Exit Interviews – Do the Benefits Outweigh the Risks? In The Legal Intelligencer

By: Joseph L. Gordon , Marc Stephen Raspanti

Roughly three out of four large U.S. employers utilize exit interviews, which are considered a low-risk, low-cost way to acquire valuable information. However, companies who approach exit interviews with an “auto-pilot” mentality may expose themselves to increased employment liability if they do not think strategically about how and why they conduct such interviews. Conversely, a robust exit interview program may reduce a company’s exposure to certain types of prospective liability, such as whistleblower claims. Likewise, exit interviews can combat against disclosure of a company’s trade secrets. Depending upon a company’s industry, culture and processes, conducting exit interviews may or may not be advisable. This article discusses some considerations to guide that decision-making process.

General Employment Liability Risks

Departing employees can, and do, raise allegations during exit interviews that create increased employment liability exposure. This often happens when a departing employee is interviewed by a human resources representative. Even though HR employees are most likely to conduct an exit interview, they often lack insight into the employee’s history at the company and may not be prepared to meaningfully respond to an allegation that is grounded in the departing employee’s daily experience.

For example, a departing employee may reveal that they had to pursue another job with better telework arrangements because their boss would not let them work from home, despite a medical condition that made teleworking desirable. Could that employee have a constructive discharge claim under the Americans with Disabilities Act due to a failure to accommodate? Perhaps. Will an HR representative be prepared to answer questions from the departing employee about why another employee in the same department was permitted to periodically work from home? Probably not. Given these potential risks, companies should assess whether their HR representatives have the time to investigate such issues (and whether they are actually likely to do so once an employee has left) before automatically embarking on an exit interview program.

Another drawback is that because HR representatives may be removed from certain operational decisions, they are at risk of being unable to respond to a departing employee’s remarks in a meaningful manner. For example, consider the following hypothetical conversation at an exit interview:

HR Manager: What motivated you to pursue a job with Company B?

Departing Employee: To be honest, I pursued this new job because I believed I was

being underpaid, and I long suspected the reason was because my boss thinks my

husband makes more money than he actually does.

HR Manager (while writing down notes): I can’t discuss how you were paid relative to

your co-workers, but I appreciate the feedback.

Think about how that conversation will appear in a subsequent court filing one year from now when that departing employee is a named plaintiff in a proposed class action alleging pay discrimination on the basis of gender. Worse yet, what if the company took no meaningful action in response to that remark because the HR representative never followed up with the supervisor who set that departing employee’s salary. Further, what if the executive responsible for setting companywide compensation policies never reviewed the HR representative’s notes from the interview. While such a lack of followup should not occur, it routinely does in the modern workplace where employees regularly profess to being overwhelmed by the volume of their job responsibilities.

With the benefit of attorney coaching, departing employees are given pre-litigation opportunities to obtain harmful admissions from company representatives. The potential for such admissions can be decreased by companies being more strategic in deciding when to conduct exit interviews and who to have conduct the interview. Notwithstanding the potential risks, there are situations where the nature of a company’s business or the competitive threat posed by a departing employee make conducting exit interviews a worthwhile endeavor.

Companies Susceptible to Whistleblower Claims

In today’s litigious environment, companies such as defense contractors, hospitals, pharmaceutical manufacturers and device manufacturers, must be concerned about fraud, waste and abuse issues. Whistleblower actions, whether under the False Claims Act or another federal or state statue with whistleblower provisions, are a real and present danger to Corporate America. Companies need look no further than the fact that whistleblowers have contributed to over $59 billion in government recoveries in the last 33 years.

A robust exit interview process can be a unique, albeit difficult, opportunity for companies to listen to valid employee complaints. Critically, that process can confirm that employees voiced no fraud concerns during their employment. A meaningful exit interview program should:

  • Include questions designed to discern whether the employee observed, experienced, heard of or participated in any fraudulent activities.
  • Be memorialized in a post-interview memorandum. If an employee answers a question that he never experienced or engaged in any unethical, improper or illegal behavior, and that employee files a subsequent action, a contemporaneous post-interview memorandum can be compelling evidence that the employer had no knowledge of the alleged fraud. Conversely, if an employee raises fraud concerns that could involve electronic devices or communications, that information should be contemporaneously noted in a post-interview memorandum to facilitate evidence preservation measures.
  • Be conducted by staff who understand a myriad of regulatory issues. Because this is not always possible, the post-exit interview memorandum should be reviewed by multiple departments within the organization, i.e., legal, human resources, compliance or an ombudsman.
  • Be supported by an internal organizational culture willing to act on the information it receives from departing employees (i.e., a willingness to resolve regulatory issues once they are raised).

This process may be difficult for some companies and require a change in the focus and scope of the typical human resources exit interview. However, a company that embraces these types of interviews will often be in far better shape to defend against a “bet the company” case brought by a governmental authority following a whistleblower claim.

Companies With Trade Secrets

Irrespective of the industry, it is often in a company’s best interest to interview departing employees who have access to confidential information and trade secrets in order to determine whether that information is at risk of improper disclosure. Some of the best practices to conducting exit interviews when employees pose competitive threats include:

  • Conducting the interview shortly after an employee has given their resignation notice using interviewers who are highly knowledgeable about the company’s business operations.
  • Include probing questions about what services the departing employee plans to provide for their future employer. The interviewers’ goal should be to acquire as much specific information about the departing employee’s prospective plans as possible.
  • Approach the interview flexibly, as different individuals will react differently to discussing their future plans. Some may feel a sense of guilt at leaving a company and be driven by a desire to cooperate as much as possible to help their employer make a smooth transition. Others may be guarded about discussing their future plans, fearing that their employer may attempt to enforce restrictive covenants once they have departed.
  • Conclude with an admonishment about the employee’s post-employment obligations, including maintaining confidentiality of certain information and advising about any restrictive covenants to which the employee is bound.

While interviews involving departing employees who may soon be working for competitors can be awkward, conducting the interview while that person is still employed provides the company with its best opportunity to obtain insight into whether its confidential information may be at risk of misappropriation.

Conclusion

Commonly thought of as a human resource function, exit interviews can involve liability and competition issues that companies ignore at their own peril. Although many companies understandably rely upon uniform practices due to the size of their workforces, exit interviews are an area where personalization is key. For certain industries, a robust program that reaches all departing employees is ideal; for others, a more selective approach is the better choice. Above all else, companies should be strategic with their approach to exit interviews.

Reprinted with permission from the April 29, 2019 edition of the Legal Intelligencer© 2019 ALM Media Properties, LLC. All rights reserved.

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