Failure to Comply with Internal Investigations Can Be Cause for Termination

At least where the internal investigation concerns actions you took within the scope of your employment that are exposing your employer to possible criminal liability.

This recent case out of the Second Circuit, Gilman v. Marsh & McLennan Cos., Docket No. 15-0603-cv(L), is the latest chapter in a long saga. The plaintiffs were employees of Marsh & McLennan who were executives being investigated for criminal charges by then-New York Attorney General Eliot Spitzer. The employees were eventually indicted and convicted of some of the charges but the convictions were thrown out because of “newly discovered contradictory evidence.”

As you might have anticipated, this chain of events led to a number of lawsuits by the accused employees, including this one against former employer Marsh & McLennan, who had terminated the employees after they refused to submit to internal interviews about the allegations in Spitzer’s criminal investigation.

The employees had brought claims for abuse of process against Marsh & McLennan but those had been dismissed. The employees were no more successful with their breach of contract claims against Marsh & McLennan. The court found that the employees’ employment contracts with Marsh & McLennan were governed by Delaware law, which finds proper cause for termination where the employee refuses a direct and reasonable order by the employer. In this case, the court found that Marsh & McLennan’s order that the employees sit for internal interviews to discuss allegations that implicated criminal liability for Marsh & McLennan and regarded the employees’ actions during the scope of their employment was a reasonable request. Marsh & McLennan needed to take such measures to protect itself, and, indeed, had a duty to its shareholders to investigate any potential criminal conduct that could have harmed the company. In fact, the court terms Marsh & McLennan’s behavior here as “unassailable, even routine.” The employees were personally free to refuse to be interviewed, but, in so doing, they provided Marsh & McLennan with proper cause for termination under their employment contracts.