Does Your Code of Conduct Speak Loud Enough?

When it comes to explaining where and how to report violations of your company’s code of conduct, does your code of conduct speak loud enough or does it mumble? If employees pick up a copy of the code today are the channels for reporting clear?  Would a jury agree that the procedures for reporting are clear? Why does this matter?

Specifying the method for reporting violations matters because U.S. employers may defend certain employment related claims, at least in part, if they can show that the employee asserting the claim failed to report the alleged wrongdoing in accordance with company policy and procedure. In other words, if an employer can show that an employee did not exercise reasonable care to avoid harassment by reporting the harassment in accordance with the company’s policies and procedures, an employer may be able to successfully defend a harassment claim.  The defense turns on whether the employer established a procedure for reporting misconduct and whether the employee reasonably followed the procedure.

Adding a clause to your code of conduct specifying where employees should report violations sounds simple.  Maybe your gut reaction is to add a line stating that an employee should report violations to her supervisor.  But what if the employee is not comfortable with her supervisor or the supervisor is the violator?  Can employees make a report to just any supervisor at your company?  If casting such a wide net, has your company trained supervisors on how to handle reports and who to contact after a report has been made to them?  Are all relevant departments involved in the reporting process?  For example, does your code direct employees to report to HR, Legal, or Compliance & Ethics?  What happens if the violation is a safety violation?  Is it acceptable for the employee to report to the safety director?  Does your head hurt yet?

I recently came across a case involving Sprint that underscores the need for your code to shout your reporting procedures.  The case, decided in 2001, is a federal appellate court case that examined the channels for reporting sexual harassment that Sprint had in place in the early 90s (the Clinton days).

In Frederick v. Sprint/United Management Co., the employee alleged that in the early 90s her supervisor subjected her to a range of discomforting behavior including: staring at her for prolonged periods, blowing her kisses, lingering at her work station, once kissing her on the cheek, touching her breasts while standing over her to supposedly assist her with typing; and subtly (or maybe not so subtly) implying that they should have sex.

The harassment allegedly started in 1992. At that time, Sprint had a 1990 sexual harassment policy with complaint procedures. Sprint also had a code of conduct entitled “Sprint’s Code of Ethics,” which was a 20 page booklet that described a broad range of employee misconduct.  Two lines in Sprint’s Code refer to sexual harassment complaints.  Specifically, Sprint’s Code stated: “It is our policy, in accordance with the law, to maintain an environment free from discrimination on the basis of sex, race…or disability.  Sexual harassment is both illegal and unethical and it should be reported immediately.”  Sprint’s Code further provided that “any questions” about incidents arising under the Code should be reported to “one’s supervisor, who in turn will work with HR, Legal and the Chief Ethics Officer to get an answer.”  The Code last indicated that an employee can anonymously call the Sprint Ethics Code Hotline with her questions.  Sprint produced its 1990 Policy and Sprint’s Code as part of its defense and claimed that the employee failed to report the misconduct in accordance with the policies outlined above.

The employee testified that she received Sprint’s Code and that she knew the Code applied to her sexual harassment claim, but she alleged she did not understand how to file a complaint under Sprint’s Code. It was undisputed that the employee never complained to her direct supervisor (who keep I mind was the alleged violator) or to any of the various departments listed in Sprint’s Code.  Moreover, the employee never called Sprint’s Ethics Code Hotline.  However, the employee testified that she reported the misconduct to two other managers at Sprint.

Two years after the alleged harassment started, Sprint published a revised Sexual Harassment Policy in 1994. Sprint’s 1994 revision to its sexual harassment policy apparently did not limit the employee to complaining to a direct supervisor, but allowed employees to report misconduct to anyone in a management position with whom they felt comfortable.

Sprint defended the lawsuit by alleging that when the alleged misconduct took place only the 1990 harassment policy and Sprint’s Code were in effect and therefore employees were required to report their allegations to either: (1) their supervisors; (2) HR; (3) the Chief Ethics Officer; or (4) through Sprint’s Ethics Code Hotline. Since the employee did not report the misconduct in accordance with the 1990 policy and Sprint’s Code, Sprint asserted as part of its defense that the employee failed to exercise reasonable care to avoid the harassment.  The employee disagreed asserting that she reported the misconduct to two other managers in accordance with the 1994 sexual harassment policy.

The federal appellate court found a material issue of fact for a jury to decide. Issues of fact for the jury to consider included: (1) whether the 1994 Policy was in fact in place when some of the harassment took place; (2) even it the 1994 policy was  inapplicable, whether it was unclear how to report a complaint under the code; and (2) whether the lack of clarity surrounding how to report  a complaint (or other extenuating circumstances) prevented the employee from reporting a complaint in a timely fashion.

Personally, I see a flaw in Sprint’s Code in that a strict reading of the Code makes it seem like the only way of reporting a complaint are to report to one’s supervisor who will then take the issue to HR, Legal or the Ethics department. However, employees exercising commonsense should know that HR, Legal and Ethics were other acceptable channels for reporting.  Regardless, it appears Sprint corrected the shortcoming in its 1994 Policy by allowing employees to report to other members of management.  The risk with allowing employees to report to any managers (and this was another issue in the Sprint case) is that some of those managers don’t always appropriately escalate the report.

Ethics & Chill: The phrase “Can you Hear me Now?” should be the mantra of companies when drafting the complaint reporting procedures within their codes of conduct and other policies.

Your Code of Conduct Encourages Employees to Report Violations. Are You Listening?

I remember reading the U.S. Supreme Court’s decision in Kasten v. Saint-Gobain  while I was practicing employment law at a private law firm.   Back then, I was focused on what the decision meant for employers.   I wasn’t reading the case through the lens of a compliance and ethics officer, so I didn’t hone in on the role of the employer’s code of ethics and business conduct until I recently reread the case.

Kasten is a Fair Labor Standards Act (“FLSA”) case.  The FLSA sets forth employment rules concerning minimum wages, maximum hours, and overtime pay; it contains a statutory provision that prohibits retaliation against employees who report a FLSA violation.

In Kasten, the employee alleged that his employer unlawfully retaliated against him after he repeatedly orally complained to his employer about unlawful timeclock locations.  It appears that the employee cited the employer’s code of ethics and business conduct as supporting justification for his complaints. It appears that the company’s code of ethics and business conduct (like many codes of conduct) obligated every employee to report suspected violations of any applicable law of which the employee becomes aware.

The employee alleged that he expressed his concerns over the placement of the timeclocks to his shift supervisor, his lead operator, human resources, and the operations manager. The employee alleged that this activity caused the company to discipline him and ultimately dismiss him.   [Note, in a separate legal action, a court held that the placement of the timeclocks violated the FLSA.]

The employer, however, denied that the employee made any significant complaints about the timeclock locations.  Rather, the employer alleged that it dismissed the employee because he failed to record his comings and goings on timeclocks.

While the sole issue that the U.S. Supreme Court decided in Kasten was whether an oral complaint in violation of the FLSA is protected conduct under the act’s anti-retaliation provisions, this case also highlights the need to vigilantly listen for employees who might be reporting a violation of the company’s code of conduct.  In Kasten, the U.S. Supreme court ultimately held that oral complaints are sufficient to trigger anti-retaliation protections, stating that to hold otherwise would prevent the effectiveness of things like hotlines, interviews, and other oral methods of receiving complaints, all of which are components of effective compliance and ethics programs.

Just Ethics & Chill Takeaway

Employers should listen carefully to their employees to discern whether what they are hearing could amount to an oral complaint related to violations of law, regulation, or internal policy.