Are you in compliance?

Don't miss out! Sign up today for our weekly newsletters and stay abreast of important GRC-related information and news.

Get updates on Compliance Week offerings, including new features, databases, research, and other resources, along with announcements of upcoming Webcasts, conferences, seminars, CPE/CLE opportunities and more.

Published every Thursday, Compliance Week Europe offers a condensed summary of risk, audit, and compliance news either originating in Europe, or of special interest to European compliance professionals. This newsletter will follow developments by the European Commission, as well as those of national governments across the region, or any U.S.-based news that might have consequence across the Atlantic. Frequency: weekly; Thursday a.m.

A fresh edition of Compliance Week delivered via e-mail and online every Tuesday morning, relentlessly focused on the disclosure, reporting and compliance requirements of our 25,000+ paying subscribers.

Published every Friday, Compliance Weekend was launched at the behest of subscribers, and offers a quick Plain English review of the week's key developments. We hope you enjoy this supplement to Compliance Week's Tuesday edition.

Labor Law Violation Shouldn’t Impact Ethics Programs

Martinek Paul J. | November 22, 2005

A ruling by a federal appeals court last month that a company violated federal labor law by implementing a workplace ethics program without union consultation might seem like bad news for companies struggling to satisfy ethics mandates.


But Thomas Servodidio, a partner with Duane Morris in Philadelphia, tells Compliance Week that companies needn’t be too concerned about the court’s decision in Georgia Power Co. v. International Brotherhood of Electrical Workers because the so-called ethics program in the case wasn’t really one at all.

“This case should have limited application since the ‘workplace ethics program’ described in this case appears to really be a type of alternative dispute resolution program,” says Servodidio. “Therefore, it would not be accurate to suggest that corporations which have adopted the typical workplace ethics programs are in danger as a result of this decision.”


Michael Reynvaan, of Perkins Coie in Seattle, agrees that the court’s decision can be read as a narrow ruling that shouldn’t cause widespread problems for corporate ethics programs. “A typical ethics program …deals with complaints about misconduct that need to be addressed or serves as sort of an ombudsman for what is ethical,” Reynvaan notes. “In that context, it would be difficult to apply the reasoning of the [Georgia Power] case. This is the first ethics program that I’ve ever heard of that has a dispute resolution program in it.”

The decision could potentially have broader implications, Reynvaan says, for companies that try to establish employee groups consisting of union and non-union workers to address issues of concern to the workforce. “[That’s] fine as long as nobody complains,” he says, noting that such programs could be subject to unfair labor practice charges similar to the attack in the Georgia Power case and to challenges made against “employee participation programs” that were popular in the late 1980s and early 1990s.

“Ethics” Program Adopted Unilaterally

The Georgia Power case involved an agreement governing grievance procedures that were used to resolve union employees’ complaints, and a separate memorandum addressing how union employees become crew leaders. Until 2001, Georgia Power also provided its employees two vehicles they could use to voice their concerns: the Equal Employment Opportunity program, which focused on charges of discrimination, and the Corporate Concerns program, which dealt with workers’ general concerns about such issues as discipline, discharge or unfairness.

In 2001, Georgia Power created what it called a “workplace ethics program” (WEP), which combined the Equal Employment Opportunity and Corporate Concerns programs. According to the court, Georgia Power “created the WEP only after learning [union] ‘employees did not feel that they were being represented properly’.”

The WEP was adopted unilaterally, without consultation with the International Brotherhood of Electrical Workers, which had been the exclusive bargaining representative for union workers for more than 50 years. The WEP included a peer-review process in which panels of union and non-union employees reviewed management decisions regarding such issues as discharge, discipline or demotion. Union members were free to invoke the WEP process or the previously established grievance procedures. When a union employee filed a claim under the WEP, the union was not notified and did not represent its members in the WEP process.

The union challenged the WEP, arguing that it had been adopted in violation of the National Labor Relations Act because it was not subject to bargaining. The National Labor Relations Board agreed and, on appeal, the Atlanta-based 11th Circuit Court of Appeals affirmed.

The court said that the WEP established grievance procedures and therefore was a mandatory subject of collective bargaining. “[I]t was rational for the [Labor Relations] Board to conclude that the unilateral whittling away at grievance procedures by creating a parallel system like the WEP also impacted terms and conditions of employment,” the court ruled.

No “End Run” Around Bargaining

Servodidio, of Duane Morris, says it was probably a misnomer to classify the program in the Georgia Power case as a workplace ethics program. “This ‘workplace ethics program’ was, in essence, a peer review process consisting of some bargaining unit employees and some non-bargaining unit employees whereby an employee had the ability to grieve a dispute over a discipline or discharge decision but then revert to pre-existing union negotiated procedures allowing for binding arbitration,” Servodidio notes. “Whether you label it an ethics program or not, under the court’s holding employers should understand that you can’t do an end-run around the exclusive collective bargaining representative when implementing a dispute resolution program that is a mandatory subject of bargaining.”

According to Servodidio, most collective bargaining agreements “have a management rights clause which typically reserves to management the explicit right to adopt reasonable workplace rules and management can unilaterally implement such rules of conduct unless it gives up that right in the collective bargaining agreement.”

If an employer “retains the exclusive right to implement workplace rules in its collective bargaining agreement, [the company is] able to establish the typical type of ethics program—which outlines ethics standards and rules of conduct—unilaterally,” Servodido adds. “In so doing, the union may have only a limited right to challenge the program on the grounds that the rules were not reasonable or the employee was not on notice of the program. Some [CBAs] don’t have a strong management rights clause but, if you have a typical management rights clause, you’re allowed to implement reasonable work rules unilaterally.”

Reynvaan, of Perkins Coie, notes that companies that don’t have the benefit of a strong management rights clause in the collective bargaining agreement can limit the application of a corporate ethics program to non-union employees. Companies also can unilaterally adopt an ethics program by citing legal obligations such as those imposed by the Sarbanes-Oxley Act. “If you do a narrow workplace ethics program that is intended to comply with Sarbanes-Oxley, then the employer is on very solid ground to go in and do that [without bargaining with the union],” Reynvaan says.