The deliberate deception at Volkswagen along with other events such as the insider trading at ImClone Systems and rogue trading at Bearings Bank all demonstrate that employees will break the law in the course of their employment.
The consequences of criminal acts committed by employees can be very significant indeed. In addition to the legal sanctions levied against the employees themselves, business can be lost through loss of reputation, corporations can face fines running into billions of dollars and senior executives can find themselves being prosecuted because the law was broken on their watch. Given that in many cases the courts are finding that the executive leadership of corporations are also criminally liable how can the executive leadership protect themselves and their companies from being held criminally responsible for the activities of their employees?
The employer-employee relationship is undoubtedly complex. Many employees spend more of their waking hours at work than they do with their families and as such the workplace environment can have a significant effect of employees. Most workplace environments and relationships are positive with employees enjoying social events, making friends and even meeting their spouse at work. Unfortunately some are not so good but whatever the nature of the relationship it will have an influence on the employee that will extend outside of the workplace and reach into many parts of their life.
In fact, it is often said the employer-employee relationship is so complex that the second most significant legal transaction that an individual can complete is to accept a job offer, the most complex being getting married. More complex than buying a house and entering into a mortgage, a binding agreement that can last for 25-30 years. So how can it be that an agreement that can be terminated with two weeks’ notice (or even immediately) is almost as significant as a marriage?
Well, the employer will have a significant degree of control over the employee. In addition to determining where they will be and what they will do for a large amount of their time the employer can control or influence who they spend that time with, the opinions they can share, the clothes they wear and even some of their off duty conduct such as how they present themselves on social media. But most importantly, the reason that the employee accepts this level of control from their employer is the employees need to feed, clothe and provide shelter for themselves and often their family also. They are (in most cases) financially dependent on their employer and therefore the employer will have a very significant influence on the employee.
All business are under pressure. The need to be financially viable, to cover the operating costs, to make the payroll and turn a profit are behind every decision. In a today’s fast moving business world corporations need to be innovative, they need to be efficient and they need to stay ahead of their competition. Add this to the raft of regulatory compliance requirements including employment standards (including Human Rights), Occupational Health and Safety (OHS), consumer protection, financial and environmental codes and regulations we can see that business is complicated and it’s challenging. So, given the complicated nature of the employer-employee relationship and the broad range of regulatory obligations placed on corporations, should the executive leadership be held accountable for the conduct of employees, particularly when the number of employees involved can run into the tens or even hundreds of thousands?
The simple answer is yes they should, and for two reasons. The first is that corporations are in business to make money. Whatever their mission, vision or values, ultimately they are there to make a profit for the owner(s) or shareholders. For this reason they can reasonably be expected to conduct themselves ethically and in accordance with all legal obligations and requirements. To do otherwise would simply be wrong. And the second reason is that as a result of the employees financial dependence on the employer, the employee is, in some respects at least, in a position of weakness. In effect, the employer- employee relationship is not one of peers but is one of servant and master.
As previously stated most employer-employee relationships are positive, but they are still not balanced. The employee has a need to provide food, clothing and shelter for themselves and in many cases their family also. As a result they will be motivated to act in their employers best interest. Their success is mutually dependent upon their employer’s success. The business grows, the employee grows. The business stagnates, the employee stagnates. And if the business fails the employee fails. The employee’s need for the business to succeed will be a significant motivator in determining the employees actions and will influence their decisions considerably.
So how does this make the executive leadership accountable for the conduct of their employee? Aren’t the employees as adults with freedom of choice ultimately responsible for their own actions? For the most part, yes they are. Employees can and will be held legally accountable for their actions which in many cases can result in a criminal prosecution. In recent years there have been a number of high profile (and lesser known) prosecutions where employees have been fined or even incarcerated for criminal acts committed in the course of their employment. But the criminal liability doesn’t end there, and for one very important reason.
In addition to being financially dependent upon their employer, all of the employees actions at work will be conducted in an environment and a culture that is created by and is the responsibility of the corporation’s executive leadership and management. That environment and culture will shape every decision that they make to the extent that on occasion they will act in manner that may be contrary to their own values.
In the course of their employment the employee will be required to perform a number of task throughout the day. That’s life, that’s what they’re there for and it’s a perfectly reasonable expectation for the employer to have. But what happens when the employee cannot complete those tasks despite their best efforts? The likelihood is that they will cut corners, bend rules and even break rules, which could include laws, to get the job done because they are motivated to do so as a result of the need to see the business succeed. At one end of the spectrum this could mean minor infractions. Perhaps they will not follow all of the safety rules, they run in the workshop, they don’t put their safety glasses on or they don’t put their seat belt on between deliveries. No harm, no foul, right? Well, no, that’s never the case, but more importantly at the other end of the spectrum we can and do find employees breaking laws relating to matters as serious as insider trader and large scale regulatory non compliance as a result of needing to see the business succeed and to achieve the objectives required as part of their employment.
So how can the executive leadership protect themselves from being held criminally liable for the ac tions of their employees? This certainly isn’t easy given the number of employees involved, all of whom are free thinking adults with the ability to make their own decisions, but it is simple with just a few simple steps. The first is to never overtly ask an employee to commit an illegal act. It’s that simple. The second is to make it clear that no illegal activity will be tolerated by employees in the course of their employment. And to do this all the employer has to do to do this is to clearly and overtly state in their corporate values that they will conduct all of their business operations in accordance with all legal and regulatory obligations and requirements for all jurisdictions within which they conduct business. By making the statement clearly and overtly no one can hide from the requirement of the statement whatever level that they are at in the company. It’s that simple. The third is to make it acceptable for an employee to say ‘I can’t do that,’ to their supervisor or manager when they are faced with the requirement to do something that they cannot do whilst complying with all necessary legal and regulatory requirements. Whether the task at hand would require the employee to cut a corner by failing to wear their personal protective equipment or to deceive a regulatory body the corporate culture must be such that the employee is able to say ‘I can’t do that,’ without fear or recrimination and the supervisors, managers and executive leaders must accept that and be able pass the message up the chain in the same light because if the business goal cannot be achieved within the law, it is not worth achieving. It’s that simple.