Employment considerations are often overlooked during dawn raids or in responding to requests for information from the authorities. Companies may focus solely on responding to the investigation and forget the impact that it can have on employees. However, failing to consider employment issues can result in legal and reputational risks for the company, as well as damage to employee morale and trust.

During an investigation, companies must ensure that they are complying with all relevant laws and regulations, including employment laws. This includes ensuring that employees are informed of their rights and obligations at the outset, that data privacy is respected, and that appropriate record-keeping procedures are in place. Failure to do so can have significant legal and financial consequences for the company.

In this article, we will explore some of the key employment considerations that companies should keep in mind during dawn raids or requests for information from the competition authorities. We will discuss the importance of communication, legal representation, employee rights, data privacy, confidentiality, record-keeping, and employee morale. Additionally, we will touch on some novel issues that may arise. By taking these considerations into account, companies can protect both their own interests and the interests of their employees.

To begin with, ahead of any potential dawn raid or request for information from a competition authority, companies should ensure that there are relevant competition guidelines in place and that all employees have received appropriate training. It will also be useful to check that employment contracts/conditions of employment cover issues such as access to personal devices used for business purposes, cooperation with investigations etc.

Once a dawn raid or request for information has commenced, it is important to bear in mind the following employment-related issues:

• Communication with employees is crucial during the investigation process, including providing clear guidance and training on how to respond to questions from investigators and what information can be shared.
• Legal representation should be considered to protect both the company and employees' interests. This is helpful for reviewing documents before they are submitted to the authorities and in preparation of interviews with the authorities. 
• Employees will often have concerns about their own position, and the company should support them and where necessary provide access to appropriate advice.
• Data privacy laws must be followed when handling all data collected during the investigation. [Please refer to our article on data protection for further information on this point]
• Employees should be reminded not to disclose details of the investigation.
• Accurate records of all communications and actions taken during the investigation must be kept. This includes all documents provided to the competition authority, communications with employees, and any actions taken to address concerns or issues that arise.
• The investigation can have a significant impact on employee morale, and companies should take steps to address concerns and maintain employee morale. This could include providing support to affected employees or addressing rumours or misinformation that may be circulating. 

The following additional considerations should be kept in mind:

• Companies should not take immediate action against employees named or involved in the investigation. Companies should take care not to react to dawn raids or investigations by authorities by taking immediate (and often irreversible) action against any employees who have been named or have been involved in the topic of the dawn raid or investigation. Doing so could result in companies not being able to obtain evidence or statements from these employees. Instead, legal advice should be sought, and all options should be carefully considered.
• Employees should act with integrity and honesty and provide accurate information. Providing false or misleading information can result in fines.
• It is possible that employment concerns could arise that are outside the scope of the investigation. For example, this could occur where evidence of misconduct arises during a search for material relevant to the competition investigation.  This will need to be handled carefully. 
• In certain jurisdictions there is a legal obligation to inform the works council at the start of an investigation.
• Companies should seek legal advice and consider all options carefully.

In certain jurisdictions, competition authorities can request information or data from an employee's personal device that is used for business purposes, such as laptops, phones, and iPads. Employees may be required to disclose their personal devices during the investigation, which raises concerns regarding data protection that must be considered by the company and its legal team. Please see our articles on the forensic aspects of investigations and our article on data protection considerations. 

Additionally, handing over to the authority data relating to employees who have left the company may raise consent and data retention issues. Archived mailboxes of ex-employees may be difficult to retrieve, so it is important to address this matter with the competition authority at the beginning of the investigation process. Therefore, it is important for companies to have data retention policies in place that specify which data should be stored or archived, where, and for how long.

Personal Liability

In addition to the points above, it is important to note that employees can face personal liability for their actions or conduct where there has been a contravention of competition law. this can include fines, penalties, legal costs, and even imprisonment in some cases. The extent of an employee's liability will depend on various factors, including the nature and severity of the contravention, the employee's level of involvement, and the jurisdiction in which the contravention occurred.

Additionally, in certain jurisdictions, an employee who is a director may face a director disqualification order. In the United Kingdom, for example, the Competition and Markets Authority (CMA) can seek the disqualification of an individual from holding company directorships for a maximum period of 15 years, where that individual is a current or former director of a company that has infringed UK competition law. Additionally, some jurisdictions have even more severe penalties, such as imprisonment. In the United Kingdom, it is also prohibited to exempt a director of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company.

For example, in 2022, the Dutch Arnhem-Leeuwarden Court of Appeal confirmed that a former director was personally liable for over €13 million in damages as a result of the company's involvement in a cartel infringement after the European Commission had imposed fines of around €29 million on suppliers because of agreements to fix prices and share sales volumes in the EU. The court found that the director had played a crucial role for these agreements and personally caused the company to participate in the cartel, justifying his personal liability under Dutch corporate law after the company was declared bankrupt.

Conclusion

In conclusion, companies must consider employment issues during dawn raids or requests for information from competition authorities. Failure to do so can result in legal and reputational risks for the company, damage to employee morale and trust and potential personal liability for employees. Companies must ensure that they comply with all relevant laws and regulations, including employment laws, to avoid significant legal and financial consequences. It is imperative for companies to take the necessary steps to protect their own interests and the interests of their employees.

For more information, please contact Peter Willis, Emily Clark and Tenisha Cramer.

This article is part of a special edition on Investigations of our monthly newsletter Competitive Edge.

READ MORE ARTICLES ON INVESTIGATIONS HERE

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