Attorneys

• W. Scott Hardy

While it may come as no surprise to learn that some of your company’s employees don’t behave like angels, it is critical to know that employers who fail to insist that their employees abide by the law and behave ethically do so at their own peril.   Although it is impossible to prevent every instance of employee misconduct, employers can gain some legal protection by providing halos to each employee in the form of a corporate compliance program.  Failure to do so could be devastating.

Whether it be an executive attempting to bribe a local politician, a salesperson intentionally misrepresenting the virtues of a product or a billing clerk padding invoices, employers cannot afford to ignore the risks of such behavior.
An employer’s potential exposure to civil and criminal liability is as broad as the number of individuals acting on its behalf and the number of times each individual acts – or fails to act – each day.

In fact, your company may be prosecuted for crimes committed by an employee or independent contractor, regardless of rank within the corporate hierarchy, who was acting on behalf of the company within the scope of his or her employment/engagement and intending to benefit the company – even if the individual’s predominant motive was to benefit himself or herself.

Business entities risk being fined heavily, debarred from being awarded government contracts and burdened with other oppressive obligations, while errant employees and, in some circumstances, managerial personnel, risk imprisonment.  Moreover, criminal prosecutions are not limited to large, Fortune 500 corporations.  Statistics show that nearly 95 percent of all federal corporate criminal defendants were small, privately-held companies.  Government contractors and companies doing business in highly regulated industries are at even greater risk.

Most employers already have some policies designed to keep them compliant with certain laws and regulations.  Anti-discrimination and harassment and workplace violence policies come to mind.  However, just like a police office who wears a bulletproof vest is not protected from being shot in the head, traditional employment policies, while necessary, only protect a company from some – but not all – risks.  For greater protection, employers should also implement other legal and ethical compliance standards to add value to existing personnel policies and employee handbooks.

Beyond the inherent benefits of ensuring that employees and others acting on behalf of your company engage in lawful and ethical business practices, a properly crafted and implemented program to prevent and detect violations of law – a corporate compliance program – minimizes the risk of criminal prosecution and allows a company to mitigate the sentence in the event it is convicted of or pleads guilty to a crime.

In order for a compliance program to be effective, an employer must:

• Establish compliance standards and procedures reasonably capable of reducing the prospect of criminal conduct
• Assign high-level personnel within the organization to oversee compliance
• Use due care not to delegate substantial discretionary authority to individuals whom it knows or should know have a propensity to engage in illegal activities
• Communicate standards and procedures to all employees and other agents through training programs and publications
• Utilize auditing and monitoring systems reasonably designed to detect criminal conduct by employees and other agents, and have in place and publicize a reporting system whereby employees and other agents can report criminal conduct internally without fear of retribution
• Enforce the ethics standards through appropriate disciplinary mechanisms consistently
• Respond appropriately to an offense that has been detected and take measures to prevent similar offenses in the future
• When crafting a compliance program, an employer also should account for the likelihood that certain types of conduct may occur because of the nature of its business, prior employee misconduct and applicable industry practices and standards.

Compliance programs are no longer a luxury afforded by only our nation’s largest corporate entities.  All employers, large and small, must ensure that their personnel conduct themselves ethically and legally.  It never hurts to don a shiny halo.

For more information, please contact shardy@cohenlaw.com.