Company can fire employees for refusing to sit for interviews arising from AG investigation

This employment dispute asks whether an employer had cause to fire two employees who did not comply with an order to explain themselves in the context of a government investigation into possible criminal conduct.

The case is Gilman v. Marsh & McLennan, decided on June 16. The State Attorney General was investigating whether insurance brokers were steering clients toward particular insurance carriers. Marsh & McLennan hired a law firm to conduct an internal investigation into all of this. Plaintiffs were to be interviewed in this internal investigation. The AG's office then shifted its investigation into an alleged bid-rigging scheme involving Marsh and several insurance carriers. After people at AIG pleaded guilty to bid-rigging and identified plaintiffs as co-conspirators, plaintiffs were directed to sit for interviews and threatened with termination if they failed to comply with that directive. Meanwhile, the State Attorney General told management that it would forego criminal prosecution of the company if it cooperated with the investigation. Plaintiffs refused to sit for interviews. One was fired; the other resigned and was denied certain post-retirement benefits "for cause."

The Court of Appeals (Jacobs, Kearse and Winter) says plaintiffs were fired for-cause because they disobeyed a lawful order  from management. The order was lawful because the employer was entitled to seek information from its employees about possible job-related criminal conduct. True, the employees may have had the personal right not to sit for these interviews. But management has rights, too.

The Court reasons:

Marsh’s demands placed Gilman and McNenney in the tough position of choosing between employment and incrimination (assuming of course the truth of the allegations). But though Gilman and McNenney “may have possessed the personal rights to [not sit for interviews], that does not immunize [them] from all collateral consequences that come from [those] act[s],” including leaving Marsh “with no practical option other than to remove [them].” “[T]here would be a complete breakdown in the regulation of many areas of business if employers did not carry most of the load of keeping their employees in line and have the sanction of discharge for refusal to answer what is essential to that end.” Marsh had to use the “sanction of discharge for refusal to answer,” id., because in the absence of an exculpatory explanation, Marsh needed to assume the worst: that the bid‐rigging allegations were true and that Marsh was vicariously liable for their criminal conduct.