Unethical Conduct By Employee, Quirky Question # 41

Quirky Question # 41:

I am the Director of Human Resources for a manufacturing firm.  I was recently contacted by the manager of a motel located near our office.  The manager informed me that one of our employees (an outside salesperson) has been stopping at the motel in the morning, picking up one of the “free” newspapers, eating the “free” breakfast, and then leaving.  The second time this happened, the manager confronted him, told him that this was stealing, and asked how he would feel if she showed up at his place of business and started taking things.  According to the motel manager, our salesperson reportedly responded by saying that if she wanted to do that, “they could talk.”  The motel manager eventually followed our employee to our office and alerted us to the situation.  What should we do?

Quirky Question # 41:

Needless to state, the behavior described in this Quirky Question demonstrates a discouraging lack of honesty and integrity.  Moreover, it raises concerns about what sort of side deals this employee might be cutting or trying to cut with his customers and others.  In our view, this conduct is sufficiently serious that you may wish to consider termination of employment, or at a minimum, a written warning that any similar behavior in the future will result in termination.

Even though this situation does not present any cutting-edge legal issues, it does illustrate the typical potential concerns worth exploring before making any termination decision.

1.  Investigation.  The first step in this situation, like others, is simply to confirm that the alleged behavior did in fact occur.  Here, the report of the motel manager certainly appears credible, since she has no apparent motive to fabricate these allegations.  Even so, it is essential to confront the employee with the allegations and give him an opportunity to deny or explain them.  This is the kind of “due process” that most judges and juries will expect to have occurred before an employee is terminated, out of a basic and simple sense of fairness.  If the employee concedes these incidents occurred as alleged, that will eliminate ambiguity regarding the underlying facts.  If the employee flatly denies the allegations, you should consider casting a broader net to look for other witnesses to these events who might be able to confirm or deny the allegations.  Of course, if other witnesses corroborate the allegations notwithstanding the employee’s denials, you will have further evidence of the employee’s lack of honesty.

2.  Contract issues.  The next step is to evaluate whether this employee has any kind of written employment agreement.  Some employees do have such agreements, and they often prevent an employer from terminating an employee unless there is “cause” – or unless the employer is willing to provide the severance pay required by the agreement.  If, however, there is no employment agreement, the salesperson is an “at will” employee, meaning that you are at liberty to terminate his employment for any reason not prohibited under the law.  (If the employee had an employment agreement that required “cause” for termination, you would have to determine whether the “cause” threshold had been met in this case, or whether you needed to consider another alternative short of discharge.)

3.  Comparable situations.  Perhaps the most frequent legal challenges to employment-related decisions arise from the state and federal laws that prohibit discrimination on the basis of race, age, gender, disability, or other protected classifications.  Before making a termination decision, you should explore whether any other employees of the company have ever been caught engaging in similarly dishonest behavior.  If you find that there have been comparable situations involving employee dishonesty (even if they did not involve a similar fact pattern, which presumably has never previously arisen), you would want to ensure that this employee was being treated no more harshly than any other employee of a different race, gender, age or the like who had engaged in similar misconduct.

Assuming this review leads to the conclusion that a termination of employment is both appropriate and legally defensible, there are at least two other issues you may wish to consider.  Other important subjects of discussion include the following.

4.  Communications.  It is often necessary to communicate something about an employment termination both inside and outside the company.  In most situations, however, “less is more.”  Disparaging statements that are made about a former employee, either inside or outside the company, can lead to potential defamation claims.  For that reason, you may elect not to communicate inside the company about the reasons for this employee’s termination.  Similarly, you may decide that you do not wish to have further communications with the motel manager regarding this subject, other than thanking her for bringing the issue to your attention, informing her that the company has responded appropriately, and requesting her to let you know if any further problems occurred.

5.  Additional investigation and training.  You also may wish to review all of this salesperson’s customer accounts to confirm that there have not been other improprieties.  Finally, you may want to take this opportunity to review and revise the company’s Employee Handbook or Code of Conduct, and/or use this as an opportunity to conduct employee training meetings on the issue of business ethics.

Dorsey & Whitney

Dorsey is a business law firm, applying a business perspective to clients' needs. We make it our first priority to know the context in which you do business - your market, your competitors, your industry.

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