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

I came across an interesting article in last month’s National Law Journal that highlights the growing trend of individual manager liability for employment litigation. (Employment Litigation Gets Personal for Company Managers: More executives sued personally for workplace actions).  It’s a reminder of why comprehensive ethics and legal compliance training should reach everyone in the organization – even the execs who presumably “know all the rules.”

Individual managers have been named in lawsuits for years. The risk of personal liability is extremely stressful and can put enormous pressure on an employer to settle even the most frivolous lawsuits. But what’s new is the rate and frequency that managers are being named as parties to lawsuits, and who’s being named as a party. Plaintiffs aren’t just targeting frontline managers who have extensive employee contact – they’re reaching to the top of the house and targeting high profile executives.  The hottest new trend for personal exec liability? Wage and hour violations, which can easily run into the millions of dollars.

Too many organizations excuse their most senior levels of management when it comes to ethics and compliance training programs.  Unfortunately, this is where the stakes can be the highest, bad practices can be the most deeply ingrained, and many transgressors have a sense of righteous impunity.  The Federal Sentencing Guidelines are crystal clear about the breadth of your ethics training obligations – they run from the lowest to the highest levels of the workforce, and periodic refresher training is expected.  Skipping over senior execs leaves both the organization, and individuals, dangerously exposed.

Will you get some pushback from top management when they discover they need to take the same training as everyone else?  Yes. Will managing that pushback be a walk in the park compared to explaining why key leaders were excused from ethics and compliance training in the event of litigation or regulatory review?  You bet.  The busy schedules of your execs, and their supposed mastery of the rules, will fall on deaf ears when questions about your ethics and compliance training programs matter most.

In today’s world of high stakes employment litigation, it’s so important that you educate all employees about the basics of your Code of Ethics as well as key workplace laws. Clearly wage and hour liability is a new topic to add to the mix, along with basic ethics, harassment and discrimination training.

We’d like to think that childish, boorish and demeaning antics only happen at “those other” companies; the ones with different values, cultures, and an unchecked workforce. But the reality is that every organization has the potential not just for isolated instances of egregious misconduct, but also for more widespread, systemic conduct – the kind of misconduct that creates significant legal risk and can destroy the culture and reputation you’ve worked so hard to build.

Case in point: EMC.  Today’s Wall Street Journal piece on the data storage giant is a doozy: A Data-Storage Titan Confronts Bias Claims.

Seventeen former saleswomen filed suit against EMC back in 2004 and they’re now seeking class action status. The plaintiffs are claiming discrimination and harassment – and the allegations are pretty old school, not to mention, a PR disaster – locker room antics, company paid visits to strip clubs, demeaning sexual remarks, and retaliation against women who complained about the hostile atmosphere.

EMC denies the allegations and is fighting the class certification, as well as the lawsuit.

Why Compliance Professionals Should Take Note

Whether or not these claims turn out to be valid doesn’t really matter. A full-length, feature story in a national newspaper connecting this type of behavior to EMC’s corporate culture is a stinging blow. 

More importantly, this situation sends a wake-up call to organizations across the country. Harassment training, including sexual harassment training, remains an absolute must for today’s workers. Men and women still view and perceive sexual harassment differently.  (Men and Women View Sexual Harassment Differently: The Power Divide). And trust me, if you don’t tell employees what you expect of them, you can be certain that “issues” like the ones faced by EMC will continue to surface.

And don’t make the mistake of leaving senior leaders off the training list. Education needs to happen at all levels of the organization. (Don’t Forget Your Senior Execs – They Need Compliance Training Too).  And senior execs need to do more than talk-the-talk, they need to live the values.  Organizational change needs to happen quickly when it comes to harassment.  At EMC, it seems as though denying expenses for strip clubs and a slap on the hand really wasn’t enough to change the tide.

And finally, organizations have to start thinking strategically and proactively about managing class action risks. Plaintiff attorneys are looking for bigger cases and bigger dollar returns. EMC is battling a high profile potential discrimination class action, but a more daunting risk facing today’s employers is wage and hour class actions.

Wage and hour claims have been increasing at an astonishing rate (up 86% between 2004 and 2006). And wage and hour class actions now outnumber all other federal discrimination class actions combined.  Not surprisingly, wage and hour education is the next tidal wave of mandatory employee training.  Not only does training prevent wage and hour violations from occurring by educating employees and mangers about the basic rules of the road, but employers can also establish a valuable affirmative defense to crippling damage awards by conducting effective and periodic wage and hour training.

Nothing is “Obvious”

I’ve been in this industry for more than a decade now. People often ask my opinion about whether compliance training will reach a saturation point where employees have learned all that they need to know. A compliance nirvana of sorts. (I mean isn’t this stuff “obvious” after all?)

While organizations are embracing more robust and effective compliance programs, we’ve clearly not reached the promised land.  With laws continuing to change and evolve, and the workforce continuing to diversify and turn over, compliance training is here to stay. It’s not just a good idea from an educational perspective – courts and regulators expect to see it.  (Click here for a snapshot of the key legal drivers behind mandatory compliance training.)

Even EMC claims to have had robust preventative training programs.  Will be interesting to see how those play into this lawsuit. 

Stay tuned …

With increasing knowledge of the Federal Sentencing Guidelines Requirements, Ethics and “Code of Conduct” training is becoming more and more popular.  The topics that employers choose to emphasize in ethics training tends to be driven by two factors: (1) prevalent areas of risk for that particular organization / industry, and (2) whatever’s making the news.

The first driver makes sense.  For example, if your company has substantial international operations, basic education on the Foreign Corrupt Practices Act (FCPA) is likely important.  An organization with a significant sales operation tends to care about anti-trust.  Most publicly traded companies want a baseline established when it comes to insider trading rules.

The second driver is a little more tricky.  The ethical meltdowns that hit newspaper headlines aren’t necessarily highly relevant to every employer.  For example, while some companies are concerned about pretexting given the HP investigation scandal from 2006, when you consider a typical employer’s compliance and risk profile, pretexting just isn’t a “top ten” issue.  (For those of you who need a quick primer, pretexting involves misrepresenting your identity to gain access to privileged information – like financial records, or telephone records.)

The reality is, most employers can dedicate about 30 to 60 minutes once a year, or once every two years, to mandatory ethics training – so allocating precious minutes to non-critical topics is obviously not ideal.  A focus on what’s newsworthy can cause employers to ignore their most prevalent and “mundane” areas of risk.

Which brings me to the topic of employee fraud and theft.

Employers frequently develop a false sense of comfort about their employees by relying on pre-hire background checks, or internal controls that look good on paper.  They think employee theft and fraud won’t happen in their workplace, or that misconduct will be spotted before it becomes a real problem.

But the reality is that employee theft happens far more often than you’d think – and it happens at all levels within an organization, including the very top.  Employees can and do steal all types of things everything – money, equipment, tools, office supplies, and business gifts. If it has value, it’s a potential target.  The statistics are shocking, but it’s estimated that American businesses lose more than $50 Billion each year due to employee theft, and that employee theft is responsible for 33% of all business bankruptcies (!).

Ok – so that’s a pervasive problem that’s worth addressing in ethics training, regardless of your size or industry.

Another soft spot?  Overlooking your senior executives and top managers. They can be some of the absolute worst offenders. A recent KPMG survey (Profiles of a Fraudster Survey 2007) drew some interesting conclusions about top executives who steal, and the impact that their conduct has on the organization.  In 73% of the cases, greed and opportunity are the prime motivators. (See Institute For Corporate Productivity: Et tu, Brute? When Top Executives Go Bad). In 55% of the cases studied by KPMG, there was no prior suspicion.

While you’re not likely to rehabilitate an employee who’s inclined to steal, you can impact his or her opportunity to engage in misconduct. And you should be looking to your employees to become your allies in this fight.  Let them be the eyes and ears of the organization.

And that’s where education about employee theft and fraud is so important.  Your ethics and Code of Conduct training should cover the basics, including:

• The rules against theft, no matter how small the asset
• The early warning signs of employee misconduct (isolation, refusal to provide information to management, a sudden change in spending habits).
• The expectation that employees report their concerns. 
• The reporting process. (In its study, KPMG emphasized the importance of educating employees about whistleblower hotlines. An anonymous tip by a whistleblower was the primary source of fraud detection in 25% of cases investigated by KPMG. Other sources of fraud detection were management reviews (21%), external controls (10%), internal controls (10%), suspicious superior (9%), complaints by customers (9%) and accidental discovery (8%).)

The KMPG study also confirmed that a corporate culture that promotes ethical behavior at all levels is critical in preventing executive fraud.  Employers need to clearly communnicate business ethics and encourage workers to question unethical or illegal orders – no matter who they're coming from.

At the end of the day, it's about a vigilant culture of compliance – and mandatory employee ethics training is central to that effort.