Hotlines

The Wall Street Journal on Sept. 6 reported a conflict between the United States and the European Union over the legitimacy of whistleblower hotlines to encourage corporate employees to report wrongdoing in the workplace, even if they do so anonymously. Whereas U.S. law and enforcement officials, in some circumstances, mandate or encourage such hotlines (including anonymous reporting), some European laws and officials view them as an invasion of privacy. As the Journal put it, “They hold that citizens have a right to know who is collecting data about them, and they also may include restrictions on revealing corporate information to outsiders. A French agency, for example, has ruled that anonymous whistleblower tip lines don’t guarantee adequate protection for people accused of wrongdoing.” A spokeswoman for the United Kingdom Information Commissioner’s Office commented, however, that her office “doesn’t see anything wrong with these hotlines.” Presumably, the conflict will be worked out by some sensible compromise between our Securities and Exchange Commission and U.S. Department of Justice and relevant European officials. But are the continental Europeans onto something that we and the Brits have missed? I think not. Hotlines do not violate legitimate privacy interest Wrongdoing by corporate employees within the scope of their employment may injure the corporate employer by victimizing it (e.g., embezzlement, vandalism) or by causing it to become civilly or criminally liable for the employee’s conduct. Corporations, therefore, have a legitimate interest in finding out about work-related misconduct by their employees; correspondingly, employees have no legitimate privacy interest in keeping such misconduct secret from their employers. Law enforcement officials receive initial information about wrongdoing from many types of informants: victims, witnesses, competitors, paid undercover informants, people with an unrelated grievance, and co-participants in the wrongdoing, among others. That the motives of those who report wrongdoing are not always admirable is irrelevant because the information they provide is merely the beginning of an investigation, whose outcome will depend on the total fruits of the investigation, tested under some legal standard. Some who report wrongdoing disclose their identity; others do not. Does that matter? Anonymity deprives the law enforcement or corporate officials of the opportunity fully to assess the credibility of the information given them; and, if they cannot make further contact with the anonymous informant, they cannot ask follow-up questions as the investigation proceeds. In general, these are losses to the officials, not to the person reported on. From this aspect of anonymity, however, there is a possible loss to the person reported on: that law-enforcement or corporate recipients of an anonymous report will launch an investigation that they would not have launched had they known the identity of the informant. That kind of situation, however, seems unlikely to occur frequently. Consider two scenarios in which A, who hates B, reports wrongdoing by B. In the first scenario, A discloses his identity; in the second, A reports anonymously. The hypothesis is that the likelihood of an investigation is greater in the second scenario than in the first. In the first, however, even if it is known that A hates B, the recipients of A’s report may still conclude that they have a duty to investigate. Whether they so conclude depends principally on their professional judgment of the inherent credibility and seriousness of A’s report, rather than on who A is or what his motives may be. In the second scenario, if an investigation following an anonymous tip about B finds no wrongdoing, the likelihood that a further anonymous tip about B would be pursued is reduced, albeit not to zero. In sum, there is a risk that the anonymity of an informant will lead to a fruitless investigation, which is a waste of investigative resources and a burden (sometimes a heavy one) on the person investigated. That risk is likely to be small, however, because, unless they, too, are improperly motivated, investigative officials have no interest in conducting fruitless investigations that waste their almost always severely constrained resources. Therefore, that residual risk seems a reasonable one for society to impose on individuals, in the interest of discovering actual wrongdoing. Individuals do have a legitimate interest in knowing who is gathering information about them. There may be legitimate investigative reasons, however, to withhold for some period from the person being investigated the existence of the investigation. Disclosure may lead to the destruction of evidence, the exertion of improper influence on potential witnesses, or other kinds of obstruction; in some law enforcement investigations, disclosure may lead to flight. Nevertheless, in a properly conducted investigation (whether by law-enforcement or corporate officials), at some point before the investigation concludes, the person under investigation should be told of the investigation and given a chance to explain. That is the normal practice in the United States. Indeed, in a corporate investigation, it is likely that the individual being investigated will learn about, or be confronted with, the report of wrongdoing relatively early in the process because it is likely to be very difficult to keep a workplace investigation secret from the people in the workplace. Therefore, disclosure, after precautions against obstruction have been implemented, seems an adequate response to the concern about secret data gathering. Knowledge in the workplace of an investigation of an anonymous report of wrongdoing by B is a burden to B. To harm B’s reputation among co-workers, however, A did not need a hotline; there are other ways to spread such a report in a workplace. The risk of malicious gossip is inherent in social living. Anonymous reports on corporate hotlines are unlikely to lead to inappropriate disclosures of corporate information to outsiders. Corporations generally have no incentive to disclose to outsiders unchecked reports of wrongdoing. Most follow-up investigations seek information only from corporate employees (but, sometimes, may extend to suppliers or customers); consequently, unrelated third parties are unlikely to learn of the investigation unless and until it is made public. If an investigation is conducted by outsiders, they will be outside lawyers, who generally are obligated to protect their clients’ confidences and secrets. If the corporation makes disclosures to outsiders, the disclosures most likely will be to third parties who need the information to avoid some type of harm or to law-enforcement officials. Neither type of disclosure is objectionable. Is an anonymous tip on a corporate hotline unfair to the employee reported on? Not if the tip leads to an investigative and decision-making process that, itself, is basically fair. Were employees summarily disciplined on the basis of anonymous tips, the French agency would have a point; but I strongly doubt that it is a widespread American practice. A fair investigation is one that genuinely seeks to determine the truth of the anonymous report, by impartially pursuing, to the extent reasonable in the circumstances, the paths most likely to lead to discovery of the truth, including giving the person reported on an opportunity to explain. The elements of a fair decision-making process vary from context to context. Those required in a criminal proceeding are not all required in a civil proceeding; and those required in a civil proceeding are not all required in an administrative proceeding. Although opinions surely will differ, the basic elements in a workplace proceeding arguably are: (i) an opportunity to learn the allegations and the evidence considered potentially dispositive, (ii) an opportunity to have the assistance of retained counsel if the potential disciplinary action is serious, (iii) an opportunity to address the decision-maker directly about the allegations and the evidence, and (iv) an unbiased decision-maker. Fairness would be enhanced by (v) an opportunity for confrontation and at least informal cross-examination, (vi) an opportunity to present witnesses and other evidence, and (vii) a statement of reasons for any ultimate adverse decision. An anonymous tip that leads to a fair investigative and decision-making process is not objectionable on the ground of unfairness. Anonymous tips may be critical information sources Why encourage tips from corporate employees? Such tips may be a critical source of information for managers, particularly of large corporations with multiple workplaces. The unavoidable filtering of information that reaches senior management may exclude information about wrongdoing known at lower levels and not discovered through routine auditing and other compliance efforts. Hotlines provide an opportunity for all corporate employees to report what they know to someone who presumably will transmit their reports to the appropriate corporate officials. Hotlines also are relatively inexpensive and unburdensome. Why permit tips to be anonymous? Corporations, like most human organizations, are hierarchical to some degree; the larger the corporation, the more hierarchical it is likely to be. A subordinate complaining about wrongdoing by a superior may reasonably fear retaliation if his or her identity were known. In some circumstances, a whistleblowing employee may also reasonably fear hostility on the part of co-workers, of whatever rank. Retaliation and hostility can take many forms, against which an employee may have no effective protection. In sum, the limited loss of information and risk of abuse associated with anonymous tips appear to be a reasonable price for the useful additional information about wrongdoing that may come from anonymous reports on hotlines. Richard M. Cooper is a partner at Williams & Connolly in Washington. He can be reached via e-mail at [email protected].