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Write your rules with care
By Lauren | December 18, 2009
Continuing my Friday series on keeping your business out of court, let’s talk about an area that frequently catches companies off guard. Most companies know that there are laws that govern their operations and that they need to comply with those laws to stay out of court. What they don’t always realize, however, is that failure to comply with rules they’ve written themselves - employee handbooks, policy manuals, codes of ethics, and so forth - can also get them in hot legal water. Here’s why:
When a company voluntarily adopts and publishes a policy, various people (employees, customers, shareholders, and others) may rely on the company to do what the policy says. Depending on the relationship, the company may have a legal duty to an individual who relied on the company to comply with its stated policies. (There are lots of legal wrinkles in how this works, but a rough rule of thumb is that the closer the relationship, the more likely it is that the company has a duty of care.) If the company doesn’t comply with its policies and the individual gets hurt because she relied on the company’s compliance, she might just have an excellent reason to sue. As an example, suppose a company promises in its employee handbook that it will only fire employees after less draconian discipline proves unsuccessful. An employee gets fired for his first ethical infraction, never having been counseled, suspended, or otherwise subjected to lesser discipline. That employee might be able to argue that the employee manual amounted to a contract that the company breached when it fired him. And it’s not just employees who can win these arguments. If a company’s code of ethics contains a lot of inflated promises (for example, “we will always hold ourselves to the highest possible standards of conduct”), customers and vendors may be able to use that code to beat the company up in court for a non-complying incident that caused them harm.
It’s important for companies to adopt appropriate policies, and just as important for companies to comply with those policies once they’re put into place. Take a look at your company’s self-imposed rules, and make sure they’re something you can actually satisfy. Then, make sure you either follow the rules or change them to reflect what you really do. It can save you and your company a lot of legal trouble.
Topics: Business Ethics, Corporate Governance, Risk Management, business communications, corporate responsibility, customer relations, ethics |