With increasing frequency these days, employers are obliged to become investigators, gathering and analyzing facts about current or would-be employees.

Often, but not always, such investigations are required by law. An employee may bring a complaint of sexual harassment. An outside accounting professional may uncover irregularities in materials to be filed with the SEC. A theft may occur in the workplace. These and other scenarios may trigger an obligation to investigate.

New federal legislation in the wake of Enron and the World Trade Center disasters creates new requirements for investigating and reporting certain conduct. Employers need precise knowledge about when and how to investigate.

Hostile work environment

A typical employment-related investigation might involve allegations of a hostile work environment or other violations of Title VII of the Civil Rights Act of 1964 ("Title VII") -- "If employers have reason to believe that sexual demands are being made on employees, they are obligated under Title VII to investigate the matter and correct any violations of the law."

If an employer had notice of such harassment and failed to take prompt and reasonable remedial action, that employer is directly liable for such harassing conduct.

When is an employer on notice of a potential Title VII violation? One cause would be the formal filing by the employee of a complaint with the EEOC or the Colorado Civil Rights Division (CCRD). Another would be if an employee informs a supervisor of harassment.

Notice can also occur if an employee can demonstrate that the activities were widespread or conspicuous in the workplace and amounted to a "campaign of harassment." An employer will be deemed to have been on notice of the harassment if "management-level employees knew, or in the exercise of reasonable care should have known," that there was a hostile work environment.

Finally, in addition to the Title VII context, a company's written policy requiring it to investigate such employee complaints, perhaps stated in an employee handbook, may create a legal obligation to do so.

Background checks

Pre-employment investigations are a key area where a company may have a duty to conduct due diligence. The law imposes a duty on employers to conduct a reasonable background check on potential employees. Failure to do so may subject the company to liability for negligent hiring.

The amount of investigation required depends on the type of job, interaction with the public and potential harm caused by a failure to investigate.

In many situations, the employer's duty is satisfied by obtaining past employment information and personal data from an initial interview. But if the job places third parties at risk -- such as a truck driver with a bad driving record -- the employer would have a duty to investigate the applicant's driving record and/or criminal background.

Other investigations required by law

A company may also have a duty to investigate if it learns of a potential copyright violation by an employee. If notified of such an infringement, the employer has a duty to investigate, to remove such material and to provide the identity of the offending employee.

Under the Sarbanes-Oxley Act of 2002, a publicly traded corporation must investigate allegations of federal or state securities fraud. The chief legal officer of a publicly traded company must conduct an investigation or hire a third-party investigator if an accountant, attorney or employee reports "evidence of a material violation" of United States or state securities laws or regulations or a fiduciary duty violation.

A company may have to investigate in response to a government request under the Patriot Act. That law, if renewed by Congress this session, expands the authority of law enforcement agencies in investigating suspected terrorists. Employers may have to comply with requests from law enforcement to reveal personal information and electronic communications from or to an employee.

Pitfalls of investigating

Conducting a good investigation can be difficult. Discriminatory behavior is often subtle, requiring patient and thorough investigation of the data. Allegations of sexual harassment involve sensitive and sometimes embarrassing information, with barriers to disclosure and fears of retaliation and humiliation.

A human resource professional needs to decide whether an investigation can best be done in-house or by an outside professional.

A thorough, unbiased investigation may or may not reveal that inappropriate or illegal conduct occurred. Rarely is any situation black and white. Often, facts are discovered that are unpleasant, even alarming, to an employer.

As difficult as it is to be an employer facing allegations of harassment or discrimination, most employers would find it far worse to be hearing things for the first time in a courtroom or deposition. The best investigator is one who starts with no foregone conclusions and searches diligently for answers.