UNDER THE BUS: Feds’ new focus on individual wrongdoers has implications for employers

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:

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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