Client Bulletin #566
The U.S. Department of Justice has recently issued a memorandum entitled “Individual Accountability for Corporate Wrongdoing.” According to the Memorandum, companies involved in federal criminal and civil investigations will have a much-reduced ability to protect individuals in the company:
*In order to qualify for any
cooperation credit, corporations must provide to the [DOJ] all relevant facts
relating to the individuals responsible for the misconduct.
From an employee-relations standpoint, the DOJ’s new approach could have significant implications. Here are a few matters for consideration.
More “protected activity” on the part of employees. As the employee population becomes increasingly aware of these new DOJ guidelines, we may see an increase in the number of employees who refuse to carry out corporate directives that they believe may be wrong. In the case of a company that promotes actual wrongdoing, that’s great. However, employees may become increasingly concerned about taking actions that fall into gray areas, or that involve the exercise of judgment and managerial discretion. An increased incidence of protected activity also means an increased risk for retaliation claims. Employers will need to be sensitive about dealing with employees who say they are “uncomfortable” carrying out certain employer directives. It may be unwise to jump to the conclusion that the employee is being insubordinate, “not a team player,” or “not sufficiently aligned with corporate objectives.”
More whistleblowing activity on the part of employees. Employees who believe that their directives could result in criminal or civil liability for themselves as individuals are likely to go on the offensive by “blowing the whistle,” either to a trustworthy individual in the organization, to a government agency, or even to the media. Again, the “whistleblowing” may not be about corporate activity that is actually illegal. However, many retaliation laws protect an employee who has a mistaken but reasonable, good-faith belief that unlawful activity has occurred. And, arguably, the DOJ Memorandum provides employees with a stronger basis to claim that the “reasonable, good-faith belief” principle applies.
Discrimination or retaliation claims based on who gets “thrown under the bus” and who doesn’t. If an employer that is the subject of a DOJ investigation protects some, but not other, employees, is it opening itself to claims of discrimination or retaliation? It’s a possibility, and employers under investigation will need to be sure that they use objective, fact-based criteria for determining whom they will stand behind.
Need for employers to more closely monitor the manner in which employees are performing their job duties. Most medium and large employers – even if they aren’t publicly traded – have codes of conduct or ethics, and train employees on appropriate and inappropriate practices. One implication of the DOJ Memorandum is that employers may need to go beyond this and make sure that employees are performing their jobs in accordance with the code of conduct on a day-to-day basis. This will require thorough “ethics” training for employees and front-line supervisors.
Need for employers to carefully review their “garden-variety” employment policies to ensure that they don’t inadvertently encourage employees to cut corners. Employers should review their policies, including policies on overtime and safety, to make sure that they aren’t setting employees up to fail or cheat. An employee who has to get 60 hours of work done in a 40-hour workweek will either be fired for lack of productivity, quit in frustration, or cheat and thrive. An employee who has one hour to make a delivery 100 miles away is likely to violate traffic laws (as well as other laws, such as those that prohibit texting while driving), endangering the employee’s own safety as well as the safety of the public. Obviously, this type of policy review – whether employees can meet the expectations of the job without cheating, or violating the law – needs to involve front-line supervisors, who are much more likely than upper management to know what realistically can and cannot be done.
Divided we fall. When multiple individuals are defendants in a lawsuit or subjects of an investigation, usually the best defense approach is to stick together and avoid blaming each other. No doubt the DOJ understands this general principle, too, and is seeking through its new guidelines to undercut the “united we stand” approach to defense. If a corporate target can’t avoid providing “all relevant facts relating to the individual responsible for the misconduct” and can’t even settle or plea bargain in a way that protects individual employees, and if employees can’t be released from liability even if they have limited or no ability to pay, then the result is sure to result in more finger-pointing and blame-gaming. And, frequently, the result of a divided defense is liability or conviction for all.
Please let us know if we can assist your company with any of these issues.
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