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HR, ethics, compliance risks & fair labour practices: ethical dilemmas, an ethical safety algorithm and recommendations for a way forward

HR, ethics, compliance risks & fair labour practices: ethical dilemmas, an ethical safety algorithm and recommendations for a way forward

By Peter Strasheim who can be contacted on 073-340-7596; stras@iafrica.com

1. Introduction

"Nothing to inspire pride". That's the verdict on the recent business ethics survey of some major South African corporates1. The Business Ethics SA 2002 Survey has found that many companies face high-risk levels "through paying 'mere lip service' to ethics management".

But, back in the business we've all heard the points of view: "Business ethics is a contradiction in terms", or that "business ethics is head office's new flavour of the month, but it'll die when the next big thing hits the agenda". The national media now keep ethical behaviour - and sometimes the absence of it - on the front pages and on television.

So what role does HR have in ethics management and the promotion of ethical conduct? How is HR affected by ethical behaviour and able to influence it? This article looks at the role HR has, and could adopt, in terms of the business case: the benefits of making the change and the risks of not doing so.


2. Objective of this paper

The aim here is to offer some of the learning about ethics and the advantages of ethical programmes for HR practitioners - and for the employers they work for or with. This paper looks at the importance of ethics; some historical and democratic precedents; practitioners and positional power; ethical red flags; challenges of change; ethical dilemmas and responses and a way to think ethically and for reaching ethically defensible outcomes.

Many corporates now face the need to upskill for understanding ethics, what ethics-related interventions to install and how to manage ethical contraventions within their operations. The King Report on Corporate Governance was the spur that has moved ethics and good governance onto the board agenda.

This author served as legal and industrial relations consultant on a team that developed and installed a strategic ethics policy and programme in a major parastatal that faced ethical challenges in the mid-1990s. The process involved a research, consultation, workshopping, planning and development of a comprehensive Ethics Policy, Compliance Guidelines and Implementation Training.

3. It’s not going to go away

So ethics is on the corporate agenda. And necessarily so, given our nation's founding constitutional values: "human dignity, the achievement of equality and the advancement of human rights and freedoms". Ethical awareness and the need for ethically defensible practices are also evolving fast. Public awareness of ethics is developing and will improve trade unions 'and employees' diagnostic skills and knowledge of what good and bad practices and outcomes are.

4. Is Ethics Really Important?

For HR practitioners reputation and credibility will always be important, whether as a full-time employee, an independent contractor on a fixed term contract, a task-based service provider, or an ad hoc provider. For some, maintaining their reputations and credibility may be about providing a professional service to the employer and an ethical service to key operational service services to keep the job, hold onto the retainer, or just to get the invoice paid.

For others, the issues go way beyond professionalism: they feel that their practice extends to questions about how to behave, based on moral duties and virtues arising from principles about right and wrong. Practitioners know that things can change fast in a unionised work environment, where key service receivers also include trade unions, practitioners in related disciplines, shop-stewards and industrial relations ("IR") or employee relations ("ER") managers. A complaint from any one of these or a grievance against the practitioner can lead to evidence in an internal disciplinary or grievance enquiry, an investigation or a starring role in the Commission for Conciliation, Mediation and Arbitration ("CCMA") or the Labour Court ("LC").

5. Ethical dilemmas - some examples

Ethical issues - and how they get recognised, understood and managed - can enhance professional reputation, personal credibility and client service, or result in a disciplinary inquiry into the practitioner's conduct as employee, or the termination of a long-term service contract. For practitioners, the way to take advantage of the benefits and to avoid the pitfalls is to become ethically aware.

Many practitioners face ethical issues, and over time have gained the experience and the insight to work them out in ways that have fair and moral outcomes for all. Other employed practitioners such as IR and ER practitioners, Safety Health and Environment managers, HRD and OD specialists, Remuneration and Benefits specialists, medical services professionals, in-house lawyers and corporate counsels have very similar ethical dilemmas.

HR practitioners can encounter many ethical dilemmas. The key issue is to be able to recognise the issue as an ethical issue, and then to know how to respond ethically. For example, the following hypothetical examples involve ethics and ethical thinking in the process of attaining a fair outcome:


>> A salary and benefit audit identifies a grading error which advantages a high performing employee, but the manager instructs that the error be concealed

>> A senior manager's serious disciplinary offence is hushed up, while for the same misconduct, ER practitioners have instructions to institute an immediate disciplinary enquiry in the case of junior managers and line supervisors

>> A line manager dismisses an employee with a known terminal illness, or a disability, which causes the family to lose the death benefit, and leave with nothing, even though the employee could have been retained until demise;

>> In a labour dispute in the High Court or CCMA, the ER Manager or legal representative deliberately does not call the HR practitioner as a key witness, and crucial evidence is not given and an unfair outcome happens

>> In the recruitment process, a Safety Manager places pressure on an HR practitioner to disclose confidential health status information, which is then used to justify not hiring the person

>> The HR executive places insurance business with a specific insurer or broker in order to receive a kickback or commission for doing so

>> The employer's Employment Equity Plan as submitted to the Department of Labour is deliberately not being followed;

>> An contracted-in medical practitioner decides to side with the IR Manager in a disciplinary enquiry into an allegation of misconduct for intoxication at work, to maintain good relations and keep their contract with the employer

>> A Safety Manager ignores a medical practitioner's Health Risk Report, or fails to respond within a reasonable time (or to respond at all) to the key OHSA-related safety and health compliance recommendations by the doctor in it

>> An HR Manager pressurises the medical practitioner to declare an employee unsafe, to allow the employee to be removed from their post or to dismiss or retrench them;

>> A line manager or senior practitioner appoints his or her relative or business associate in contravention of the established recruitment procedure;

>> An employed practitioner decides not to confront the Manager they report to, because the annual performance review cycle is coming up;

>> A line manager refuses to establish posts which can be used for return to work from benefits or sick leave, or to provide 'light duty';

6. An ethical fine line: what approach to take?

Ethical awareness involves sensitivity to the following realities:

>> Decisions do not only impact the bottom line but also on others who have no commercial relationship to the decision

>> Decisions need to be taken based on a balance between conflicting demands

>> Decisions need to be reached through a process of ethical thinking

>> What support is needed to help make tough decisions?

What approaches are possible, moral, ethical and legal? Does one do nothing? Will inaction make things worse or better? What ethical courses are available to employed HR practitioners and contracted-in HR service providers - in relation to the new focus on ethics in our constitutional democracy? Some references to history may assist.

7. Ethics in history

It seems that practitioners may benefit from some guidance on what's simply right and what's plain wrong. This could evolve on a case by case basis, and lurch from scandal by scandal, but it shouldn't have to and need not. A good place to look for guidance on best practice is to history. Four thousand years ago, Mesopotamian rulers had similar problems to those today, and sought to establish more honest trading practices. They produced the Code of Hammurabi, with penalties a little harsh for now; death was the consequence for most infractions. Later on, Aristotle and Plato3 argued about whether a code of ethics would not be better as a guide on the fine points of rights and wrongs than an individual's own discretion and judgement. Our own media headlines signal that they might.

Plato took the position that the ideal decisions could be made by a 'philosopher - king' who had special insights above other people into good governance and the truth. Rules, he said, could not produce the correct decisions, only wise and good humans could. Therefore, morals and just outcomes were to Plato a result of having the right people in the right positions at the right time. He thought that people who knew 'the good', or what the right thing to do was, would do it.

Aristotle had perhaps a little more insight into the future dynamics of a post-modern globalised capitalist world of in the 21st century. He argued from the position that there were actually no such thing as the benevolent and just 'philosopher-kings', and that even if an individual did know what good was, there was that tricky matter of the 'weakness of the will'. So he concluded with what we all suspect: people could not be completely objective, and they tend to take a short-term view. He thought that they allow emotion and passions to intrude on a wise or moral or ethical decision. To Aristotle "the frailties of human nature require that decisions about ethics generally be a matter of law or rules".

8. Ethics in a Constitutional Democracy

Over time Aristotle's approach has prevailed, and finds its ultimate expression in western-style democratic constitutions with Bills of Rights such as in our Constitution in Chapter 2, from sections 7 to 39. In this way the excesses of our former state have been curtailed, as also the ability of any state to limit certain rights in line with popular opinion about what is right and wrong.

8. Ethics, Practitioners and Positional Power

At its simplest, there seem to be four types of legal arrangements relationships through which HR and ER practitioners provide their related services to an employer:

>> Ss an employee, in terms of a contract of employment, based on a job description;

>> As an independent contractor (or partnership), in terms of a contract, based on a service level agreement;

>> As a leased worker via a "temporary employment service" (labour broker) to the employer client;

>> On an as-needed service provider, in terms of an oral agreement, based on trust and mutual confidence.

From an HR perspective, the employed and independent practitioners are "persons in the middle". Neither a member of either of the two main protagonist groups - 'management' and 'labour' - their position is like that of a supervisor, or a manager who is known to be a trade union member.

The effect of this positioning reduces the possibility of significant positional power in the organisational sense. These in turn sets up a dependency and a vulnerability, which makes their services and their decisions and their recommendations susceptible to control by others.

This positional weakness makes HR practitioners more susceptible than many to the possibility of being manipulated and influenced. Ethical awareness becomes a necessary competency. Educational institutions train in technical competencies but not in how to apply ethical principles in competitive capitalism, against the realities of downsizing and objectives of production and productivity goals. The result is that HR and ER practitioners need insight and understanding about the issues thay face, and then empowerment with purpose-made strategies and tools to help them promote ethics, improve quality, reduce non-compliance risks, and to ensure constitutional and moral decisions and outcomes.

9. Red flags

In the book "The Ethical Edge" the authors identify some general 'red flags' that can alert diligent persons in responsible roles about the actual or potential presence of ethical problems. The persons who would need to consider the red flags and then apply their minds to what to do and whether to act could include governing bodies, trustees, office bearers, directors, and so on. Anyone in a position of responsibility with fiduciary duties would need to react if there is an ethical issue to respond to and to find strategies to manage. The red flags they mention include the following:

>> Conflicts of interests

>> Employee, patient, union or employer complaints

>> Use of assets

>> Complaints about privacy and confidentiality

>> Pressures on productivity

>> Downsizing and restructuring pressures

>> Compensation and benefits

>> Lack of full disclosure

>> Events affecting image and reputation

>> Institutional culture

The corporate power position of the HR and ER practitioner set up many ethical red flags of this form.

10. Ethics and understanding the challenge of change

The new democratic order has rightly and necessarily produced a large volume of long-overdue legislation that directly affects HR and ER practice. The rate and the complexity of the change are also daunting - even for lawyers. Everyone is on a new and often somewhat steep learning curve.

The challenge is to position a strategy and implementing a plan to support members for legal and ethical compliance. This is made even more complex due to the inter-disciplinary nature of the various disciplines involved. HR and ER are in the space that many fields of expertise converge. What all this means is that there arises a responsibility to stay expert in the field of expertise the practitioner is specialised in, but to also become aware of others as well and to function effectively in relation to them. Ethical conflicts between fields, perspectives and power positions are realities that have to be managed.

11. A mass of new legislation and law

A cursory overview of the legislation and their regulations and codes which apply to HR and ER practice in one way or another include the following:

>> Constitution of the Republic of South Africa Act ("Constitution");

>> Promotion of Equality & Prevention of Unfair Discrimination Act ("Equality Act");

>> Occupational Health and Safety Act ('OHSA");

>> Mines Health and Safety Act ("MHSA");

>> Mental Health Care Act ("MHCA");

* Compensation for Occupational Injuries and Diseases Act ("COIDA");

>> Occupational Diseases in Mines and Works Act ("ODIMWA");

>> Promotion of Access to Information Act ("PAIA");

>> Protected Disclosures Act ("PDA");

>> Labour Relations Act ("LRA"); and its

>> Code of Good Practice on Dismissal ("CGP: Dismissal");

>> Code Of Good Practice On The Handling Of Sexual Harassment Cases ("CGP: Sexual Harassment");

>> Employment Equity Act ("EEA"); and its

>> Code of Good Practice on HIV/AIDS ("CGP: HIV/AIDS") and

>> Code of Good Practice on the Employment of People with Disabilities ("CGP: Disability");

>> Basic Conditions of Employment Act ("BCOEA") and its

>> Code of Good Practice on the Arrangement of Working Time ("CGP: Working Time")

>> Code of Good Practice on the Protection of Employees during Pregnancy and After the Birth of a Child ("CGP: Pregnancy").

On top of this, there is the case law output being generated continuously. In very general outline, the Constitutional Court, High Court system and Supreme Court of Appeal produce civil rights and health and safety-related cases, the Labour Court and CCMA generate labour and employment law decisions, and finally the Pension Funds Adjudicator and Long Term Insurance Ombudsman deliver insurance, pensions and disability-related determinations.

12. Possible responses of the professional body

It seems possible that due to the rate and pace of the legal change, existing ethical guidelines may be general enough to offer broad outlines, but unspecific enough to deliver detailed guidelines. The objective would be practical tools to understand and to deal with - and to think through - the more complex operational workplace challenges that face practitioners on a daily basis. Most general guideline in place are usually too vague or too general to have meaningful application utility.

This was the experience of many large corporates and businesses. They discovered that in for example, the purchasing Department, its existing purchasing procedures and supplier relations guidelines, read with the Disciplinary Code were inadequate to manage the problems that arose in the grey area between legality and ethics.

They recognised that although procedures were being followed, the outcomes were problematic, because the ethical approaches to right and wrong when taking decisions were not being used. So, a need was identified to develop material to guide decision taking in the grey areas - an Ethics Policy and supporting Guidelines for decision taking in the sensitive and complex issues and areas. In addition, appropriate resources for issues that needed to be understood and managed were available with peer support resources.

13. From 'What' to 'How': advantages of an Ethics Code & Guidelines

If the ethical dilemmas are considered to be serious enough for employed and independent practitioners to address, then the professional body may want to consider what the interventions could be to address the power relations issues that set up the ethical problems. Best practice suggests a detailed Code supported by supporting practical Guidelines for the practical workplace issues that present ethical problems and risks for practitioners in the workplace.

Advantages of a Code and Guidelines are, based on the textbooks:

>> It will provide a stable and permanent guide and will be more reliable than personal discretion (as Aristotle had insisted);

>> A well-drafted Code with Guidelines does provide tangible demonstrable support for practitioners who find themselves in ethically ambiguous situations. This recognises the constraints that arise when the decisions about what to do can - but should not be - determined not by ethics but by the requirements or constraints of the job description;

>> They can control any autocratic power applied by employers and line managers - at the same time as guiding the conduct of practitioners. The Code can be one that exists because it has been put in place by the employer, in which case the practitioner can rely on and apply it when in an ethically ambiguous situation. When an employer-based Code does not exist, then the practitioner can rely on the dictates of the professional Code's detailed guidelines and apply them - in co-operation with the employer. Any employer's alleged unethical conduct / behaviour / instruction / request is therefore controllable because it can be objectively channeled, controlled and rendered transparent and public;

>> A detailed Code and Guidelines is in the interests of the profession, the practitioners and the patients and the employers.

14. Reporting relationships

The often-vexed issue of reporting relationships for HR and ER practitioners may also be informed - and even resolved - through the application of ethical thinking.

Ethical reasoning dictates that a manager should not accept the responsibility of managing the standards, quality, performance and compliance of a subordinate where that manager does not have the skills to do so. The fact needs to be taken into account that some aspects of HR compliance and service delivery are undeniably complex, and increasingly challenging.

However, where the practitioner is aware, or believes, that the manager they are reporting to does not have the range of skills required or the necessary time needed to supervise the practitioner, then ethical responsibilities - if not also professional duties and obligations - may start to apply.

Ethical considerations would be increased if the employer has an Ethics Policy in place that the practitioner (as employee or contractor) is required to respect and comply with. In this instance, the practitioner may consider raising concerns with the manager, and consider a restructuring of the reporting line. Given the legal complexities at the convergence of a range of disciplines, there may be an ethical argument for reporting to the Audit Services Manager, or Legal Services Manager on the legal and compliance aspects and to the Safety Manager on the traditional aspects.

The objective would be to promote ethical decision-making, to reduce the inherent risks and to promote rights - but only if ethical concerns exist.

15. An ethical safety algorithm

It should be apparent from the above that ethics is about values - those of the practitioners themselves, and those of the employer, in the form of a manager the practitioner reports to or interacts with. Ethics are really founded upon individual values, which are made up of core beliefs or motivations that set up the personal attitudes we carry around with us5. These values determine two key attributes:

>> The ability to distinguish right from wrong;

>> The commitment to do what is right.

However, we all have other non-ethics related values that may conflict with ethical values. Personal motivations such as the desire for status, wealth and fame are not ethics-related values, and can be pursued to the extent that they do not replace or sacrifice ethics-related values or honesty, integrity and respect for human dignity. The key is to recognise ethics-related values and apply a decision-taking process that will assist practitioners and managers to think ethically.

An ethical safety promotion algorithm is the following:

1. Understand what the problem is

# What is the problem?

# How did it happen?

# Is it really a problem?

# Why is it a problem?

2. Consider the impact of the problem on others

Which ethical principle is involved?

# Who are the affected parties?

# What affect will it have on each of them respectively?

3. Get advice

# Review the Guidelines: Which law / value / standard / policy?

# People to contact for advice or guidance?

# What would another ethical person think?

4. Find solutions by brainstorming alternatives

# How many alternative solutions are there?

# How can harm be reduced & moral outcomes attained?

# Which are you proud of and uncomfortable with?

# Can both corporate and individual rights be respected?

5. Make a decision

# Communicate the decision clearly and completely

# Personalise the decision - would you tell others

# Communicate the decision transparently

# Be able to give sound and fair reasons for making it

6. Review and learn (continuous ethical improvement process)

# What lessons & how to transfer the learning to others?

# How can we stop this happening again?

# What changes to processes and procedures do we do?

16. Conclusion and recommendations

This paper hopes to have succeeded in the limited objective of raising practitioner awareness of ethics as an issue and of ethical thinking as a way to promote constitutional rights, promote professional service, employment rights and to resolve sensitive issues and build relationships with employers.

Some very general recommendations going forward are the following:

>> Practitioners, as employees typically work in some isolation from the other functional specialists, and as contractors often as individuals in their own businesses. The non-compliance risks are likely to increase as new legislation starts getting applied. A way of developing in-house risk-management and compliance capacity is to enter an approved and legal consortium or joint venture or association with practitioners in related non-HR or ER specialisations;

>> Awareness raising to develop insight into the rationale behind ethical thinking and the benefits of applying it;

>> A more detailed practical Ethics Code for all the complex situations

>> A practical Ethics Guidelines document;

>> An HR and ER workplace ethics awareness programme for employers and managers;

>> Offering an ethical decision-taking algorithm for undertaking and reaching difficult decisions on ethical issues for use by managers and practitioners;

>> A peer support consultation line.

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Gary Watkins

Gary Watkins

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