How persuaded are you by KPCB’s efforts to cast itself as the victim of a money grubbing, ungrateful employee?  Is Ellen Pao one of those gold diggers Kanye West has warned us about?  

About the Author:  Lorene F. Schaefer, Esq. is an attorney and the President of Workplace Investigations Group, a nationwide network of employment attorneys who conduct impartial internal investigations and deliver training on how to conduct effective internal investigation that will withstand legal scrutiny. She is also the President of Win-Win Resolve, a consulting company founded by a group of employment attorneys to help businesses solve workplace conflict and compliance concerns at the lowest and earliest levels possible.  Lorene is available nationwide as a workplace investigator and mediator.

Will Kleiner Win the Discrimination Battle but Lose the Retaliation War?

#ellen Pao v. #KleinerPerkins Most of the commentary on the Ellen Pao v. Kleiner Perkins jury trial has been focused on whether or not Pao will prevail on her claim of gender discrimination, but the testimony over the last couple of days has revealed that it’s actually Pao’s claim of retaliation that poses the highest risk of a jury verdict.

Under the law, Pao could prevail on her retaliation claim even if she loses her discrimination claim.

If you think about it, that’s not that surprising as somehow it just seems easier for a juror to believe that the partners at Kleiner Perkins changed their behavior towards Pao after she sued them than to believe that they intentionally discriminated against her because she’s a woman.

To prevail on her retaliation claim Pao must show three things:

1) she engaged in a “protected activity”,

2) Kleiner Perkins took an “adverse employment action” against her; and

3) her “protected activity” was a substantial factor motivating Kleiner Perkins’ “adverse employment action.”

Admittedly, I’m not in the court room, but I have been following the mainstream and social media coverage.  In fact, it’s almost addicting and I’ve not been as productive as I normally am since the trial started.  I’ve particularly enjoyed reading the tweets and live blogging of  Liz Gannes and Nellie Bowles at Recode and the coverage by Davey Alba of Wired, Marisa Kendall of The Record, Nitasha Tiku of The Verge, Elizabeth Weiss of USA Today, and Jeff Elder and Deborah Gage of the Wall Street Journal.

Here’s how I see the case shaping up so far on Pao’s claim of retaliation:

#ELLENPAO retaliation claim against #KleinerPerkins

It is undisputed that Ellen Pao filed her lawsuit against Kleiner Perkins on May 10, 2012.  Filing a lawsuit clearly qualifies as “protected activity.”  So — Check on that element of her retaliation claim.

It is also undisputed that Kleiner Perkins terminated Pao only 5 months later – October 1, 2012.  Being fired is clearly an “adverse employment action.”  So — Check on that element of her retaliation claim.

That leaves only the element of causation.  According to Lynn Lieber, a California lawyer and member of Workplace Investigations Group, the California Supreme Court has not ruled on the causation standard for retaliation claims under California law.  Ms. Lieber says the likely outcome when it does is that the the standard will be “substantial motivating factor,” which is the same as it is for FEHA discrimination claims.  If not, she says the standard will be merely “a motivating factor.”

In the Pao v. Kleiner Perkins case, my reading of the commentary coming out of the courtroom is that Pao may well be able to prove the causation element of her retaliation claim even under the higher causation standard of “substantial motivating factor.”  According to media reports, Pao’s supervisor testified this week that he didn’t start documenting her poor performance until 4 days AFTER she filed her lawsuit.  That short time period between her protected activity of filing the lawsuit and the adverse action of starting to document her poor performance creates a strong inference of retaliation.  Yes, Kleiner Perkins has attempted to argue (in its Trial Brief at pages 25-26 and during the trial) that Pao’s performance had been poor for some time and that “the decision to terminate Pao’s employment was made in 2011.”

In light of her supervisor’s testimony this week, I’m not persuaded by Kleiner Perkins’ argument and don’t think the jury will be either.  The reality is that Kleiner Perkins had never placed her on a performance improvement plan or formally documented her allegedly poor performance until 4 DAYS AFTER SHE SUED THEM.

Looks like a duck.  Swims like a duck.  Quacks like a duck.  Screen Shot 2015-03-20 at 8.15.45 AM

It’s April Fools at the Employment Law Blog Carnival!

Employment Law Blog CarnivalWhy yes – Employment lawyers do have a sense of humor and in honor of April Fools Day Robin Shea over at Constangy, Brooks, Smith & Prophete, LLP has pulled a few pranks in this month’s edition of the Employment Law Blog Carnival.

So stop what you’re doing and head on over to the Employment and Labor Insider to check out the fantastic “EMPLOYMENT LAW BLOG CARNIVAL: April Fools’ Edition.”


No Matter the Verdict, has Kleiner Perkins Already Lost?

Social Media Battle Kleiner Perkins Ellen PaoIt is day 7 of the sex discrimination jury trial against a high-profile Silicon Valley venture capital firm and the social media debate is raging.

For those not following along, Ellen Pao, formerly a partner at Silicon Valley venture capital firm Kleiner Perkins Caulfield & Byers (“KPCB”), sued her then-employer for gender discrimination and retaliation in May 2012.

KPCB’s efforts to keep spectators and the media out of the courtroom failed and tweets have been flying out of the courtroom.   Others are live blogging their comments. Given the amount of main stream and social media coverage of this trial, one can’t help but step back and ask ….

has Ellen Pao already “won” the social media battle regardless of what the jury verdict is?

I’ve been writing about how social media is leveling the playing field for disgruntled employees and how millennials are increasingly using social media to challenge perceived discrimination or harassment for some time but the volume and intensity of social media coverage of this trial has taken us to a new level.

Insights for Business Leaders

If there was ever any doubt that having effective EEO and anti-harassment policies and procedures that are trusted by employees is critical in today’s world, the social media firestorm surrounding the Pao v. KPCB jury trial has surely eliminated it.

Smart employers recognize that it is no longer sufficient to comply simply with the minimal legal standards in responding to employee complaints.  Rather, they are working to implement policies and procedures for conducting internal workplace investigations that comply not only with the law but also adhere to the principles of procedural fairness.

Why?  Because research tells us that employees who perceive an employer’s internal dispute resolution processes and internal workplace investigations as procedurally fair or trustworthy are statistically less likely to sue or raise their complaints publicly on social media or to the government.

Click here to read an article with 6 Tips to Increase Employee Trust of Internal Workplace Investigations.

Is the C-Suite Ready for Trial Tweeting?

Tweets Flying Out of CourthouseThe tweets are flying out of the courtroom in day 5 of the highly anticipated Silicon Valley sex bias jury trial happening right now in a Superior Court of California San Francisco courtroom.

Journalists from the Wall Street Journal, Business Insider, Wired, The Verge, VentureWire, USA Today, and Re/Code are sharing their observations of the jury trial on Twitter®. There are also Tweets from lay people.

To say the least, navigating this strange, new world presents lots of challenges for business leaders. Everyone in the C-Suite knows the importance of being well-prepared for questions from investors and analysts at investor relations presentations, but how prepared are business leaders to respond to questions coming on Twitter or other social media accounts?

Consider, for example, the impact on employee recruitment and retention of the following Tweets coming out of the courtroom in the Ellen Pao v. Kleiner Perkins Caufield & Byers jury trial:


More Women Needed in Leadership

Screen Shot 2015-03-02 at 4.08.57 PM

Screen Shot 2015-03-02 at 4.08.02 PM

locker room mentality at Kleiner Perkins

Complaints at Kleiner Perkins

Contempt - Ellen Pao v.  Kleiner Perkins


Ellen Pao v. Kleiner Perkins

Ellen Pao v. Kleiner Perkins


Will Employer’s Attempt to Keep Ellen Pao Discrimination Trial Secret Work?

Stop Spectator AccessNearly three years after a former junior-partner at venture capital firm Kleiner Perkins Caufied & Byers LLC filed her lawsuit alleging gender discrimination and retaliation, the jury trial appears set to begin next week.

As a general matter, jury trials of civil discrimination claims are presumptively open to the public.   This right of the public to attend civil trials is rooted in democratic principles as articulated in 1884 by Oliver Wendell Holmes who was then a justice on the Massachusetts Supreme Court:

“It is desirable that the trial of [civil] causes should take place under the public eye, … not because the controversies of one citizen with another are of public concern, but because it is of the highest moment that those who administer justice should always act under the sense of public responsibility, and that every citizen should be able to satisfy himself with his own eyes as to the mode in which a public duty is performed.”

Cowley v. Pulsifer, 137 Mass. 392 (1884).

In a motion filed yesterday, Kleiner Perkins argues that the right of the media and public to attend these types of civil jury trials is not absolute. Citing the right to privacy of non-party employees and the “injurious effects” of disclosing its confidential and commercially valuable business information, Kleiner Perkins has asked the judge to prevent spectators from watching certain parts of the jury trial.

Specifically, Kleiner Perkins has asked that the Court exclude

“spectators from the courtroom when evidence is presented regarding (1) third-party employee compensation and performance . . . (2) KPCB’s confidential/proprietary business information and financial performance; and (3) investment financial information and performance regarding third-party Managing LLC’s funds.”

To read the full motion click here.

Opposition Likely to Motion to Exclude Spectators

Even if for some reason Ellen Pao’s legal team decides not to oppose Kleiner Perkins’ motion to exclude spectators from the courtroom, I think it is safe to predict that the media will ask to intervene to oppose the motion. This case has been widely followed in the media and given the amount of coverage the public interest in the case seems clear.

Assuming this case does not settle, I will be providing updates on this issue of public access to the jury trial as well as the case more generally as the case proceeds.

What Can You Learn From Wal-Mart’s Screw Up?

Walmart SanctionedIn December 2014, a federal judge here in Atlanta sanctioned Wal-Mart Stores Inc.for destroying evidence in an employee discrimination case. The sanction was two fold: (1) Wal-Mart was ordered to pay $19,980.00 in attorney’s fees to the employee’s attorney; and (2) the federal judge held that if the case proceeded to a jury trial the jury would be instructed to presume that Wal-Mart terminated the employee in retaliation for the employee filing a claim of discrimination with the Equal Employment Opportunity Commission.

Yes, you read that right. The federal judge decided that Wal-Mart’s conduct was so egregious he ordered that if the case proceeded to a jury trial he would instruct the jury that Wal-Mart had engaged in illegal retaliation. The only issue, at that point, for the jury to consider would be what amount of damages should be awarded.

Not surprisingly, given this ruling by the judge, the parties have now entered into a confidential settlement.

So, what did Wal-Mart do to deserve this drastic sanction?

Here’s the chronology of events according to the employee’s Motion for Sanctions for Spoliation of Evidence he filed with the Court:

Wal-Mart Chronology Sanctions

According to the documents filed with the court, Wal-Mart’s video surveillance system regularly taped over the videotapes in the cameras unless action was taken to stop that process. It is undisputed that neither the Store Manager nor anyone from the Human Resources department took the necessary steps to preserve the video tape.

In reading the court filings in this case, including the sworn deposition testimony of the Store Manager, it seems that at least one explanation for why Wal-Mart failed to take steps to preserve the video tape was that he didn’t think that there was going to be any dispute about whether or not the gate was left unlocked. If you believe his deposition testimony, he says that Abdulahi admitted he had left the Garden Center gate unlocked.

But it turns out that Abdulahi denied he left the Garden Center gate unlocked when he was questioned under oath during his deposition in the federal lawsuit.

So how could Wal-Mart have avoided this court sanction and what should other business leaders takeaway as the lessons learned from this case? I contacted James Radford, the attorney who represented the employee in this case, and he shared the following lessons for employers:


In addition to the lessons suggested by James, I would add the following:

  • Train all of your employees responsible for employee discipline, including terminations, to ensure they understand the importance of preserving all of the information that they rely on to make disciplinary or termination decisions — even if they think (as this Wal-Mart manager likely did) that some of the information is redundant.
  • Train all of your employees responsible for conducting investigations into allegations of workplace misconduct in how to conduct and document investigations that will withstand legal scrutiny. Workplace Investigations Group offers training programs nationwide.
  • Implement a process for review of all terminations by Human Resources and/or your employer’s legal counsel.


EEOC’s Arguments to Supreme Court Antithesis of Transparency and Open Government

EEOC TrustOn January 13, 2015, the United States Supreme Court heard oral arguments in which the Equal Employment Opportunity Commission (“EEOC”) made arguments that fly in the face of President Obama’s call for transparency and open government.

In the case, Mach Mining v. Equal Employment Opportunity Commission, the EEOC acknowledged its statutory duty to “attempt to resolve” complaints where “reasonable cause” has been found “by informal methods of conference, conciliation and persuasion,” but argued that the EEOC’s compliance with this duty is not subject to judicial scrutiny.

Essentially, the EEOC seemed to be arguing

Trust us. We’re the government. We’re here to help.

Not surprisingly, that argument was not persuasive to several of the justices. Chief Justice Roberts, for example, commented during the oral argument that, “I am very troubled by the idea that the government can do something and we can’t even look at whether they’ve complied with the law.”

The issue of whether the EEOC’s conciliation efforts are subject to judicial scrutiny has been percolating in the lower courts for years. It seems safe to say that private employers and the government have spent millions of dollars debating this issue. In several cases, the EEOC has been sanctioned for failing to comply with its duty to conciliate.

The defense bar argues that the EEOC, at times, abuses its authority by failing to engage in good faith efforts to conciliate before filing lawsuits against employers and that only judicial scrutiny can serve as a check to this abuse of power. The EEOC argues that its duty to conciliate is one of agency discretion entrusted to it by Congress and that there is not a specific conciliation process in place and, as such, its conciliation efforts should not be subject judicial scrutiny.

What is the EEOC hiding? Why is it afraid to put its conciliation process up for review?

As Justice Scalia commented during oral argument, the remedy for the lack of standards is in the EEOC’s hands:

But the remedy for that is ­­ is at your hands.  As the other side said, you could issue rules which say, this is an informal process, but what it consists of is, number one, we give you notice of what the  -what the offense is; we sit down with you to discuss settlement of that; number three, we make apparent to you what our offer is for settling the matter, and whatever other rudiments of conciliation the agency believes in.

What’s wrong with that?

Indeed, what is wrong with us requiring that our governmental agencies be open and transparent in their operating processes?

The government offered three reasons for its failure to issue the regulations – all of which fall flat, especially in light of President Obama’s Open Government Directive:

  1. the EEOC “needs flexibility in these processes;”
  2. the EEOC has “its own training procedures about good ways to do conciliation and the steps to be taken;” and
  3. to issue such regulations assumes that there would be some type of judicial review of whether the EEOC complied with the regulations.

It is Time for Transparency of Process.

I say it is time to stop the debate and for the leadership at the EEOC to step up and lead. It is time for the agency to comply with President Obama’s open government directive. For the EEOC to continue to refuse to issue these much-needed regulations is a flagrant violation of Obama’s call for transparency and open government. It is also simply poor leadership.

Call to EEOC to Start Rulemaking Process

In March of 2013, I presented written testimony to the EEOC urging it to implement a pilot program incorporating a structured ADR process into the EEOC’s post-cause conciliation process. At the time, I suggested that implementing such a program would assist the EEOC in recognizing “the need to conserve its limited economic resources while at the same time staying focused on continuing its mission to stop and remedy unlawful employment discrimination so that the nation can achieve our ultimate vision of justice and equality in the workplace.”

I still think that incorporating a structured ADR process into the EEOC’s post-cause conciliation process would benefit both the agency and assist it in better meeting its mission.

Regardless, however, of the specifics of any conciliation process, the current refusal of the EEOC to issue standards must not continue.

I call on the leaders at the EEOC to comply with the “Open Government Directive” issued on December 8, 2009. To do so, the EEOC needs to take “specific actions to implement the principles of transparency, participation collaboration” as regards the process that the EEOC will follow in complying with its obligation to resolve complaints through informal efforts of conference, conciliation and persuasion.

HR Magazine: Being a Super Sleuth

HR MagazineThanks to HR Magazine writer, Dori Meinert, for extensively quoting me in her article “How to Conduct a Workplace Investigation” in the December 2014 edition of HR Magazine.  

Ms. Meinert’s article provides great insights for HR professionals and others responsible for investigating complaints of workplace misconduct.  She also provides prudent suggestions for HR and operational managers on how to avoid costly mistakes in responding to internal complaints of workplace misconduct

Click here to read the full article in HR Magazine titled – “How to Conduct a Workplace Investigation.”

About the Author: Lorene F. Schaefer, Esq. specializes in conducting prompt, impartial and thorough investigations. As President of Workplace Investigations Group, she also regularly delivers investigation training to employees responsible for Title IX compliance and investigation. She is also the author of Corporate Counsel’s Guide to Internal Investigations of Harassment, Discrimination & Retaliation, which will be published in 2015 by the ABA.