Sexual Harassment Training : ELT, Inc. : AB 1825, Employment Law, Online Harassment, Compliance, and Harassment Training

What are the Laws and Regulatory Guidelines that Require Ethics and Code of Conduct Training?

1. The Sarbanes-Oxley Act of 2002 strongly encourages training on the Code, and requires education about reporting systems.
2. The Federal Sentencing Guidelines mandate training on ethics and legal compliance.

What are the Relevant Components of The Sarbanes-Oxley Act of 2002 (SOX)?

• Section 406 of SOX requires disclosure of whether a code of ethics has been adopted.

Section 406 of SOX directed the Securities and Exchange Commission (SEC) to issue rules requiring each public company to disclose whether or not it has adopted a code of ethics that applies to the organization's key officers. The SEC adopted final rules implementing Section 406 of SOX in January 2003.

The final SEC rules define the term "code of ethics" as written standards that are reasonably designed to deter wrongdoing and to promote:

• Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.
• Full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with or submits to the SEC and in other public communications made by the company.
• Compliance with applicable governmental laws, rules and regulations.
• The prompt internal reporting of any violations of the code of ethics to an appropriate person or persons identified in the code of ethics.
• Accountability for adherence to the code of ethics.

SOX does not actually mandate adopting a Code of Ethics / Code of Conduct, but it requires that a company disclose whether or not it has adopted a Code that satisfies the definition above. If the company has not adopted such a Code, it must disclose why. This approach is often described as a "law of shame."

• NYSE and NASDAQ Governance Standards require a Code.

Expanding upon the Section 406 concept, the SEC approved new NYSE and NASDAQ Governance Standards. Both exchanges require a "Code of Business Conduct and Ethics" covering all employees, officers and directors. Each listed company must make its Code available to the public.

The NYSE requires CEO's to certify compliance with these listing standards on an annual basis. (Final NYSE Corporate Governance Rules, Section 10.) The NYSE requires more than a Code. It mandates "compliance standards and procedures that will facilitate effective operation of the Code." These "procedures" are largely interpreted to include training and education.

• Section 301 of SOX requires clear communication of reporting channels and protocols.

It's important to consider the importance of training when addressing general compliance with SOX. SOX requires each Audit Committee to establish a procedure for the confidential, anonymous reporting of complaints about audit and financial matters. (Section 301(4)). Such "procedures" naturally involve training and education about reporting channels and protocols.

What are the Federal Sentencing Guidelines?

The Federal Sentencing Guidelines (FSG's) are rules that set out a uniform sentencing policy for convicted defendants. They were amended in November of 2004 to include critical training requirements.

The FSG's now require employers to adopt comprehensive ethics and compliance programs, and to train everyone on the fundamental components of those programs. Practically speaking, this means having a Code of Conduct or Code of Ethics and training on that Code.

How Do the Federal Sentencing Guidelines Work?

The FSG's make clear that employers can be held liable for their employees' illegal conduct. If employers take proactive steps to prevent unethical and illegal conduct through an effective ethics and compliance program (which includes training), employers can substantially mitigate potential fines and punishment for criminal violations:

The potential fine range for a criminal conviction can be significantly reduced -- in some cases up to 95 percent -- if an organization can demonstrate that it had put in place an effective compliance and ethics program and that the criminal violation represented an aberration within an otherwise law-abiding community.¹

The opposite side of this equation is that an absence of effective ethics and compliance programs can be used to increase fines and punishment.

Do Ethics & Code of Conduct Training Requirements Apply to All Employers – Both Public and Private?

Yes. Unlike SOX, the FSG's apply to both public and private employers.

The Federal Sentencing Guidelines apply to "all organizations, whether publicly or privately held, and of whatever nature, such as corporations, partnerships, labor unions, pension funds, trusts, nonprofit entities, and government units." ²

While the Sarbanes-Oxley Act applies to publicly traded companies, the rules and guidelines that it established are being widely adopted by privately held companies for two reasons: (1) Sarbanes-Oxley standards make for good business practice, adding value beyond simple "check the box" compliance. Many of the Sarbanes-Oxley requirements, like training, can help to substantially mitigate risk and liability for privately held organizations; and (2) Sarbanes-Oxley type legislation is expected in the near future for privately held organizations. Leading employers are recognizing the opportunity to stay ahead of the compliance curve.

Why Are the FSG's Relevant to Civil Proceedings?

There is a long and extensive history of courts and regulatory agencies using the Federal Sentencing Guidelines to establish expected standards of conduct for employers, and to determine associated fines and penalties for not meeting those standards. The Commentary to the FSG's emphasizes that effective ethics and compliance programs go beyond the deterrence of criminal conduct to "facilitate compliance with all applicable laws."³

Who Needs to Be Trained?

Everyone.

Sections 8B2.1(b)(4)(A) & (B) of the Federal Sentencing Guidelines reference the need to train the entire workforce with a sweeping definition of "individuals" who must be trained:

The organization shall take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program, to [members of the governing authority, high-level personnel, substantial authority personnel, the organization's employees, and, as appropriate, the organization's agents] by conducting effective training programs and otherwise disseminating information appropriate to such individuals' respective roles and responsibilities.

This requirement is further underscored in the Commentary to the Amendments:

Section 8B2.1(b)(4) makes compliance and ethics training a requirement, and specifically extends the training requirement to the upper levels of an organization, including the governing authority and high-level personnel, in addition to all the organization's employees.

How Often Does Training Have to Occur?

"Periodically."

As detailed above, Section 8B2.1(b)(4)(A) of the Federal Sentencing Guidelines refers to a periodic training requirement.

While "periodic" is not defined officially by the FSG's, employers can be guided by how that term has been interpreted in the employment law arena. The US Supreme Court and the EEOC require "periodic" harassment and discrimination prevention training for all employees and managers. A thorough review of employment law training case law shows that "periodic" is generally interpreted as every 12 – 24 months.⁴

California's recently passed harassment training law (AB 1825; new Government Code section 12950.1 )⁵ also references periodic training, and officially sets the time frame at every two years.

Based on this legislative context and a thorough review of state and federal case law from the past 5 years, ELT recommends training every year, and at least every other year.

Also, it is essential that new employees be trained as soon as possible. Under California's new harassment training statute, mandated training must occur within six months after a new manager is hired.

Can Distributing a Code of Conduct Meet the Training Requirements?

No.

The Federal Sentencing Guidelines specifically reference the need to proactively communicate the organization's ethics and compliance program by "conducting effective training programs." Clearly, distributing a Code of Conduct, whether electronically or in hard copy, does not amount to an effective education program.

Once again, given the relative infancy of the FSG requirements, employers can be informed and guided by the historical data and information regarding employment law training requirements. Following landmark decisions by the US Supreme Court in 1998⁶, and specific training guidelines from the EEOC in 1999⁷, there is a mountain of case law showing that distribution and even tracking of policies is not enough to meet a training requirement.

Employers with more than 200 employees should be particularly aware of the formality of the FSG's training requirement. While small employers (<200 employees) may provide training through more informal means ( i.e. staff meetings) as long as the training is effective and comprehensive, larger employers (200 employees or more) must provide more formally planned and implemented training programs.⁸

Does the Quality of Training Really Matter?

Yes!

The FSG's make continual reference to an "effective" training program. The new California training statute uses the same term, "effective."

Most importantly, quality training means that more is accomplished than just "checking the box."

Finally, the introduction of the organization's Code of Conduct is a message of high importance transmitted from the Board of Directors through the CEO. The more powerful the delivery of this message, the better its acceptance and durability.  Without qualification, "quality" matters when the integrity and future of your organization is being presented!

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1. UNITED STATES SENTENCING COMMISSION, AN OVERVIEW OF THE ORGANIZATIONAL GUIDELINES (2004).

2. Id.

3. U.S. SENTENCING GUIDELINES, §8B2.1 cmt. background.

4. http://www.elt-inc.com/2004_national_law_of_training.pdf

5. http://www.elt-inc.com/AB1825_ELT.doc

6. Faragher v City of Boca Raton , 118 S Ct 2275 (1998); Burlington Industries, Inc. v Ellerth, 118 S Ct 2257 (1998).

7. Equal Employment Opportunity Commission, Enforcement Guidance: Vicarious Employer Liability for Unlawful Harassment by Supervisors (6/18/99).

8. U.S. SENTENCING GUIDELINES, § 8B2.1(b) cmt. background.

A Closer Look at Connecticut
Connecticut requires employers with fifty or more employees to provide two hours of harassment training to all supervisory employees within six months of the assumption of a supervisory position.¹ Unlike California law and federal law, this is not an ongoing requirement. However, the regulations implementing the Connecticut law specifically state, "While not required by these regulations, the Connecticut Commission on Human Rights and Opportunities ("CHRO") encourages an employer having fifty (50) or more employees to provide an upgrade of legal interpretations and related developments concerning sexual harassment to supervisory personnel once every three (3) years."² The CHRO officially approved online training as a training solution in 2003.

With respect to Connecticut's law, ELT's programs not only include those items that the Regulations mandate³, but also content that encompasses the seven optional recommendations for harassment training:

1. Taking complaints seriously.
2. Providing exercises.
3. Teaching interpersonal skills.
4. Advising employees of strategies to avoid the negative effects of sexual harassment.
5. Advising as to the benefits of learning about the subject.
6. Presenting and explaining the employer's policy.
7. Discussing perceptual and communication differences.

The Connecticut law further specifies that the training is to be in "clear and understandable language."

Simply referring learners to the text of the Connecticut statute, or to a bulleted summary of the statute's requirements is insufficient for compliance. The substance of the required training content must be effectively integrated into a high-quality, interactive learning experience.

The Danger of Special "State Versions" of Training Programs
Recently, with the attention generated by California's new harassment training statute (AB 1825), some training providers have begun to market different "versions" of their courses for California and Connecticut. Learners in select states are exposed to special screens and features that include content designed to address state requirements. These programs have been quickly developed to capture a market opportunity.

Clearly this "add on" approach is needed if the programs originally created by these providers lack the critical content required by the state statutes and are insufficient in terms of length. The absence in the original programs, however, would suggest potential non compliance with federal law. For example, the Connecticut statute requires harassment training: "[d]iscussing strategies to prevent sexual harassment in the work place."⁴ While this is a clear requirement of training in Connecticut, it is certainly not unique to that state and is a basic component of any effective harassment prevention training program.

Establishing a Consistent, National Training Program
It is strongly recommended that one national version of a training program be used for all fifty states. Increasingly, organizations cross state and national boundaries. Managers stationed in New York may be transferred to California, while others may be relocated to other states. Individual managers in today's digital age can easily be supervising employees in many different states. It is too cumbersome to provide several different versions of the course and track compliance.

Sexual Harassment and other Prohibited Harassment are not concerns isolated within two States. The California and Connecticut requirements are not hyper-technical or "outside the mainstream." In New York, Texas, Florida and other states, it will be hard to explain why a more comprehensive course is used in California and Connecticut.  Moreover, it is only a matter of time before statutes and case law in other states endorse the "substantive" features emphasized in California and Connecticut.

Additionally it should be recognized that legal standards, definitions, and training requirements will continue to change over time. To the greatest extent possible, ELT anticipates these changes and incorporates "state of the art" comprehensive learning into its courses. It also monitors legal changes through its exclusive content provider, Littler Mendelson. When needed, automatic improvements are made to the courses to ensure compliance. This commitment to quality and ongoing review are ELT hallmarks and part of our commitment to be your partner, not merely a vendor.

Samuel Alito was sworn in as an Associate Justice for the US Supreme Court today – the same day he authored his decision for the Third Circuit in Jensen. Jensen expands employer’s potentially liability for “retaliatory harassment.”

In Jensen, a letter carrier with the Kingston, PA branch of the US Post office complained to management that her supervisor was sexually harassing her. The supervisor was fired, and Jensen was moved into the supervisor’s former workstation. That’s when the nasty co-worker behavior began, including threats, obscenities and vandalism. To intensify the intimidation, some employees even drove their U-Carts directly at her, apparently at high speeds, in a show of support for their former boss. (That’s loyalty taken to disturbing extremes.)

Why is the case important?

Noting the consistency between the anti-retaliation and anti-discrimination provisions of Title VII, the Third Circuit held that the kind of retaliatory harassment experienced by Jensen, can by itself, be an “adverse employment action” under Title VII.   Since harassment can be severe or pervasive enough to alter the terms or conditions of employment under the anti-discrimination provision of Title VII, the same must be true under Title VII's anti-retaliation provision.

The Third Circuit joins the First, Second, Fourth, Sixth, Seventh, Ninth and Tenth Circuits in its view that retaliatory harassment can rise to the level of an adverse employment action.  The opposing minority in the Fifth and Eighth Circuits limit the anti-retaliatory provision of Title VII to prevent “ultimate employment decisions,” vs. the type of conduct experienced by the plaintiff in the Jensen case.

At ELT, we’ve found very few managers really understand the concept of retaliation, and how it’s separate and distinct from underlying claims of harassment. It is critical that harassment training programs give strong treatment to the issue of retaliation – both subtle and overt. (Retaliation content is actually required under California’s AB 1825 training mandate.) 

These are complex issues for your supervisors to digest. Putting them into context, through excellent situational training, is the best way to bridge the gap.

Now with Alito on the bench, let’s see what happens with the hotly anticipated retaliation decision expected from the US Supreme Court in Burlington Northern. The court accepted review of Burlington on Dec 5, 2005. It could drastically increase employer liability for retaliation claims. Stay tuned …