Chapter 18 Compliance Investigations

Abstract

Compliance is a “hot topic” in German labour and employment law. Press and media report on a regular basis about major compliance cases affecting various industries. Companies who are not compliant with mandatory law may face severe fines, criminal prosecution, exclusion from (public) tender proceedings, but also significant reputational issues. Such consequences can in worst case even destabilise the whole company.

More and more frequently, companies must handle situations where suspicious facts with regard to corruption, bribery, tax fraud, or violations of anti-trust and competition laws, arise suddenly and which force the company to quickly investigate this in order to avoid or reduce penalty payments that can reach into millions of Euros.

Investigations do not come with advance notice. Therefore, once a suspicion arises, it is crucial to have an efficient organisation in place, which enables the employer to investigate without undue delay.

At the beginning of such compliance investigations the main focus is often on how to reduce potential criminal sanctions including fines. Typically, only at a later stage the investigation focuses on possible consequences against individual employees. It is not unusual that the employer may then be in a very weak position and must try to settle a termination case for high severance payments or face reinstatement, even in cases where employees may have committed criminal offences. Employers are therefore well advised to consider potential labour and employment law pitfalls already at the outset of the investigation.