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Ethics for Human Resources Professionals PaulFalconeHR Paul@PaulFalconeHR

Ethics for Human Resources Professionals www.PaulFalconeHR.com Paul@PaulFalconeHR.com. Contents. Introduction to business ethics in the workplace: employment history and ethics theory, the Sarbanes Oxley Act, and corporate governance standards

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Ethics for Human Resources Professionals PaulFalconeHR Paul@PaulFalconeHR

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  1. Ethics for Human Resources Professionals www.PaulFalconeHR.com Paul@PaulFalconeHR.com www.PaulFalconeHR.com

  2. Contents Introduction to business ethics in the workplace: employment history and ethics theory, the Sarbanes Oxley Act, and corporate governance standards Employment laws, company policies, codes of conduct, and past practices: guidelines for ethical business decision-making www.PaulFalconeHR.com

  3. Contents (cont.) Workplace audits and self-regulation; egregious misconduct and summary offenses Effective internal investigations Ethical considerations in international companies, cultural differences, and outsourcing and off-shoring considerations www.PaulFalconeHR.com

  4. Part I Our History, our Laws, and our Evolving Workplace www.PaulFalconeHR.com

  5. Ethics: A Definition • Ethics can be defined as a code of moral standards by which people judge the actions and behaviors of themselves and others. • Business Ethics is the “application of a moral code of conduct to the strategic and operational management of a business” – www.applied-corporate-governance.com. www.PaulFalconeHR.com

  6. Legal vs. Ethical • Legal standard = compliance / avoidance of wrongdoing that could run afoul of the law • Ethical standard = building a moral corporate culture that has integrity www.PaulFalconeHR.com

  7. Ethics Programs Workplace ethics programs generally fall into one of three categories: • Codes and compliance programs (e.g., SOX, ISO) focus on preventing unwanted behavior • Corporate identity and values programs focus on what a company stands for and the good qualities the company wants its employees to exhibit • Social outreach programs = +corporate social responsibility” www.PaulFalconeHR.com

  8. Legal Standards & Guidelines • “Legal requirement” vs. “moral imperative” • Can you demonstrate that your company had a legitimate, non-discriminatory, non-retaliatory reason for the actions that it took? • Can you demonstrate business necessity (AKA a compelling business reason) and job-relatedness? • Standard: Did the employer have a good faith belief? www.PaulFalconeHR.com

  9. Legal Guidelines (cont.) • State laws have “concurrent authority” with federal laws – whichever law is broader in terms of worker protections prevails • “Fair treatment” vs. “preferential treatment” • “Acting outside the course and scope of your employment” • “Affirmative obligation to disclose” www.PaulFalconeHR.com

  10. Legal Guidelines (cont.) • Disparate Treatment: intentional discrimination • Disparate (Adverse) Impact: a policy, neutral on its face and even-handedly applied, nevertheless has a disproportionate adverse effect on a protected group www.PaulFalconeHR.com

  11. A Brief History of Ethics The study of ethics involves two basic questions: • What is the right thing to do? • Why should you do the right thing? www.PaulFalconeHR.com

  12. Ethics History (cont.) Ethicists have come up with three main approaches to how people should conduct their lives: • Develop character traits that allow you to live a good and ethical life • Focus on your duties to yourself, others, and society in general • Look to the consequences of your actions and how those consequences affect you and others www.PaulFalconeHR.com

  13. Ethics History (cont.) • Meta-ethics attempt to describe the nature of good and bad and right and wrong • Descriptive ethics (AKA comparative ethics) study what different people believe is right and good • Normative ethics focus on what people should do to live a moral life • Virtue ethics focus on character education, which is the act of training people to develop virtuous habits like truthfulness, fairness, and integrity www.PaulFalconeHR.com

  14. Ethics History (cont.) • Aristotelian values include: generosity, temperance, modesty, and greatness of soul. Virtues are states of character, but they only become true character through constant exercise. • Immanuel Kant’s “categorical imperative” follows one overarching commandment from which all duties and obligations are derived. Kant’s “moral universalism” posits that some actions are always right or wrong. www.PaulFalconeHR.com

  15. Ethics History (cont.) • Thomas Hobbes’ 17th century “social contract theory” states the individuals and groups willingly trade some of their freedoms in exchange for a government or society that can protect their individual and collective interests • Natural rights theorists accept John Locke’s contention that all citizens have a natural right to life, liberty, and the acquisition of property www.PaulFalconeHR.com

  16. Ethics History (cont.) • Consequential ethics state that people should act in ways that result in the best consequences. Acts themselves aren’t good or bad; they’re only deemed good or bad by what happens because of them. Does the end justify the means? • Hedonism states the pleasure is the only thing that’s inherently good. • Utilitarianism is commonly defined as the greatest good for the greatest number. www.PaulFalconeHR.com

  17. Ethics History (cont.) • Situational ethics, developed by Episcopal priest Joseph Fletcher in the the 1960s, emphasizes the overriding importance of agape, or absolute, unchanging, and unconditional love for all people . . . • Situational ethics come into play only when the circumstances are so extreme that following conventional moral principles would lead to a bad outcome (i.e., the morality of any action is always determined by the circumstances). www.PaulFalconeHR.com

  18. A Short Overview of U.S. Employment Law • The “Job as Property Doctrine” – the right to work is fundamental to American citizens that it shouldn’t be taken away without workplace due process as accorded under the 14th Amendment to the Constitution • Standard: “Termination for Just Cause Only” • “Workplace due process” typically comes in the form of progressive discipline (i.e., documented corrective action) www.PaulFalconeHR.com

  19. Progressive Discipline Before any worker loses her job, she has the right to: • Know the nature of the problem • Know what she needs to do in order to fix the problem (i.e., company expectations) • Be given a reasonable amount of time in which to fix the problem • Understand the consequences of inaction www.PaulFalconeHR.com

  20. 1930’s Employment-at-Will • The Great Depression threatened the very existence of capitalism, and Congress passed a series of laws that were intended to keep companies in business at all costs • The worker’s right to due process was replaced by the employer’s right to terminate at whim • From the 1930s to the 1970s, the United States witnessed its greatest growth in unionization as a result because union workers are not “at will” and are typically held to a “for cause” standard under the collective bargaining agreement www.PaulFalconeHR.com

  21. Benefits of Joining a Union • #2 Reason: The right to collectively bargain for wages and benefits and enjoy greater job security • #1 Reason: “If you join our union and pay your union dues, we won’t let companies terminate you at whim. Our collective bargaining agreement will guarantee that you’re accorded workplace due process in the form of progressive discipline, and you’ll gain control of your future back.” www.PaulFalconeHR.com

  22. A California Court in 1980 Tameny vs. Arco Oil (June 2, 1980) • 15-year employee was fired for refusing to engage in unlawful activities (“price fixing”) on employer’s behalf • CA Supreme Court Justice Rose Byrd ruled, “We won’t countenance firing a long-term employee, even if at will, for reasons that violate public policy.” • The public policy exception was born. • Tort law became part of legal landscape in CA. www.PaulFalconeHR.com

  23. Limitations on Employment at Will Exceptions to employment-at-will include . . . • Employment contracts (including collective bargaining agreements) • Statutory considerations (protected classes) • Public policy exceptions (WC, whistle blowing, and engaging in concerted activities) • Implied contract exceptions / implied covenants of good faith & fair dealing (handbooks, vesting) www.PaulFalconeHR.com

  24. EAW vs. Discharge for Just Cause Only • Defense Attorney’s strategy = “Employment-at-Will Affirmative Defense” used at the hearing stage with the goal of immediate dismissal of the case (“Summary Judgment”) • Plaintiff Attorney’s strategy = “Discharge for Just Cause Only” standard used at the trial stage (if the case “survives Summary Judgment”) www.PaulFalconeHR.com

  25. Hearings vs. Trials Lesson: It’s not one or the other, it’s both – Without a crystal ball, you can’t know now what kind of spin a plaintiff attorney will place on a case six – 12 months from now and how a judge will lean. Therefore, since you can’t know in advance if you’ll win a summary judgment at the hearing stage (using the EAW affirmative defense), you must always be prepared to show that you have just cause at the trial stage (via progressive discipline)! www.PaulFalconeHR.com

  26. 1930’s • 1935 – The Wagner Act (known as the National Labor Relations Act - NLRA) – guarantees basic rights of private sector employees to unionize, bargain, and strike • 1938 – Fair Labor Standards Act (FLSA) – banned oppressive child labor (under age 14), set minimum wage (25 cents), required employers to pay overtime and set maximum workweek to 44 hours www.PaulFalconeHR.com

  27. 1940’s and 1950’s • 1947 – Taft Hartley Act – protects employers from unfair labor practices (i.e., unions refusing to bargain with employers in good faith) • 1959 - Labor Management Reporting and Disclosure Act (Landrum-Griffin Act) – provides employers the right to sue unions www.PaulFalconeHR.com

  28. 1960’s • 1965 - Executive Order 11246 – prohibits federal contractors from discriminating in employment decisions based on race, color, religion, sex, or national origin; federal contractors must develop an Affirmative Action Plan (AAP) • 1967 - Age Discrimination in Employment Act (ADEA) – prohibits discrimination based on age (40 years or older) and protects employees from a hostile work environment based on age • 1968 - Fair Credit Reporting Act (FCRA) - protects individuals by regulating the way businesses gather and use credit information about them www.PaulFalconeHR.com

  29. 1960’s (cont.) • 1963 - Equal Pay Act (EPA) - protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination • 1964 - Civil Rights Act-Title VII - prohibits employment discrimination on the basis of sex, race, color, religion, or national origin (includes recruitment, hiring, wages, assignment, promotions, benefits, discipline, discharge, and layoffs) www.PaulFalconeHR.com

  30. 1970’s • 1970 – Occupational Safety & Health Act (OSHA) - governs occupational health and safety; ensures that employers provide employees with an environment free from recognized hazards • 1972 - Vietnam Era Veteran’s Readjustment Assistance Act (VEVRA) - provides equal opportunity and affirmative action for Vietnam era veterans, special disabled veterans, and veterans who served on active duty during a war (applies to employers with Federal contracts or subcontracts of $25,000 or more). • 1973 - Rehabilitation Act - prohibits discrimination on the basis of disability in programs conducted by Federal agencies, contractors and/or programs www.PaulFalconeHR.com

  31. 1970’s (cont.) • 1974 - Employee Retirement Income Security Act (ERISA) - protects the interests of employee benefit plan participants by setting minimum standards for pension plans in private industry and rules on the tax effects associated with employee benefit plans • 1978 - Uniformed Guidelines on Employment Selection Procedures - provides standards for use of employment testing; employers must demonstrate a selection process is valid in predicting performance, and selection process cannot create adverse impact • 1978 -Pregnancy Discrimination Act (PDA) – prohibits discrimination based on pregnancy; treat pregnancy as any other temporary disability www.PaulFalconeHR.com

  32. 1980’s • 1985 - Consolidated Omnibus Budget Reconciliation Act (COBRA) - provides workers who lose health benefits to continue group health benefits (temporarily) in certain circumstances • 1986 – Immigration and Reform Act (IRCA) – prohibits discrimination based on national origin or citizenship of applicants; companies may be penalized for hiring illegal aliens • 1986 - Health Insurance Portability and Accountability Act (HIPAA) – protects an individual’s personal health information (amended in 1996 - improves portability and continuity of health insurance coverage) • 1989 – Whistleblower Act – protects federal whistleblowers who work for the government and report agency misconduct; agency cannot retaliate against an individual who reports misconduct www.PaulFalconeHR.com

  33. 1990’s • 1990 - Americans with Disabilities Act (ADA) – prohibits discrimination based on disability in employment decisions • 1991 – Civil Rights Act – provides the right to trial by jury on discrimination claims and introduced the possibility of emotional distress damages (i.e., punitive damages), while limiting the amount that a jury could award • 1993 – Family Medical Leave Act (FMLA) – provides job protection and unpaid leave for certain circumstances • 1994 – Uniformed Services Employment and Reemployment Act (USERRA) – provides job rightsof individuals who leave employment to serve in the uniformed services and prohibits employers from discriminating against past and present members of the uniformed service (and applicants to the uniformed services) www.PaulFalconeHR.com

  34. 2000’s • 2002 – Sarbanes Oxley (SOX) - ensures the reliability of publicly reported financial information, company noncompliance may result in negative consequences and contains protection for corporate whistleblowers • 2008 - Genetic Information Nondiscrimination Act (GINA) - prohibits the use of genetic information in health insurance and employment decisions www.PaulFalconeHR.com

  35. Protected Characteristics • Federal Law (Title VII) = 5 protections Race, color, religion, sex, and national origin • California State Law = 17 protections Five from Title VII + ancestry, physical disability, mental disability, medical condition, marital status, pregnancy, age, sexual orientation, gender identify, gender expression, genetic information, and military & veteran status www.PaulFalconeHR.com

  36. Part II The Sarbanes-Oxley Act of 2002 (SOX) • The Code of Business Conduct / Code of Ethics / Code of Conduct • Conflicts of Interest • SOX Controls and Compliance www.PaulFalconeHR.com

  37. Corporate Governance • Arthur Anderson’s conflict of interest prior to its fall: Accounting and Auditing services offered to the same clients (Enron) • Should the offices of Chairman of the Board (COB) and CEO be held jointly by the same person? COB = board of directors activities CEO = operational activities www.PaulFalconeHR.com

  38. Corp Governance (cont.) • Pros: A combined Chairman/CEO acts as abridge between the board and the operating company and can provide critical leadership for strategic initiatives. • A principal role of the Chairman is to propose the general agenda for board meetings from among the many issues facing a company on a day-to-day basis. As a result, a CEO may be in the best position to develop this agenda in the most efficient and effective manner. • Cons:The board must maintain independent oversight of management. Joining the roles of COB and CEO could consequently impact board independence. www.PaulFalconeHR.com

  39. Corp Governance (cont.) Key Board Committees • Audit Committee • Social Responsibility Committee • Nominating and Personnel Committee • Shareholder Advisory Committee Note: “Trustees” must be independent of the company’s management www.PaulFalconeHR.com

  40. “Defective Certification” • Criminal prosecution for CEO and CFO of publicly traded companies • Penalties include: $1 MM, up to 5 years in prison $5 MM, up to 20 years in prison (if willful) Lesson: SOX, AKA SARBOX, has teeth!!! www.PaulFalconeHR.com

  41. Part III: Internal Investigation Strategies • Rule 1: It’s all about the record • Rule 2: Practice trumps policy • Rule 3: Always the Get the Accused Worker’s Side of the Story Before Making a Final Decision www.PaulFalconeHR.com

  42. Investigations (cont.) • Rule 4: When the issue drives the outcome • Rule 5: The importance of timeliness • Rule 6: Removing employees from the workplace: a necessary consideration in the investigation process www.PaulFalconeHR.com

  43. Investigations (cont.) • Rule 7: Sameness vs. Consistency • Rule 8: Performance vs. Conduct • Rule 9: Beware the Dreaded “Preemptive Strike” www.PaulFalconeHR.com

  44. Investigations (cont.) • Rule 10: Vet the record before recommending termination • For a list of key record review items, visit www.PaulFalconeHR.com and look at the Blog page under: “Ten Practical and Street-Smart Rules for Conducting Internal Workplace Investigations” www.PaulFalconeHR.com

  45. Part IV: Real Life Scenarios You Make the Call . . . Scenario 1: “Hey boss, can I talk to you for a few minutes off the record?” www.PaulFalconeHR.com

  46. Scenarios (cont.) • Scenario 2: Two employees (peers) begin dating in the workplace. Do they have an obligation to disclose their new relationship? • Scenario 3: Two employees (manager - subordinate) begin dating in the workplace. Do they have an obligation to disclose their new relationship? www.PaulFalconeHR.com

  47. Scenarios (cont.) • Scenario 4: Loner employee carries a little red book where she takes notes about her coworkers. She tells that they if they do anything to hurt her, she will turn over her notebook to her attorney and sue them personally. Does the company have any recourse toward this employee? • Scenario 5: Loner employee from New Orleans creates voodoo dolls of her coworkers and sets them prominently on her desk. Can management intervene? www.PaulFalconeHR.com

  48. Scenarios (cont.) • Scenario 6: Assistant store manager reports to store manager (husband and wife). Husband (AM) arrested for drug possession. Does wife (store manager) have an obligation to disclose her husband’s / assistant manager’s arrest? www.PaulFalconeHR.com

  49. Scenarios (cont.) • Scenario 7: Retail store announces to its workers that it’s expanding hours to include Sundays from 9:00 – 4:00. Employees suddenly “see religion.” Does the company have any recourse to a team that refuses to work Sunday hours for religious reasons? www.PaulFalconeHR.com

  50. Scenarios (cont.) • Scenario 8: Bank employee reports to work with a new nose ring, ear gauge, and eyebrow pin. Does a company have the right to insist that those paraphernalia be removed when dealing with customers? Can a company reassign someone with body piercings and new tattoos to a back-office role that avoids customer interaction? What if the individual opts to sport a beard or wear a Burka for religious reasons? www.PaulFalconeHR.com

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