Ethics for Human Resources Professionals

1. Ethics for Human Resources Professionals UCLA Extension 859.50 Management 1.2 CEU Winter Quarter Saturday, March 8 and 15, 2014 Reg# Z6749CA

2. Instructor . . . Paul Falcone www.PaulFalconeHR.com Paul@PaulFalconeHR.com (310) 691-3838

3. Course Overview: Day 1  9 – 10:30 AM  Introduction to business ethics in the workplace: employment history and ethics theory, the Sarbanes Oxley Act, and corporate governance standards 10:45 – Noon  Employment laws, company policies, codes of conduct, and past practices: guidelines for ethical business decision-making Noon – 1:00     Lunch 1:00 – 2:30  Guest Speaker: Richard Falcone, Esq. Managing Partner, Littler Mendelson—Employer liability and employment defense for “managerial bad acts” 2:45 – 4:00  Guest Speaker: Simon Manoucherian, Esq. AGC, Grifols BioScience. Ethics in practice: discrimination, retaliation, and employee privacy concerns

4. Course Overview: Day 2 9 – 10:30 AM  Workplace audits and self-regulation; egregious misconduct and summary offenses 10:45 – Noon  Effective internal investigations and “You Make the Call” game of real-life scenarios Noon – 1:00     Lunch 1:00 – 2:30  Ethical considerations in international companies, cultural differences, and outsourcing and off-shoring considerations 2:45 – 4:00  Guest Speaker: Gerald Alcantar, Adjunct Professor, LMU. Affirmative action plans and diversity & inclusion initiatives

5. Class Introductions • Self-Intros & “Elevator Pitches” • Please share your business card (or create one now) to share with Paul • Remember, you’re all on an interview today! 

6. A Real-Life Conundrum . . . • What is Workplace Ethics all about? • What types of questionable scenarios have you seen yourself in the workplace or at school? • What is the value of this course, and why is it mandatory as part of UCLA Extension’s professional designation in human resource management?

7. Part I Our History, our Laws, and our Evolving Workplace

8. Ethics: A Definition • Ethics can be defined as a code of moral standards by which people judge the actions and behaviors of themselves and others. • Business Ethics is the “application of a moral code of conduct to the strategic and operational management of a business” – www.applied-corporate-governance.com.

9. Legal vs. Ethical • Legal standard = compliance / avoidance of wrongdoing that could run afoul of the law • Ethical standard = building a moral corporate culture that has integrity

10. Ethics Programs Workplace ethics programs generally fall into one of three categories: • Codes and compliance programs (e.g., SOX, ISO) focus on preventing unwanted behavior • Corporate identity and values programs focus on what a company stands for and the good qualities the company wants its employees to exhibit • Social outreach programs = +corporate social responsibility”

11. Legal Standards & Guidelines • “Legal requirement” vs. “moral imperative” • Can you demonstrate that your company had a legitimate, non-discriminatory, non-retaliatory reason for the actions that it took? • Can you demonstrate business necessity (AKA a compelling business reason) and job-relatedness? • Standard: Did the employer have a good faith belief?

12. Legal Guidelines (cont.) • State laws have “concurrent authority” with federal laws – whichever law is broader in terms of worker protections prevails • “Fair treatment” vs. “preferential treatment” • “Acting outside the course and scope of your employment” • “Affirmative obligation to disclose”

13. Legal Guidelines (cont.) • Disparate Treatment: intentional discrimination • Disparate (Adverse) Impact: a policy, neutral on its face and even-handedly applied, nevertheless has a disproportionate adverse effect on a protected group

14. A Brief History of Ethics The study of ethics involves two basic questions: • What is the right thing to do? • Why should you do the right thing?

15. Ethics History (cont.) Ethicists have come up with three main approaches to how people should conduct their lives: • Develop character traits that allow you to live a good and ethical life • Focus on your duties to yourself, others, and society in general • Look to the consequences of your actions and how those consequences affect you and others

16. Ethics History (cont.) • Meta-ethics attempts to describe the nature of good and bad and right and wrong • Descriptive ethics (AKA comparative ethics) study what different people believe is right and good • Normative ethics focus on what people should do to live a moral life • Virtue ethics focus on character education, which is the act of training people to develop virtuous habits like truthfulness, fairness, and integrity

17. Ethics History (cont.) • Aristotelian values include: generosity, temperance, modesty, and greatness of soul. Virtues are states of character, but they only become true character through constant exercise. • Immanuel Kant’s “categorical imperative” follows one overarching commandment from which all duties and obligations are derived. Kant’s “moral universalism” posits that some actions are always right or wrong.

18. Ethics History (cont.) • Thomas Hobbes’ 17th century “social contract theory” states the individuals and groups willingly trade some of their freedoms in exchange for a government or society that can protect their individual and collective interests • Natural rights theorists accept John Locke’s contention that all citizens have a natural right to life, liberty, and the acquisition of property

19. Ethics History (cont.) • Consequential ethics state that people should act in ways that result in the best consequences. Acts themselves aren’t good or bad; they’re only deemed good or bad by what happens because of them. Does the end justify the means? • Hedonism states the pleasure is the only thing that’s inherently good. • Utilitarianism is commonly defined as the greatest good for the greatest number.

20. Ethics History (cont.) • Situational ethics, developed by Episcopal priest Joseph Fletcher in the the 1960s, emphasizes the overriding importance of agape, or absolute, unchanging, and unconditional love for all people . . . • Situational ethics come into play only when the circumstances are so extreme that following conventional moral principles would lead to a bad outcome (i.e., the morality of any action is always determined by the circumstances).

21. A Short Overview of U.S. Employment Law • The “Job as Property Doctrine” – the right to work is fundamental to American citizens that it shouldn’t be taken away without workplace due process as accorded under the 14th Amendment to the Constitution • Standard: “Termination for Just Cause Only” • “Workplace due process” typically comes in the form of progressive discipline (i.e., documented corrective action)

22. Progressive Discipline Before any worker loses his job, he has the right to : • Know the nature of the problem • Know what he needs to do in order to fix the problem (i.e., company expectations) • Be given a reasonable amount of time in which to fix the problem • Understand the consequences of inaction

23. 1930’s Employment-at-Will • The Great Depression threatened the very existence of capitalism, and Congress passed a series of laws that were intended to keep companies in business at all costs • The worker’s right to due process was replaced by the employer’s right to terminate at whim • From the 1930s to the 1970s, the United States witnessed its greatest growth in unionization as a result

24. Benefits of Joining a Union • #2 Reason: The right to collectively bargain for wages and benefits and enjoy greater job security • #1 Reason: “If you join our union and pay your union dues, we won’t let companies terminate you at whim. Our collective bargaining agreement will guarantee that you’re accorded workplace due process in the form of progressive discipline, and you’ll gain control of your future back.”

25. A California Court in 1980 Tameny vs. Arco Oil (June 2, 1980) • 15-year employee was fired for refusing to engage in unlawful activities (“price fixing”) on employer’s behalf • CA Supreme Court Justice Rose Byrd ruled, “We won’t countenance firing a long-term employee, even it at will, for reasons that violate public policy.” • The public policy exception was born. • Tort law became part of legal landscape in CA.

26. Limitations on Employment at Will Exceptions to employment-at-will include . . . • Employment contracts (including collective bargaining agreements) • Statutory considerations (protected classes) • Public policy exceptions (WC, whistle blowing, and engaging in concerted activities) • Implied contract exceptions / implied covenants of good faith & fair dealing (handbooks, vesting)

27. EAW vs. Discharge for Just Cause Only • Defense Attorney’s strategy = “Employment-at-Will Affirmative Defense” used at the hearing stage • Plaintiff Attorney’s strategy = “Discharge for Just Cause Only” standard used at the trial stage

28. Hearings vs. Trials Lesson: It’s not one or the other, it’s both – Without a crystal ball, you can’t know now what kind of spin a plaintiff attorney will place on a case six months from now and how a judge will lean. Therefore, since you can’t know in advance if you’ll win a summary judgment at the hearing stage (using the EAW affirmative defense), you must always be prepared to show that you have just cause at the trial stage (via progressive discipline)!

29. 1930’s • 1935 – The Wagner Act (known as the National Labor Relations Act - NLRA) – guarantees basic rights of private sector employees to unionize, bargain, and strike • 1938 – Fair Labor Standards Act (FLSA) – banned oppressive child labor (under age 14), set minimum wage (25 cents), required employers to pay overtime and set maximum workweek to 44 hours

30. 1940’s and 1950’s • 1947 – Taft Hartley Act – protects employers from unfair labor practices (i.e., unions refusing to bargain with employers in good faith) • 1959 - Labor Management Reporting and Disclosure Act (Landrum-Griffin Act) – provides employers the right to sue unions

31. 1960’s • 1965 - Executive Order 11246 – prohibits federal contractors from discriminating in employment decisions based on race, color, religion, sex, or national origin; federal contractors must develop an Affirmative Action Plan (AAP) • 1967 - Age Discrimination in Employment Act (ADEA) – prohibits discrimination based on age (40 years or older) and protects employees from a hostile work environment based on age • 1968 - Fair Credit Reporting Act (FCRA) - protects individuals by regulating the way businesses gather and use credit information about them

32. 1960’s (cont.) • 1963 - Equal Pay Act (EPA) - protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination • 1964 - Civil Rights Act-Title VII - prohibits employment discrimination on the basis of sex, race, color, religion, or national origin (includes recruitment, hiring, wages, assignment, promotions, benefits, discipline, discharge, and layoffs)

33. 1970’s • 1970 – Occupational Safety & Health Act (OSHA) - governs occupational health and safety; ensures that employers provide employees with an environment free from recognized hazards • 1972 - Vietnam Era Veteran’s Readjustment Assistance Act (VEVRA) - provides equal opportunity and affirmative action for Vietnam era veterans, special disabled veterans, and veterans who served on active duty during a war (applies to employers with Federal contracts or subcontracts of $25,000 or more). • 1973 - Rehabilitation Act - prohibits discrimination on the basis of disability in programs conducted by Federal agencies, contractors and/or programs

34. 1970’s (cont.) • 1974 - Employee Retirement Income Security Act (ERISA) - protects the interests of employee benefit plan participants by setting minimum standards for pension plans in private industry and rules on the tax effects associated with employee benefit plans • 1978 - Uniformed Guidelines on Employment Selection Procedures - provides standards for use of employment testing; employers must demonstrate a selection process is valid in predicting performance, and selection process cannot create adverse impact • Pregnancy Discrimination Act (PDA) – prohibits discrimination based on pregnancy; treat pregnancy as any other temporary disability

35. 1980’s • 1989 – Whistleblower Act – protects federal whistleblowers who work for the government and report agency misconduct; agency cannot retaliate against an individual who reports misconduct • 1986 – Immigration and Reform Act (IRCA) – prohibits discrimination based on national origin or citizenship of applicants; companies may be penalized for hiring illegal aliens • 1986 - Health Insurance Portability and Accountability Act (HIPAA) – protects an individual’s personal health information (amended in 1996 - improves portability and continuity of health insurance coverage) • 1985 - Consolidated Omnibus Budget Reconciliation Act (COBRA) - provides workers who lose health benefits to continue group health benefits (temporarily) in certain circumstances

36. 1990’s • 1994 – Uniformed Services Employment and Reemployment Act (USERRA) – provides job rightsof individuals who leave employment to serve in the uniformed services and prohibits employers from discriminating against past and present members of the uniformed service (and applicants to the uniformed services) • 1993 – Family Medical Leave Act (FMLA) – provides job protection and unpaid leave for certain circumstances • 1991 – Civil Rights Act – provides the right to trial by jury on discrimination claims and introduced the possibility of emotional distress damages (i.e., punitive damages), while limiting the amount that a jury could award • 1990 - Americans with Disabilities Act (ADA) – prohibits discrimination based on disability in employment decisions

37. 2000’s • 2008 - Genetic Information Nondiscrimination Act (GINA) - prohibits the use of genetic information in health insurance and employment decisions • 2002 – Sarbanes Oxley (SOX) - ensures the reliability of publicly reported financial information, company noncompliance may result in negative consequences and contains protection for corporate whistleblowers

38. Protected Characteristics • Federal Law (Title VII) = 5 Race, color, religion, sex, and national origin • State Law = 17 Five from Title VII + ancestry, physical disability, mental disability, medical condition, marital status, pregnancy, age, sexual orientation, gender identify, gender expression, genetic information, and military & veteran status

39. Part II The Sarbanes-Oxley Act of 2002 (SOX) • The Code of Business Conduct / Code of Ethics / Code of Conduct • Conflicts of Interest • SOX Controls and Compliance

40. Corporate Governance • Arthur Anderson’s conflict of interest prior to its fall: Accounting and Auditing services offered to the same clients (Enron) • Should the offices of Chairman of the Board (COB) and CEO be held jointly by the same person? COB = board of directors activities CEO = operational activities

41. Corp Governance (cont.) • Pros: A combined Chairman/CEO acts as abridge between the board and the operating company and can provide critical leadership for strategic initiatives. •  A principal role of the Chairman is to propose the general agenda for board meetings from among the many issues facing a company on a day-to-day basis. As a result, a CEO may be in the best position to develop this agenda in the most efficient and effective manner. • Cons:The board must maintain independent oversight of management. Joining the roles of COB and CEO could consequently impact board independence.

42. Corp Governance (cont.) Key Board Committees • Audit Committee • Social Responsibility Committee • Nominating and Personnel Committee • Shareholder Advisory Committee Note: “Trustees” must be independent of the company’s management

43. “Defective Certification” • Criminal prosecution for CEO and CFO of publicly traded companies • Penalties include: $1 MM, up to 5 years in prison $5 MM, up to 20 years in prison (if willful) Lesson: SOX, AKA SARBOX, has teeth!!!

44. Part III Video: Avoiding Litigation Landmines • The “ethics” of the plaintiff bar and “professional plaintiff” employees • Typical plaintiff attorney strategies and tactics to win a case, even if only a “nuisance claim” • Practical remedies for employers

45. Part IV: Internal Investigation Strategies • Rule 1: It’s all about the record • Rule 2: Practice trumps policy • Rule 3: Always the Get the Accused Worker’s Side of the Story Before Making a Final Decision

46. Investigations (cont.) • Rule 4: When the issue drives the outcome • Rule 5: The importance of timeliness • Rule 6: Removing employees from the workplace: a necessary consideration in the investigation process

47. Investigations (cont.) • Rule 7: Sameness vs. Consistency • Rule 8: Performance vs. Conduct • Rule 9: Beware the Dreaded “Preemptive Strike”

48. Investigations (cont.) • Rule 10: Vet the record before recommending termination • For a list of key record review items, visit www.PaulFalconeHR.com and look at the Blog page under: “Ten Practical and Street-Smart Rules for Conducting Internal Workplace Investigations”

49. Part V: Real Life Scenarios You Make the Call . . . Scenario 1: “Hey boss, can I talk to you for a few minutes off the record?”

50. Scenarios (cont.) • Scenario 2: Two employees (peers) begin dating in the workplace. Do they have an obligation to disclose their new relationship? • Scenario 3: Two employees (manager - subordinate) begin dating in the workplace. Do they have an obligation to disclose their new relationship?