Drafting an internal (“ethics”) code of conduct with worldwide reach raises questions as to which topics to include and which to exclude.
This issue of Global HR Hot Topic is the second part of a checklist that began with the July issue.
- Antitrust / competition and non-collusion with competitors / trade practices: Antitrust laws differ from country to country. Global codes of conduct often instruct employees not to engage in basic violations such as collusion and price fixing, and tell employees whom to ask for guidance on these matters.
- Insider trading: Publicly-traded multinationals need global code of conduct provisions that ban insider trading in the company’s own stock. Organizations like professional services firms whose employees’ jobs give them access to insider information about publicly-traded clients need client insider trading restrictions.
- Audit/accounting fraud / substantive SOX compliance: Sarbanes-Oxleyregulated multinationals are subject to audit/ accounting rules that reach operations worldwide. Codes of conduct often impose SOX accounting and compliance standards worldwide, with an explanation of why compliance is vital. Indeed, as a best practice, even certain non-SOX-regulated multinationals include audit/accounting provisions in their codes.
- US federal sentencing guidelines: Violations of some US laws with extra territorial effect can lead to a US criminal conviction Multinationals draft global code of conduct provisions cognizant of provisions in US federal sentencing guidelines that offer affirmative credit for certain human resources policies meant to curtail illegal conduct. Of course, codes will not discuss sentencing guidelines explicitly; the drafting issue is imposing human resources rules and non-compliance sanctions robust enough to earn sentencing credit.
- Data privacy/processing: Data “protection” laws in the European Union, Argentina, Australia, Canada, Hong Kong, Japan, and elsewhere impose tough mandates on multinationals that run global human resources information systems (see our May 2007 Global HR Hot Topic). Multinationals’ compliance initiatives should impose tight rules on employees who “process” personal data. Codes of conduct often set out these rules.
- Monitoring communications and reserving right to search: A best practice for a handbook issued domestically within the United States is to clarify that employees not form expectations of privacy in employerprovided communications systems by expressly reserving the employer’s right to monitor employee e-mails, telephone calls, and the like—and sometimes also reserving a right to search offices, desks, lockers, even lunch boxes. American employers drafting global codes of conduct often try to extend an American-style right-to-monitor/search provision globally. The problem is that data privacy laws outside the US differ radically; the American approach of using an employee communication to defeat an “expectation of privacy” simply is not enough in many countries. But there is no “magic bullet” here. Global employee monitoring provisions need careful structuring to account for the employer’s specific needs and the specific jurisdictions in play. Regardless of what monitoring rights a global code of conduct purports to reserve, in many jurisdictions employers will need legal advice before invoking any such purportedly-reserved right.
- Environmental protection: Some global codes of conduct contain provisions requiring employees to comply with local environmental laws, and some codes require complying with the more protective of local law, US law, or global standards.
- Intellectual property: Some global codes contain intellectual property provisions instructing employees to respect others’ copyrights, such as in photocopying or e-mailing copyrighted materials or copying software.
- Restrictive covenants and trade secrets: Global codes of conduct often purport to impose on worldwide workforces restrictive-covenant-like prohibitions— confidentiality, post-termination noncompete and non-solicitation of employees/ customers restrictions. But a code of conduct is an impotent medium to impose these: Restrictive-covenant-type rules often need to appear in an employee’s signed contract, and enforceability rules differ widely by country, with some countries requiring extra consideration, making a global approach totally infeasible. As such, restrictive covenant topics are best left out of a code of conduct (other than perhaps a short statement of the employer’s commitment to enforce any employeesigned covenants). This said, though, a confidentiality provision can be appropriate, as can be a general statement on the importance of complying with applicable trade secrets laws.
- Safety in the workplace and pandemic response: Most countries have workplace safety laws broadly analogous to US OSHA. While no code of conduct can replicate all applicable safety rules, some codes contain provisions requiring compliance with applicable safety rules and imposing accident reporting procedures. Certain multinationals impose more complex global safety protocols that include, for example, pandemic response protocols. These require attention to additional issues (see our May 2009 Global HR Hot Topic).
- Drug-free workplace/substance abuse: To the extent allowable under the US Americans with Disabilities Act, some US employers seem inclined to take a “zero-tolerance” approach to illegal drugs and alcohol in the workplace, even refusing to hire employees whose positive drug-test results offer no evidence of work-time impairment. Outside the US, however, workplace drug testing can as a practical matter be virtually impossible. Further, many drugs illegal in the US are legal elsewhere, and as such are inappropriate to prohibit using off-hours. Even zero-tolerance workplace alcohol policies can seem impractical and puritanical in countries where company cafeterias and vending machines serve beer and wine and where alcohol is ubiquitous at business lunches. Rethink any US-drafted drug/alcohol policy for the global context. Run a draft of any proposed global drug/alcohol provision by local human resources overseas, to check whether the mandate is realistic.
- Media contact: Multinationals are constantly the subject of business press media stories. Some global codes of conduct contain provisions instructing affiliates’ employees worldwide on press relations and fielding media inquires.
- Compliance with company rules: A code of conduct might have a provision requiring employees to follow company rules set out elsewhere, such as in local human resources polices and handbooks, or such as reimbursement procedures, clocking-in rules, safety protocols, and the like.
- Sanctions clauses: US-drafted codes often contain clauses exposing employees who violate any provision in a code to discipline up to discharge. Outside the US, however, saying conduct is subject to a sanction does not necessarily make it so: Local laws on good-cause discipline may prohibit employer sanctions for some violations of certain rules set out in a code. Also, outside the US, mandated disciplinary procedures often apply. Draft any sanctions clause cognizant of the limits on disciplinary restrictions outside the US employment-at-will environment.
- Complaints system/whistleblowing hotlines: Sarbanes-Oxley requires imposing “anonymous” whistleblower hotline “procedures.” These days even many non-SOX-regulated multinationals impose global reporting procedures, often outsourcing hotlines to outside providers. But employee hotlines are heavily regulated in the European Union. Any code of conduct provision outlining global reporting procedures needs careful strategy. (See our November and December 2007 Global HR Hot Topic and our article at 42 The Int’l Lawyer 1 (2008).)
- Acknowledgment: Many global codes of conduct end with an acknowledgement page for employees to sign, acknowledging their agreement to follow the code. But global employee acknowledgements raise a number of logistical problems, and they can actually backfire, giving ammunition to non-signers who violate the code. Consider any acknowledgement procedure carefully. (See our discussion of this issue in our March 2007 Global HR Hot Topic.)
A well-drafted internal ethics code of conduct contains a tailored provision on those of the above topics for which there is a business case, and omits topics that the code issuer need not address. Good global codes steer clear of provisions on those every-day human resources topics that are more appropriately relegated to the local level, which in many cases include: testing/monitoring, breaks, vacation, holidays, overtime, payroll, work hours, smoke-free workplace, performance evaluations, employee benefits, and severance pay/procedure.
Check that an internal code covers each topic for which there is a business case. Adapt each clause to account for realities of overseas workplaces. Exclude local human resources topics better addressed in individual employment agreements, or in local employee handbooks.