What Are the Legal Risks of Refusing to Cooperate with a Corporate Investigation?

What Are the Legal Risks of Refusing to Cooperate with a Corporate Investigation?

You get an email from HR. Conference room. 2pm today. “Outside counsel will be present.” You walk in and there’s a lawyer you’ve never met sitting across from you with a legal pad. They start with something called an “Upjohn warning” – the lawyer represents the company, not you personally; the attorney-client privilege belongs to the company, not you; anything you say can be disclosed to third parties including prosecutors; you should consider retaining personal counsel. Then they start asking questions about conduct that could be criminal. You’re facing an impossible choice: cooperate and potentially hand prosecutors evidence they’ll use against you, or refuse and face immediate termination for cause – losing not just your job, but your unvested stock options, severance package, and unemployment benefits. What actually happens when you say no?

Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience representing executives facing corporate investigations and defending employees caught in the impossible position between cooperation and self-incrimination. The reality is that courts consistently uphold an employer’s right to terminate employees who refuse to cooperate, even when those employees face potential criminal exposure. Here’s what refusing to cooperate actually costs you, whether having a personal lawyer protects you, and the strategic calculus for deciding whether cooperation is the least-bad option in your situation.

What That Warning Actually Means

That warning they gave you at the beginning of the interview isn’t legal boilerplate – it’s a carefully crafted disclosure that strips away protections you might think you have. “The attorney represents the company, not you personally” means the lawyer sitting across from you works for your employer, not for you – if your interests conflict with the company’s interests, the lawyer will protect the company every time. “The attorney-client privilege belongs to the company” means anything you say is privileged, but the company owns that privilege and can waive it whenever doing so serves corporate interests – including handing your statements to prosecutors in exchange for cooperation credit. “You should consider retaining personal counsel” is legal cover acknowledging that you’re being interviewed in a situation where you might need protection, but it’s not an offer to provide you with a lawyer or to pause the interview while you find one.

Here’s the practical reality: you’re sitting in that conference room as an employee with a duty to cooperate with legitimate employer inquiries, but you’re being questioned about conduct that might be criminal. The company can fire you for refusing to answer, but prosecutors can use your answers against you in criminal proceedings. The Upjohn warning makes explicit that you’re not protected – you’re being told upfront that the company can use what you say against you, and you should probably get a lawyer because they’re not looking out for your interests. Then they ask you to start answering questions anyway.

What “For Cause” Termination Actually Costs You

Most employees think refusing to cooperate means losing their job – that’s bad enough. But “for cause” termination triggers forfeiture of compensation that often dwarfs annual salary. Consider the Second Circuit case Gilman v. Marsh & McLennan: two employees refused to participate in interviews during an internal investigation related to potential securities violations. The company terminated them “for cause” under Delaware law for refusing to obey a direct order from their employer. The terminated employees sued to recover unvested stock options and severance benefits. They lost. The court held that refusal to cooperate with a legitimate internal investigation constituted cause for termination, and that termination for cause triggered forfeiture provisions in their employment agreements.

The financial stakes: unvested stock options at a major financial services firm can be worth hundreds of thousands or millions of dollars depending on seniority and tenure. Severance packages at that level often include multiple years of salary plus benefits continuation. Unemployment benefits are typically denied when termination is for cause. Add it up and you’re potentially gambling a seven-figure forfeiture by refusing to answer questions in a conference room interview.

And here’s the paradox that makes this even more brutal: in the McGrory v. Applied Signal Technologies case, an employee was accused of workplace discrimination and refused to fully cooperate with the company’s investigation. After the investigation concluded, the company determined the discrimination allegations were unfounded – the employee was innocent. They fired him anyway for refusing to cooperate during the investigation. The California Court of Appeal upheld the termination. You can be fired for not cooperating even when you’re ultimately cleared of the allegations being investigated. Cooperation doesn’t guarantee you keep your job, but refusal guarantees you lose your job plus all unvested compensation – even if you’re innocent of the underlying allegations.

Can Your Lawyer Stop This?

Employees facing Upjohn warnings often think: “I’ll just bring my personal lawyer to the interview and that solves the problem.” It doesn’t. Having personal counsel present helps you navigate the interview strategically – your lawyer can advise you which questions to answer, how to frame responses to avoid creating false impressions, and when asserting Fifth Amendment rights is appropriate despite employment consequences. But personal counsel cannot prevent the company from terminating you for refusing to cooperate. Courts have held that even employees represented by counsel who selectively refuse to answer questions can be fired for cause if the refusal constitutes insubordination.

What personal counsel CAN do: negotiate the scope and conditions of the interview, object to ambiguous questions, assess whether the investigation appears to be a prelude to criminal referral, and advise whether you should assert Fifth Amendment rights even knowing it will likely result in termination. In some situations, having a lawyer present signals to the company that you’re taking the matter seriously and that careless handling could create liability. If your termination would itself create litigation risk – because you’re in a protected class, because you’ve recently engaged in whistleblowing, because your employment contract has specific termination-for-cause definitions – personal counsel can sometimes negotiate a middle path where you provide some cooperation in exchange for protections.

But none of this changes the fundamental power imbalance: the company wants information, you have information they want, they can fire you for not providing it, and having a lawyer present doesn’t give you veto power over that termination decision. Personal counsel helps you make strategic choices, not avoid having to make those choices.

When to Cooperate, When to Refuse

So when should you cooperate and when should you refuse despite the financial devastation? There’s no universal answer – it depends on your situation – but here’s the framework: If you’re innocent and evidence will exonerate you, cooperation is usually safer than refusal. If you’re guilty and evidence is damning regardless of your statements, cooperation might get you a cooperation agreement or immunity in exchange for testimony against higher-ups, while refusal guarantees termination without any protection from prosecution. If criminal exposure is likely and you don’t yet have personal counsel, refuse to answer until you’ve consulted with a lawyer – taking the risk of immediate termination is better than inadvertently confessing to a felony.

Consider how the investigation started. If it’s triggered by a whistleblower complaint that names you specifically and provides detailed allegations, prosecutors may already have enough evidence to charge you whether you cooperate or not – in that scenario, cooperation at least gives you the chance to provide context or point to exculpatory evidence. If you’re refusing because you believe answering truthfully will incriminate you – that’s exactly when you need counsel before deciding whether cooperation with immunity is possible or whether refusal despite termination is your only option. Courts have consistently held that even investigations launched for improper motives still allow termination for refusal to cooperate if the investigation itself is legitimate in scope.

Why Your Fifth Amendment Rights Don’t Save Your Job

Employees often assert: “I have a Fifth Amendment right not to incriminate myself, so they can’t fire me for invoking it.” That’s half right. You absolutely have Fifth Amendment protection against government-compelled self-incrimination – no prosecutor can force you to testify against yourself in a criminal proceeding. But the Fifth Amendment constrains government action, not private employer conduct. When corporate counsel interviews you during an internal investigation, that’s not government action for Fifth Amendment purposes even though the investigation might lead to criminal prosecution. The company isn’t “the government.” You CAN refuse to answer questions by invoking Fifth Amendment rights. The company CAN fire you for that refusal.

This creates a constitutional tension that feels unjust but is well-established in law. Your personal liberty – freedom from self-incrimination – exists independently of your employment status. But employment is generally “at will” absent a contract specifying termination standards, and even employment contracts typically allow termination “for cause” when employees refuse to comply with reasonable directives. Courts have found that requiring cooperation with internal investigations is a reasonable directive, and that employees who invoke Fifth Amendment rights to avoid answering are still subject to termination for insubordination.

The principle underlying this doctrine: constitutional rights protect you from government overreach, but don’t insulate you from private consequences of exercising those rights. You can invoke your right to free speech and criticize your employer publicly – but they can fire you for it. You can invoke Fifth Amendment rights and refuse to answer questions – but the company can terminate you for that refusal. The Constitution protects you from punishment by the state for asserting rights; it doesn’t protect your job when asserting those rights conflicts with employment obligations.

At Spodek Law Group – we’ve represented executives who cooperated with internal investigations and successfully negotiated immunity or favorable treatment with prosecutors, and we’ve represented employees who refused to cooperate, were terminated, and managed to challenge those terminations based on specific contractual protections or retaliation theories. The difference between good and bad outcomes often comes down to getting legal advice before that first interview – understanding what you’re risking, what you’re protecting, and whether middle-ground solutions exist. If your company has initiated an internal investigation and you’ve been asked to participate, contact us at 212-300-5196 before you walk into that conference room. The choice between cooperation and refusal isn’t one you should make without understanding exactly what both options cost.