Internal investigations on the rise in Switzerland

What you need to know about best practices and how to protect your company from liability

Whistleblower series: Switzerland

A combination of laws and corporate best practices have created a system of procedures within the Swiss business community that is proving effective in mitigating the risks companies face when confronted with allegations of misconduct.

What sort of misconduct or allegations can a Swiss company face? According to Sarah Keller, a Senior Associate with CMS von Erlach Poncet AG, the most common topic of internal investigations in Switzerland is "misappropriation of company funds, often relating to expenses and the violation of expense regulations." In addition, Swiss companies must occasionally deal with charges of bullying and harassment in the workplace.

In recent years, Switzerland has experienced a spike in internal investigations, but this does not necessarily mean that misconduct in Swiss business in on the rise. Instead, recent Swiss case law has made it clear that companies in certain situations have to conduct an investigation in order to comply with the "duty of care" principle and that it is in the best interests of companies to be vigilant to allegations of abuse and respond when evidence surfaces. As a result, more and more Swiss companies are recognising the importance of establishing comprehensive internal-investigation procedures and putting them into action the moment they receive a report of misconduct.

Although Swiss case law affirms that it is crucially important companies conduct internal investigations in certain situations, the rights and obligations of both employers and employees when allegations of misconduct arise are still not clear to everyone. Swiss law does not specifically address internal investigations.

According to Christian Gersbach, a partner with CMS Erlach Poncet AG, even though Swiss law doesn't specifically address internal investigations, "certain fundamental principles of Swiss employment law apply to the conduct of such investigations and also the mutual rights and duties of the parties."

One of the most important statutes in this regard is the employer's duty of care, outlined in art. 328 of the Swiss Code of Obligations (CO), which serves as a "general guideline" for company conduct during an internal investigation. This law obliges an employer to "act in good faith" and do everything possible to protect the employee's personality rights. Hence, if an allegation of abuse against an employee arises, this law compels the employer to act, but to do so in a way that protects all employees involved – the victim, the accused and any witnesses.

The law governing the employer's right to give instructions (art. 321 CO), enables a company to be able to launch an investigation and guarantee the cooperation of employees, who in turn have a "fiduciary duty" to conduct themselves in a honest and lawful manner vis-à-vis the employer's funds and assets (art 321a CO). Switzerland's data protection legislation governs how an employer can collect data considered evidence.

According to these provisions, a company can only investigate an employee for alleged misconduct performed on the job. (An employee cannot be investigated for conduct the company may find embarrassing during private hours away from the workplace, such as comments made over social media). Furthermore, the employer does not have the same right as, for example, a state prosecutor (e.g. if the employee does not participate in an investigation or makes false statements). As a result, the measures that the employer may take during an investigation – and as a result of such an investigation – are strictly limited to employment law. On the other hand, according to case law, the employer does not have to grant the same rights to the subject of an investigation as guaranteed by – for example – penal procedural law. In particular, while the employee must have a right to be heard, these employee rights are less far-reaching than the ones in a criminal investigation conducted by a public prosecutor.

The employer, however, does enjoy certain rights. He has both a right and duty to conduct an internal investigation if confronted with the proof of misconduct. But when specifically is an investigation called for? Because judgments in the Swiss high court have increasingly demanded documented justification for the termination of employees, CMS's Sarah Keller advises that thorough internal investigation procedures be implemented whenever serious allegations of employee misconduct or misappropriation arise so that any termination that follows cannot be challenged in court.

In fact, the employer has a series of duties it must adhere to should allegations be reported: a duty to conduct an internal investigation that establishes the facts since any penalties that an employer levies against a worker could be challenged if there is insufficient evidence backing it up. The employer also has a duty to establish all the relevant facts before responding to allegations of harassment in the workplace.

In terms of corporate liability, financial regulations in industries like banking demand that the facts behind any allegation of misappropriation be clearly and formally established.

Furthermore, it may be necessary to investigate the conduct of managers or directors to establish their liability for certain actions. In this case, an investigation might result in recommendations on how to establish institutional checks within a company.

Employees also have duties in connection with internal investigations. First of all, as stated, they have a duty and right to participate in any investigation that is launched. Different from criminal law in many jurisdictions that afford citizens the right to remain silent and not incriminate themselves in an investigation, employees have no right to refuse cooperation. Indeed, they have the duty to give complete and accurate information when questioned, even if their testimony is self-incriminating.

The employee does have a right to be heard during an investigation. But it is unclear based on case law whether an employee has the right to have a lawyer present during questioning. Many Swiss legal analysts argue that employees do not have this right, but CMS's Christian Gersbach recommends that companies allow the presence of a lawyer if requested by an employee since this could facilitate his cooperation and bolster the investigation's overall atmosphere of fairness.

If a lawyer is retained, who pays for this representation? The employee generally is responsible for these costs except for rare circumstances where company procedures and policies may be under investigation. In other instances, the company may have insurance policies for personnel that could cover these expenses.

What can trigger an internal investigation?

Several types of allegations can compel a company to initiate an internal investigation. In Switzerland, perhaps one of the most common accusations is expense fraud. Bullying and harassment are also reported. Whatever the allegation, the ultimate decision to launch an investigation lays with management.

In this instance, a company should mandate an independent unit to respond and investigate allegations. This team could be made up of personnel from the company's compliance or human resources office. But it is also possible to hire an experienced and impartial external body to respond, such as a law firm, accountancy office or corporate investigations agency specialising in HR issues.

When an investigation begins, discretion is paramount, but companies are not advised to keep an investigation totally secret from employees since the staff will undoubtedly be aware that something is going on. So the investigatory team and management will have to be sure to measure its response: to communicate the investigation's existence without revealing information that might violate the rights of employees or compromise the inquiry. This communication must be formulated as a strategy and drafted with utmost care.

In terms of communication, the investigators must also insure that in harassment cases, witnesses or the victim are not subject to further abuse. If deemed necessary, the accused could be removed from the work environment until the facts are established. A useful tool for this is to send him home on "garden leave" where the employee receives full salary, but is asked to remain at home and on call for possible questioning. If garden leave is ordered, this must not reflect adversely on the employee and any communication strategy the company devises for its staff must make this clear.

Launching an investigation

The first step in any investigation is document collection and review, which is crucial because documentation almost always offers essential background. Also, documents represent documentary evidence that may be crucial when arriving at and justifying a judgment. But when collecting documented evidence, employers must distinguish between an employee's private and professional communications, such as email and phone text messages.

The basic rule is: the employer has a right to review all business communication, but under almost all circumstances cannot access an employee's private communications. And all reviews must comply fully with Swiss (and possibly EU) data protection regulations.

Interviews

After all pertinent documents have been reviewed, the next step is the interviews process. Interviewing the accused, the victim (if there is one) and any witnesses should be done by an interview team specially selected by the investigation. The interviews should be private, and before each one begins, the various members of the interview team should be introduced to the subject. The lead interviewer should then explain the purpose of the interview, the background of the investigation and the process that is underway.

The primary interviewer should also explain that the meeting will be recorded. In many cases, written notes are taken, but if all the participants agree, an audio or audiovisual recording can be made of the interview.

The employee should also be cautioned that everything that transpires at the meeting is confidential and should not be confided to colleagues or coworkers.

Regarding colleagues and coworkers, the company is obliged to protect any witnesses summoned to give testimony, especially if they are in a position of having to make a statement against a superior. In cases such as this (e.g. harassment allegations), the employer should do everything possible to avoid a highly stressful confrontation between the accused and a victim during the investigation process.

After the document review and interviews, a final report must be drafted, which should outline the evidence collected and come to a determination whether or not the allegation has been proven. Once completed, the main findings of the report (sans identification of witnesses or any other confidential information) should be shown to the accused, who should have an opportunity to respond to its findings in a written statement.

At this stage, the company should decide whether or not to levy sanctions against the accused. Penalties could include a formal warning, standard termination and in serious cases termination with immediate effect. In the case of the latter, immediate termination must be issued no more than three business days after the misconduct became known, which is to say after the findings of the internal investigation were released. In short, companies must be prepared for quick action in the worst-case scenario.

Apart from sanctions, an investigation can recommend certain corrective measures, such as specialised training or coaching for staff to resolve any communication or behavioral problems that might exist within a team.

Finally, at the end of an investigation, the company must provide a comprehensive and thoughtful summary for the staff. Employees must be told what transpired (in general terms) and what measures the company will undertake to prevent similar misconduct from occurring in the future. The staff, which will be fully aware of the investigation through the company's communications and office gossip, will want an explanation and closure.

For further information on how to conduct an internal investigation in Switzerland and assistance with any investigation your firm may now be conducting, contact your regular CMS advisor or local CMS experts.