When a multinational’s headquarters launches a global code of conduct, often the first question is: “What’s our code going to say?” But what many don’t realize is that the question skips over key logistical issues that should be resolved before implementing something that is supposed to govern the behaviors of a diverse global workforce.
Indeed, too many global codes of conduct in place today were implemented without accounting for these logistical issues, subjecting many codes to attack and potentially giving rise to liabilities. So instead, the question that needs to be asked first is “How are we going to impose this on our employees overseas?”
There are five key logistical considerations to bear in mind before launching a global code of conduct, regardless of whether the code deals with global policies on ethics, business conduct, discrimination/harassment/diversity, Sarbanes-Oxley/Foreign Corrupt Practices Act or whistleblower hotlines.
1. Multiple versions
US-based multinationals rolling out global codes of conduct should decide whether:
(a) To use one global code worldwide – A single global code of conduct creates a uniform policy and is of course simplest. However, code provisions appropriate for US employees may need to be modified or reworded for use elsewhere.
(b) To create a “rest-of-the-world” version separate from the “US” version – Many US-based multinationals roll out a US code of conduct plus a separate “rest-of-the-world” version; this strategy accounts for issues from a non-US perspective, but neglects specific local-country issues; or
(c) To spin off distinct local codes for each affected country – Every country’s laws are unique. Tailoring an aligned local code of conduct for each country that accounts for local law and HR policy as well as headquarters issues should be the most effective strategy. But many versions of one code of conduct can get complicated and expensive to manage.
2. Dual employer
Most US-based multinationals’ overseas employees work for locally-incorporated subsidiaries or affiliates. To extend a headquarters code of conduct directly to employees of foreign affiliates raises the “dual employer” problem. By imposing rules directly on local foreign workers, the US headquarters may become a co-employer with the local subsidiary, leading to joint liability for employment claims. In Latin America, US multinationals regularly face these claims. A best practice is for headquarters to impose the conduct code on foreign affiliate entities only; each affiliate, in turn, imposes it on its own employees. This approach also cuts off the technical argument where an overseas employee claims the headquarters code is inapplicable because his local employer entity failed to implement it in the first place or else failed to take account of rules as to what is or is not a valid way to introduce a policy.
3. Consultation
Outside the US, employee representative groups such as “works councils” and trade union committees are common. Laws can impose a requirement like the US labor-law concept of “mandatory subject of bargaining”: an employer cannot change workplace rules until after it sits down and discusses the proposal with employee representatives. Since codes of conduct qualify as workplace rules, it means that any such code will need to be discussed with employee representatives and accepted before implementation. Unfortunately, outside the US, employee representatives can be skeptical of US codes of conduct. Therefore, from the inception headquarters needs to involve its overseas management. For example, give them a “heads-up” that a code of conduct will be coming and discuss consultation strategy and timing.
4. Translation
In Belgium, Chile, France, Poland, Portugal, Quebec and elsewhere, local law requires that work rules (such as in a code of conduct) be communicated in the local language. In these places, an English-language code will not only be unenforceable, it can cost money: last year a US multinational that distributed English-language papers to French workers paid a $689,920 penalty. Further, even in those countries without local-language laws, local courts are reluctant to enforce English-language policies; translations strengthen enforceability.
5. Distribution/acknowledgement
Multinationals need strategies for: (a) how to distribute the code of conduct to overseas employees; (b) how to train on the code overseas; and (c) how to adapt the code to local offerings (in Japan, for example, it will be necessary to amend the local work rules to reflect new code prohibitions). Also, multinationals need to develop some way to prove each employee actually received the code. This will aid enforcement against those claiming never to have seen it, so as to establish a defense against US Foreign Corrupt Practices Act and Sarbanes-Oxley enforcement actions.
The common US approach is to have employees sign acknowledgements, but that raises problems abroad:
- In Continental Europe and elsewhere, employee acknowledgments often are not binding; due to inequality of bargaining power between an employer and an employee, signed forms of this nature raise suspicions of coercion.
- A 100 percent return rate on acknowledgements may be impossible outside the US where codes of conduct often meet with skepticism. But away from the US employment-at-will environment there is no “good cause” to discipline an employee who openly refuses, or quietly neglects, to sign. How, then, to handle non-signers?
- Non-signers raise an “Achilles’ heel” problem: If they later violate the code, they will argue they were exempt because they never signed.
As an alternative to acknowledgements of receipt of the conduct code itself, local HR representatives might distribute the code personally in training sessions. Ideally, the HR representatives would collect signed attendance sheets from all employees that show they attended the sessions (and got the materials, including the code). If employees are likely to push back even on signing those acknowledgements, then as a fall-back the HR representatives themselves might sign forms stating the date and circumstances of transmission to each employee.
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Donald C. Dowling, Jr. (ddowling@whitecase.com) is International Employment Counsel at the New York office of the international law firm White & Case LLP, which has 35 offices in 23 countries. Don's law practice is dedicated to outbound international employment law, including: codes of conduct/CSR; global HR policies, HR data privacy, and expatriate "secondments." He chairs XBHR, a cross-border HR professionals' organization, and teaches International Employment Law and European Union Law as an adjunct law school professor.
