The mountain of legal issues facing businesses in regulated industries often seems overwhelming. But, thoughtful management can utilize an important tool – internal investigations – to uncover and mitigate potential workplace-related liabilities before they spiral out of control.
What is Workplace Misconduct?
Workplace misconduct — such as health and safety violations, retaliation, drug and alcohol use, and theft or fraud — ranks among the most important legal challenges a cannabis or beverage company might encounter, especially because the regulatory environment creates additional complications. Cannabis companies, businesses in the alcohol sector, and others in regulated substance industries often face external scrutiny from vigilant government agencies and concerned citizens, as well as internal risks and challenges from their own workforce. The ever-present threat of misconduct or workplace crisis looms ominously over these highly regulated businesses…
Companies must approach workplace misconduct carefully, especially when it implicates the regulated activities or wrongful (harassing, discriminatory, retaliatory) behavior among employees. Conducting a neutral internal workplace investigation represents one of, if not the, most important step a company should take when confronted with workplace misconduct.
Why Conduct Neutral Internal Workplace Investigations?
Workplace investigations can take many forms, but at their core, they are formal inquiries to determine whether company policies, laws and/or regulations have been violated. During the process, a neutral investigator gathers information, interviews potential witnesses, and assembles a factual assessment of the incident giving rise to the investigation. While management might dread the headache of uncovering a serious workplace issue, failing to confront the problem in a thoughtful and diligent manner could lead to a much greater crisis with significantly more liability.
When to Conduct an Internal Workplace Investigation
The need for an investigation usually arises after a business learns about potential misconduct, either from inside the company, such as an employee complaint, or an external source, such as regulators or law enforcement. Investigations serve several purposes, including to facilitate a response to a complaint, protect employees from mistreatment, and avoid legal liability.
They often represent the best way to discover, address, and prevent workplace problems from occurring or escalating. In fact, under California law, employers have a duty to investigate certain types of misconduct and they must take remedial action to prevent further discrimination or harassment from occurring in workplace. See Cal. Govt. Code § 12940(k).
Internal investigations can help companies identify and assess misconduct, discipline personnel wrongdoers, protect business reputation and even provide some insulation from potential liability. Even when serious misconduct has already occurred, a carefully managed investigation can help a company fashion defenses and craft appropriate remedies. On the other hand, foregoing an internal investigation can put a company at risk for increased government scrutiny and possibly even increased civil or criminal liability.
Cannabis Companies Face Special Challenges
Like nearly every aspect of their business, regulations add additional complications and sensitivity to workplace issues for California cannabis companies. Notably, Section 15000.5 of the Department of Cannabis Control (“DCC”) regulations even makes cannabis licensees responsible for every “act, omission, or failure” of an employee within the scope of his or her employment. It is hard to overstate how much potential liability this places on cannabis companies and their management.
§15000.5. Licensee’s Responsibility for Acts of Employees and Agents.California Code of Regulations Title 4 | Division 19. Department of Cannabis Control
In construing and enforcing the provisions of the Act and the regulations in this division, the act, omission, or failure of an agent, officer, representative, or other person acting for or employed by a licensee, within the scope of his or her employment or office, shall in every case be deemed the act, omission, or failure of the licensee.
In addition, DCC regulations contain many specific restrictions and reporting requirements that can necessitate internal investigations. For example, per § 15036(a)(2) & § 15036(a)(3), a licensee must notify the DCC and local law enforcement within 24 hours of discovering “diversion, theft, loss, or any other criminal activity by an agent or employee of the licensee pertaining to the operations of the licensee.” Licensees also bear a responsibility to notify the DCC about certain labor violations and other activities falling under the “workplace misconduct” umbrella. Failure to comply with the extensive regulatory reporting requirements could even jeopardize a cannabis company’s authorization to operate. As a result, the importance of workplace investigations becomes clear.
Attorneys at Rogoway Law Can Help!
While companies can utilize in-house personnel, such as a human resources representative, to conduct investigations, many benefits can come from engaging an outside investigator. Utilizing outside professionals in workplace investigations can avoid any appearance of influence or bias, lending a neutral credibility to the investigation. Many companies engage outside legal counsel for this purpose, increasing the credibility of the investigation and establishing a basis for applying attorney-client privilege to the investigation findings.
The lawyers at Rogoway Law help many regulated substance businesses, including those in the cannabis and beverage industries, with internal investigations, conducting rigorous enquiries and crafting neutral assessments of sensitive workplace incidents. Our industry expertise contributes to a deep understanding of the unique regulatory challenges these difficult situations can create for regulated substance businesses. If you need assistance, please contact us; we are happy to answer your questions.