Investigations Carried Out by Private Employers May Still Be Subject to Constitutional Protections for Public Employees

To encourage corporate co-operation in government investigations of alleged corporate wrongdoing, the federal government often offers leniency to incentivise the company being investigated to aid the investigation. This includes the questioning of the company’s employees by the company or by its hired counsel. This may put employees in the crosshairs, having to choose whether to co-operate with the investigation, risking termination if they do not co-operate and self-incrimination if they do. This article discusses the extent to which certain long-established Constitutional protections for public employees under questioning extend to private employees in similar situations.

The government, of course, cannot coerce an individual into co-operating with an investigation. This core American principle is codified in the Fifth Amendment’s protection against self-incrimination and guarantee of due process, and has been incorporated into the 14th Amendment via its due process clause to extend that right to state and local investigations and proceedings.

In Garrity v State of NJ, 385 US 493 (1967), the Supreme Court recognised that, for public employees, “[t]he option to lose their means of livelihood or to pay the penalty of self-incrimination is the antithesis of free choice to speak out or to remain silent.” Id at 497. Accordingly, the Court held that where such a choice is presented, any statements given to authorities are the product of coercion and thus cannot be used against the statement-maker in a later criminal proceeding. This concept has come to be known as Garrity immunity, which is a type of use-immunity that attaches to statements made by public employees to their employers under threat of termination. As the Supreme Court explained in Kastigar v United States, 406 US 441 (1972), a grant of use-immunity “prohibits the prosecutorial authorities from using the compelled testimony in any respect”, and thus, “[e]nsures that the testimony cannot lead to the infliction of criminal penalties on the witness[.]” Id at 453.

The Garrity holding, and its progeny, does not altogether forbid government employers from making such ultimatums. See United States v Smith, 821 F3d 1293, 1296 (11th Cir 2016); United States v Goodpaster, 65 F Supp 3d 1016, 1025–1026 (D Or 2014). A government employer who explains Garrity immunity to an employee under questioning is permitted to take adverse employment action against an individual who nevertheless refuses to testify. See Kalkines v United States, 473 F2d 1391, 1393 (Ct Cl 1973) (“[A] governmental employer is not wholly barred from insisting that relevant information be given it; the public servant can be removed for not replying if he is adequately informed both that he is subject to discharge for not answering and that his replies (and their fruits) cannot be employed against him in a criminal case”).

As reaffirmed in 2022 by Department of Justice Deputy Attorney General Lisa Monaco, “The Department [of Justices]’s first priority in corporate criminal matters is to hold accountable the individuals who commit and profit from corporate crime.” See Memorandum from Deputy Attorney General Lisa O Monaco, Further Revisions to Corporate Criminal Enforcement Policies (15 September 2022) (the “September 2022 Memorandum”). To this end, the Department of Justice provides “co-operation credit” to corporations that timely disclose all relevant, non-privileged facts and evidence to the DOJ, enabling a purportedly timely investigation and assessment of individual culpability for corporate wrongdoing. Id. Seeking such credit, many corporations will choose to conduct an internal investigation to ascertain information the government may find creditworthy. Whether this investigation is at the government’s behest or is performed on the company’s own initiative with the intention of turning over the findings to the government, it is unclear to what extent private employees questioned by their employers are entitled to the same Garrity protections as their public counterparts.

The Southern District of New York was recently confronted with this issue in United States v Connolly, No 16-cr-0370 (CM), 2019 WL 2120523 (SDNY 2 May 2019). In Connolly, a former Deutsche Bank employee argued that the close relationship between the bank and the government made the bank’s internal investigation “fairly attributable” to the government, and thus his indictment premised on statements he made during that investigation should be dismissed pursuant to Garrity and Kastigar. The court stated:

“While Garrity involved the conduct of a government employer, the Garrity rule applies with equal vigour to private conduct where the actions of a private employer in obtaining statements are ‘fairly attributable to the government’. Private conduct is attributed to the government when ‘there is a sufficiently close nexus between the state and the challenged action.’” Connolly, 2019 WL 2120523, at *10 (citations omitted).

Despite such clear language on the application of the law, the Connolly court found there were “holes in the record” which necessitated “a full-bore Garrity hearing[.]” Id at *1. Ultimately, because the court found that the evidence was not used for an impermissible purpose, the court was unwilling to undertake an “academic exercise”, and denied the employee’s motion for relief. Id.

Nonetheless, Connolly’s dictum raises an important issue: what level of co-operation between the private employer and the government establishes a “sufficiently close nexus” such that an employee will be entitled to Garrity immunity? The Second Circuit has explained.

A nexus of state action exists between a private entity and the state when the state:

Such a nexus of state action also exists when the private actor:

See United States v Stein, 541 F3d 130, 147 (2d Cir 2008) (emphasis in original) (citation omitted).

Getting to the bottom of this question can require an evidentiary hearing to establish the amount of government influence exerted over a private company’s internal investigation. In United States v Coburn, No 2:19-cr-00120 (KM), 2022 WL 357217 (DNJ 1 February 2022), in connection with a potential motion to suppress statements made during an internal investigation, the defendant moved to compel documents targeting evidence of investigative outsourcing by the government to his employer. In ordering production (subject to attorney-client privilege concerns), the court reasoned that the sought documents might “be relevant to demonstrate that Garrity-style coercion occurred, or, more critically, that the government pulled the strings to implement investigative techniques that would violate the Constitution if done directly by the government.” Id at *8.

Where there is no evidence of state action or influence, or the employee does not believe they risk their job by remaining silent, Garrity protections may not apply, even if the coerced statements are subsequently utilised by the government. In United States v Jianyu Huang, No 12-cr-1246 (WJ), 2014 WL 12789662 (DNM 9 July 2014), private employees were denied Garrity immunity for statements made during an internal investigation by their private employer because some statements were the product of “purely private conduct between an employee of a private firm and his immediate supervisors.” Id at *5. See also United States v Vangates, 287 F3d 1315, 1321 (11th Cir 2002) (citation omitted) (controlling factor in Garrity inquiry is “the fact that the state had involved itself... to coerce a person into furnishing an incriminating statement”); United States v Solomon, 509 F2d 863, 869 (2d Cir 1975) (no Garrity violation where the New York Stock Exchange was pursuing its own interests and obligations, and not acting as an agent of the Securities and Exchange Commission).

The cases discussed describe a continuum where the protection afforded to private employee statements made during a private investigation depends on the amount of government influence. As corporations seek to gain favour with the government by voluntarily co-operating with government officials to investigate their own alleged wrongdoing, courts will be confronted with important questions regarding Garrity protections. When an employee refuses to co-operate, courts must determine what level of adverse employment-related action is permissible. Emerging case law suggests private employee statements that are the product of coercion will receive similar Garrity protection when the government is sufficiently involved, and the employee holds a subjective and objectively reasonable belief that they will be terminated in the absence of co-operation.