Ethics & COC Training FAQs

Yes.

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." ⁽¹⁾

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.

The Federal Sentencing Guidelines ("FSG") 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. ⁽²⁾

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

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⁾

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.

"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 statute, mandated training must occur within six months after a new manager is hired.

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 1998 ⁽⁶⁾, and specific training guidelines from the EEOC in 1999 ⁽⁷⁾, 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 less 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⁾

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." ELT's solution is engaging, exciting and entertaining. While this is done in a totally professional manner, lessons are imbedded within compelling stories that are based on actual events. The learner identifies with the experience and gains an intuitive understanding of the conduct expected by his or her employer. Behavior actually changes!

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. Employees experiencing this course will not only remember the message, but also the experience. They actually look forward to the next opportunity to learn from the increasingly familiar characters of Working People^TM -- the fictional workplace featured in each ELT production. Without qualification, "quality" matters when the integrity and future of your organization is being presented!