Ethical and Legal Issues

EMPLOYEE PRIVACY AND ETHICAL ISSUES

In an 1890 Harvard Law Review article, former U.S. Supreme Court Justice Louis Brandeis defined privacy  as the “right to be left alone.” 87  It is the interest employees have in controlling the use of their personal information and in being able to engage in behavior free from regulation or surveillance. 88  Attention centers on three main issues: the kind of information collected and retained about individuals, how that information is used, and the extent to which it can be disclosed to others. These issues often lead to  ethical dilemmas  for managers, that is, situations that have the potential to result in a breach of acceptable behavior.

Organizations have the right to monitor the use of their computers by employees.

But what is acceptable behavior? The difficulty lies in maintaining a proper balance between the common good and personal freedom, between the legitimate business needs of an organization and a worker's feelings of dignity and worth. 89  Although we cannot prescribe the content of ethical behavior across all conceivable situations, we can prescribe processes that may lead to an acceptable (and temporary) consensus among interested parties regarding an ethical course of action. In the remainder of this chapter, we will examine several areas that pose potential ethical dilemmas for employers and privacy concerns for employees or job applicants. Let us begin by considering fair-information-practice policies.

Fair Information Practices in the Internet Age

Let's begin by discussing individual privacy outside of work settings. Every time you use the Web, companies can learn about you; thus 80 percent of major sites tracked user behavior in 2009, versus 40 percent in 2005. Many of them skirt privacy rules by sharing data with sister firms so that they can target ads to your demographic characteristics and interests. Chances are you are also revealing more than you know on social-media sites. Fully 73 percent of social-media profiles can be found through a public search engine, and 77 percent of social-network users do not restrict access to their photo albums. The risk? Losing out on jobs, among others. As of 2011, 58 percent of employers use social-networking sites to research job candidates, and 33 percent of those have found information that caused them not to hire a candidate. 90

European regulators have established privacy guidelines for social-networking sites. Here are four key ones:91

· ▪ Sites should offer privacy-friendly default settings.

· ▪ Users should be advised that pictures should only be uploaded with the individual's consent.

· ▪ Sites must set maximum periods to retain data on inactive users. Abandoned accounts must be deleted.

· ▪ Users should be allowed to adopt a pseudonym.

In 2011 Facebook seized the initiative and rolled out new controls for sharing personal information, giving its more than 800 million users new tools to manage who can see information about them. It moved a number of privacy controls—which previously required navigating to a separate settings page—to users’ home pages and profile pages, next to where they view and post content. The result? Facebook is now competing on privacy. 92

On a company's intranet in the workplace, it is important to emphasize that, as a general matter, no absolute privacy exists, even for bosses. 93  They may view employees on video monitors; tap their phones, e-mail, and network communications; and rummage through their computer files with or without employee knowledge or consent, 24 hours a day. In some cases, however, courts are finding that unless employers explicitly tell employees that they will monitor e-mail, they do not have the legal right to do it—even if the e-mail in question was a personal one using a work account, rather than a personal address. 94

What about instant messaging (IM), the immensely popular computer programs that let users exchange short text messages with online buddies in real time? Companies can pull up message logs stored locally on employees’ computers, search logs stored remotely on a corporate or Web-hosted server, and even establish policies to block IMs containing certain words from being sent at all. 95

Among major U.S. companies, about 78 percent do some form of electronic monitoring of employees. Some 74 percent monitor Internet connections, 72 percent e-mail, 31 percent IMs, and 40 percent phone conversations. 96

Why do employers monitor their employees? They are mostly worried about two things: their legal liability for employee abuse of company information systems and employees’ productivity. 97 Companies monitor e-mail and Internet activity to minimize their exposure to defamation, trade-secret, and breach-of-contract lawsuits. They also worry about copyright-infringement suits based on material employees download, including pictures, music files, and software. Their biggest concern, however, has to do with sexually explicit, racist, or other potentially offensive material that could lead to charges of a hostile work environment, as defined by harassment and discrimination laws. As an employee, how do you stay out of trouble? Consider adhering to the following practices in your personal conduct at work:

· ▪ Know your company's written policy. Ask your boss what constitutes “unreasonable” or “inappropriate” use.

· ▪ If you have any doubt about what personal Internet use your company allows, total abstinence is the best bet.

· ▪ Use your own e-mail account instead of your company's for personal correspondence at work.

· ▪ Limit personal surfing and e-mail to times clearly outside office hours.

· ▪ When composing e-mail or downloading Internet information, ask yourself if you would be willing to post it on your office door. If the answer is no, then don't proceed further.

· ▪ Remember this: When it comes to privacy in the workplace, it's best to assume that you don't have any. 98

Safeguards to protect personal privacy are more important than ever. What should managers do? To establish a fair-information-practice policy, here are some general recommendations:

· 1. Set up guidelines and policies to protect information in the organization: types of data to be sought, methods of obtaining the data, retention and dissemination of information, employee or third-party access to information, release of information about former employees, and mishandling of information.

· 2. If you store, develop, or process data on a vendor's server running on the Internet, or “in the cloud,” it is critical to perform due diligence to minimize the risks of compromised data, and to ensure that the service provider can meet regulatory requirements. 99

· 3. Inform employees of these information-handling policies.

· 4. Become thoroughly familiar with state and federal laws regarding privacy.

· 5. Establish a policy that states specifically that employees and prospective employees cannot waive their rights to privacy.

ETHICAL DILEMMA When a Soon-to-Be-Laid-Off Employee Asks for Advice *

You are a manager of a division targeted for layoffs. You've seen the list of employees to be cut, but you've been asked to keep the information secret for two weeks. An employee on the list asks you whether he should be putting a down payment on his first home.

If you don't tell him, then he could be heading into a financial nightmare. If you do tell, you obviously break confidence with your company.

Word may spread, panicking enough employees that you end up with a stampede to the exit door. The problem deepens if yours is a public company implementing layoffs because of a pending merger or acquisition that has yet to be announced. If the employee you tell acts on the information or passes it on to others who do, you might incur legal problems because of violated securities regulations. What would you do?

*

Source: Seglin, J. (2001, July 23). When an employee about to be axed asks for advice …Fortune, p. 268.

· 6. Establish a policy that any manager or nonmanager who violates these privacy principles will be subject to discipline or termination.

· 7. Allow employees to authorize disclosure of personal information and to maintain personal information within the organization. 100  Research has shown that an individual's perceived control over the uses of information after its disclosure is the single most important variable affecting perceptions of invasion of privacy. 101

Next, managers should articulate, communicate, and carry out fair-information-practice policies by taking the following actions:102

· 1. Avoid fraudulent, secretive, or unfair means of collecting data. When possible, collect data directly from the individual concerned.

· 2. Do not maintain secret files on individuals. Inform them of what information is stored on them, the purpose for which it was collected, how it will be used, and how long it will be kept.

· 3. Collect only job-related information that is relevant for specific decisions.

· 4. Maintain records of individuals or organizations who have regular access or who request information on a need-to-know basis.

· 5. Periodically allow employees the right to inspect and update information stored on them.

· 6. Gain assurance that any information released to outside parties will be used only for the purposes set forth prior to its release.

Particularly since the corporate wrongdoings of Enron, Arthur Andersen, Adelphia, Tyco, WorldCom, and other organizations, the public in general, as well as peers and subordinates, tend to give executives low marks for honesty and ethical behavior. 103  Companies that have taken the kinds of measures just described, such as IBM, Bank of America, AT&T, Cummins Engine, Avis, and USAA, report that they have not been overly costly, produced burdensome traffic in access demands, or reduced the general quality of their HR decisions. Furthermore, they receive strong employee approval for their policies when they ask about them on company attitude surveys. By matching words with deeds, companies such as these are weaving their concerns for employee privacy into the very fabric of their corporate cultures.

Assessment of Job Applicants and Employees

Decisions to hire, promote, train, or transfer are major events in individuals’ careers. Frequently, such decisions are made with the aid of tests, interviews, situational exercises, performance appraisals, and other assessment techniques. Developers and users of these instruments must be concerned with questions of fairness, propriety, and individual rights, as well as with other ethical issues.

Developers, if they are members of professional associations such as the American Psychological Association, the Society for Human Resource Management, or the Academy of Management, are bound by the ethical standards put forth by those bodies. 104  Managers who use assessment instruments are subject to other ethical principles, beyond the general concerns for accuracy and equality of opportunity, including the following:105

· ▪ Guarding against invasion of privacy (e.g., with respect to biodata items, four areas seem to generate the greatest concern: self-incriminating items, those that require applicants to recall traumatic events, intimacy, and religion). 106

· ▪ Guaranteeing confidentiality (treating information provided with the expectation that it will not be disclosed to others).

· ▪ Obtaining informed consent from employees and applicants before assessing them.

· ▪ Respecting employees’ rights to know (e.g., regarding test content and the meaning, interpretation, and intended use of scores).

· ▪ Imposing time limitations on data (i.e., removing information that has not been used for HR decisions, especially if it has been updated).

· ▪ Using the most valid procedures available, thereby minimizing erroneous acceptances and erroneous rejections.

· ▪ Treating applicants and employees with respect and consideration (i.e., by standardizing procedures for all candidates).

What can applicants do when confronted by a question they believe is irrelevant or an invasion of privacy? Some may choose not to respond. However, research indicates that employers tend to view such nonresponse as an attempt to conceal facts that would reflect poorly on an applicant. Hence applicants (especially those who have nothing to hide) are ill advised not to respond. 107 Clearly, it is the employer's responsibility to (1) know the kinds of questions that are being asked of candidates and (2) to review the appropriateness and job relatedness of all such questions.

Whistle-Blowing

Like a referee on a playing field who can blow the whistle to stop action,  whistle-blowing  refers to disclosure by former or current organization members of illegal, immoral, or illegitimate practices under the control of their employers to persons or organizations that may be able to do something about it. 108  Research indicates that individuals can be conditioned to behave unethically (if they are rewarded for it), especially under increased competition,109 but that the threat of punishment has a counterbalancing influence. 110  More importantly, when a formal or informal organizational policy is present that favors ethical behavior, ethical behavior tends to increase. 111

What are organizations actually doing? A 2011 poll of 390 organizations revealed that the top two methods that organizations use to let their employees know how to report unethical and/or illegal behavior are the employee handbook/company intranet (85 percent) and new-employee orientation (70 percent). As for reporting such behavior, most organizations (85 percent) encourage employees to contact HR. The next two most frequently offered channels are contacting the reporting employee's direct supervisor (65 percent) and contacting other senior managers (53 percent). About two out of five organizations (41 percent) offer an ethics hotline, but most employees would rather report wrongdoing directly to somebody they know than to a hotline. As for investigations themselves, the largest percentage of respondents indicated that HR investigates reported unethical behavior (89 percent) and illegal activity (86 percent). The next most often-cited source that conducts investigations is senior management (53 percent). 112

After the wave of accounting scandals in the early 2000s, Congress passed whistle-blower protections in the 2002 Sarbanes-Oxley corporate reform law. 113  The act

· ▪ Makes it unlawful to discharge, demote, suspend, threaten, harass, or in any manner discriminate against a whistle-blower.

· ▪ Establishes criminal penalties of up to 10 years in jail for executives who retaliate against whistle-blowers.

· ▪ Requires board audit committees to establish procedures for hearing whistle-blower complaints.

· ▪ Allows the Secretary of Labor to order a company to rehire a terminated whistle-blower with no court hearings whatsoever.

· ▪ Gives a whistle-blower a right to a jury trial, bypassing months or years of cumbersome administrative hearings.

More recently, Congress passed the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which contains powerful new incentives for whistle-blowers as well as enhanced antiretaliation protections. These whistle-blower protections reach well beyond the financial-services industry and are not limited to public companies. The Act creates a substantial financial incentive for whistle-blowers who voluntarily report “original information” directly to the Securities and Exchange Commission (SEC) or to the Commodity Futures Trading Commission (CFTC) that leads to successful enforcement and the recovery of more than $1 million in monetary sanctions. Those who qualify may be awarded 10 to 30 percent of the collected monetary sanctions, with the specific amount determined by the SEC or CFTC.

To encourage employees to use internal compliance programs, SEC regulations provide that an employee will be treated as a whistle-blower as of the date the employee provides the information internally as long as the employee provides the same information to the SEC within 90 days. In addition, the SEC will “consider higher percentage awards for whistleblowers who first report violations through their company's internal compliance programs.” Finally, The Dodd-Frank Act amends SOX to lengthen the statute of limitations for a SOX retaliation claim from 90 days to 180 days and to clarify that employees are entitled to have SOX retaliation claims tried before a jury. 114

IMPACT OF PROCEDURAL JUSTICE AND ETHICS ON PRODUCTIVITY, QUALITY OF WORK LIFE, AND THE BOTTOM LINE

As we have seen throughout this chapter, employees and former employees are very sensitive to the general issue of “justice on the job.” On a broad range of issues, they expect to be treated justly, fairly, and with due process. Doing so certainly contributes to improved productivity and quality of work life, because grievances are both time consuming and costly. On the other hand, organizations that disregard employee rights can expect two things: (1) to be hit with lawsuits, and (2) to find courts and juries to be sympathetic to tales of employer wrongdoing. Whistle-blower cases illustrate this trend clearly. The monetary consequences can be substantial as well. After whistle-blowers uncovered massive fraud at Cendant Corporation, the firm's market capitalization dropped a breathtaking $20 billion. a  Conversely, a study of 2,481 firms subject to Sarbanes-Oxley corporate-governance compliance found that those with strong internal controls in place enjoyed market-beating gains in their share prices, while those with weak internal controls under-performed the market. b  As in so many other areas of employee relations, careful attention to procedural justice and ethical decision making yields direct as well as indirect benefits. The old adage “An ounce of prevention is worth a pound of cure” says it all.

a

Nelson, E., and Lublin, J. S. (1999, Aug. 13). Buy the numbers? How whistle-blowers set off a fraud probe that crushed Cendant. The Wall Street Journal, pp. A1, A8.

b

Reilly, D. (2006, May 8). Checks on internal controls pay off. The Wall Street Journal, p. C3.

Despite retaliation, financial loss, and high emotional and physical stress,115 whistle-blowers continue to come forward, and they are likely to continue to do so. In a recent study of 230 corporate fraud cases, almost 20 percent of them came to light as a result of employee disclosure, more often than the media, industry regulators, analysts, auditors, or the Securities and Exchange Commission. Yet 82 percent of the employees who uncovered the frauds said they were penalized—ostracized, demoted, or pressured to quit, for instance. 116  Are they social misfits? On the contrary, research indicates that most of them are well-adjusted individuals who have strong personal values that they live by. 117

In the case of federal contractors, disclosure of fraud, waste, and abuse can lead to substantial financial gains by whistle-blowers. Thus under the federal False Claims Act of 1863, as amended, private citizens may sue a contractor for fraud on the government's behalf and share up to 30 percent of whatever financial recovery the government makes as a result of the charges. 118  In addition, the Dodd-Frank Act established a three-year statute of limitations for a retaliation claim under that Act. For example, when TAP Pharmaceutical Products paid an $875 million fine for conspiring with doctors to cheat the government, whistle-blower Doug Durand received $77 million for his efforts in the six-year investigation to expose the massive fraud. 119

IMPLICATIONS FOR MANAGEMENT PRACTICE

Managers who fail to address employee concerns for ethics and procedural justice do so at their peril. In 2009, fully 63 percent of American workers who observed misconduct reported it, usually to an internal company authority. a  Ethics programs are control systems whose objectives are to standardize employee behavior within the domains of ethics and legal compliance. Evidence now indicates that management, and especially top-management, commitment to an ethics program affects both its scope and control orientation. Programs of broad scope include multiple elements, dedicated staff, and extensive employee involvement. Control may be compliance oriented,emphasizing adherence to rules, monitoring employee behavior, and disciplining misconduct, or it may be values oriented, emphasizing commitment to shared values and encouraging ethical aspirations. Some programs strive for both, so that organizational values are not perceived as empty rhetoric. b  Remember that employees’ perceptions influence their judgments about procedural justice. In fact, multiple meta-analyses (quantitative cumulations of research studies) of studies of organizational justice have confirmed the beneficial effects on employee attitudes and performance of procedural-justice safeguards. c  Provide explicit procedures for resolving conflicts and be sure that all employees know how to use them. Treat all people with dignity and respect, and they will respond with high levels of performance and commitment.

a

Ethics Resource Center. (2010, Dec.) Blowing the whistle on workplace misconduct. Retrieved from www.ethics.org/files/u5/WhistleblowerWP.pdf  on August 25, 2011.

b

Weaver, G. R., Trevino, L. K., and Cochran, P. L. (1999). Corporate ethics programs as control systems: Influences of executive commitment and environmental factors. Academy of Management Journal 42, pp. 41–57.

c

Greenberg, 2011, op. cit.

Whistle-blowing is likely to be effective to the extent that (1) the whistle-blower is credible and relatively powerful, (2) the reported information is clearly illegal and unambiguous, (3) the evidence is convincing, and (4) the organization itself encourages whistle-blowing and discourages retaliation against whistle-blowers. 120  If you have a tale to tell, begin by asking yourself four important questions:121

· 1. Is this the only way? Don't blow the whistle unless you have tried to correct the problem by reporting up the normal chain of command and gotten no results. Make sure your allegations are not minor complaints.

· 2. Do I have the goods? Gather documentary evidence that proves your case, and keep it in a safe place. Keep detailed notes, perhaps even a daily diary. Make sure you are seeing fraud, not merely incompetence or sloppiness.

· 3. Why am I doing this? Examine your motives. Don't act out of frustration or because you feel underappreciated or mistreated. Do not embellish your case, and do not violate any confidentiality agreements you may have.

· 4. Am I ready? Think through the impact on your family. Be prepared for unemployment and the possibility of being blacklisted in your profession. Last but not least, consult a lawyer.

Conclusion

Ethical behavior is not governed by hard-and-fast rules. Rather, it adapts and changes in response to social norms. This is nowhere more obvious than in human resource management. What was considered ethical in the 1950s and 1960s (deep-probing selection interviews; management prescriptions of standards of dress, ideology, and lifestyle; refusal to let employees examine their own employment files) would be considered improper today. Indeed, as we have seen, growing concern for employee rights has placed organizational decision-making policies in the public domain. The beneficial effect of this, of course, is that it is sensitizing both employers and employees to new concerns.

To be sure, ethical choices are rarely easy. The challenge in managing human resources lies not in the mechanical application of moral prescriptions, but rather in the process of creating and maintaining genuine relationships from which to address ethical dilemmas that cannot be covered by prescription. 122

Citation:

Cascio, W. (02/2012). Managing Human Resources, 9th Edition. [VitalSource Bookshelf Online]. Retrieved from http://digitalbookshelf.argosy.edu/#/books/0077649117/