New Headaches for 2005? Corporate Codes of Conduct and Legal Liability
One result of the relatively new Sarbanes-Oxley Act is that many companies are implementing “codes of conduct” to be in compliance. Other companies are instituting similar policies, even though they may not be legally required.
In this posting by HR Hero, a discussion is provided regarding such Codes of Conduct and what they mean for companies.
According to the posting,
these codes of conduct, though often required, open the company to additional legal liabilities. For example, under the Sarbanes-Oxley Act, employees may seek protection by filing a claim with the U.S. Department of Labor (DOL) within 90 days of the alleged violation.
For companies not covered by the Sarbanes-Oxley Act, a code of conduct may:
support claims based on existing legal theories like breach of contract, retaliatory discharge for doing something the law encourages, or promissory estoppel (which means the employee relied on promises of protection in the code of conduct).
In any event, the implications of a Code of Conduct must be carefully considered!
Go here for more details.
Sure, it should be considered seriously. But I have a hard time seeing the cons outweighing the pros.
The possibility of new whistleblower claims (or perhaps more accurately, new support for existing whistleblower causes of action) is outweighed by the benefits of showing corporate good faith efforts at legal compliance. This sentence in the HR Hero piece is key:
“[F]ederal sentencing guidelines require the U.S. Department of Justice to look for a code of conduct that includes a nonretaliation promise when evaluating efforts by corporations to either avoid a criminal indictment or seek leniency in sentencing in a federal criminal proceeding.”
Why wouldn’t you want something that would help this way if the feds were after your company for criminal sanctions?
Compliance with employment laws and harassment reporting procedures can — and probably should — both be integrated into a code of conduct.
As with federal criminal proceedings, in employment discrimination actions the code of conduct can be your friend, helping defeat punitive damages and establish the Faragher affirmative defense to harassment liability. It can also help with tort claims based on employment conduct, by helping establish that the alleged misconduct was clearly outside the scope of employment.