The use of codes of conduct providing both general and
specific guidance for conduct in the workplace and covering
issues like discrimination, harassment, health and safety,
ethical behaviour, software copying, environmental
practices, freedom of association, workplace privacy has
become common practice over the last few years, especially
for multinational companies. There are various reasons why
codes of conduct are so commonly used nowadays, and in
particular:
increasing emphasis on corporate governance and
standards of behaviour generally in the corporate
workplace;
companies’ desire to enhance their reputation across the
world by demonstrating that they are socially
responsible and ethical;
improving workplace conditions and the quality and
loyalty of the global workforce.
However, recent decisions in some E.U. countries and in
particular in France have shown that the worldwide
implementation of standardized Codes of Conduct is more than
problematic, in particular due to the extra-territoriality
of the American
Sarbanes-Oxley Act (SOX).
Indeed,
while on July 30, 2002, President Bush described SOX
provisions as the "the most far-reaching reforms of
American business practices since the time of Franklin
Delano Roosevelt”, the French Data Protection Agency (“CNIL”)
refused to authorize the implementation of Codes of Ethics
enabling employees to report, via anonymous employee
hotlines, any suspected or unethical conduct in the
workplace. The French Data Protection Agency ruled that
collecting data questioning employees’ professional
integrity was unfair and could lead to an organized system
of “professional” whistleblowing and to slander and false
accusations.
In a
ruling dated September 15, 2005, the French court of
Libourne held that a note requiring employees to report
cases of fraud or embezzlement anonymously should be removed
from the workplace.
1. What are the steps to be taken to properly implement a
code of conduct in France?
While an increasing number of large companies are eager to
adopt a global code of conduct, they do not always focus on
the necessity to properly communicate on it to employees.
It is clear that if a code is to succeed, it must be part of
the corporate culture and discussed with the employees and
their representatives before being implemented in the
company. During that
discussion, employers must explain the reasons for setting
up a code of conduct, its guidelines and its potential
impact on employees’ work conditions.
In some countries like France, such a discussion with
employee reps. is a mandatory step in particular if the code
of conduct is likely to impact employees’ working
conditions. Before
they are implemented, codes of conduct must be adapted to
the French legal context and then submitted to employee
reps. for opinion, in order to take their suggestions and
proposed modifications into account.
The
opinion rendered by employee reps. is not binding, meaning
that companies are allowed to implement the code of conduct
despite the contrary opinion of employee reps. Employers’
failure to consult employee reps. constitutes a violation of
employee representation rights , which is a criminal offence
punishable by a one-year imprisonment and a fine of €3,750.
Upon
completion of the consultation stage, employers have to
apply the code of conduct to their employees. However, they
should keep in mind that codes of conduct are not regulated
in France, meaning that their terms and conditions cannot be
imposed upon employees.
Codes of
conduct should not be regarded as part of employment
contracts and not be submitted to employees’ signature as
there is a strong likelihood that not all of them would
agree to sign them. In such a case, a code of conduct would
not be applicable to the whole workforce, which would
clearly be inconsistent with the very purpose of that
document.
In
practical terms, when implementing a code of conduct in
France, it is highly advisable to prepare a general memo
informing all employees of its implementation and to
hand-deliver it to each of them together with a copy of the
code of conduct. Furthermore, a copy of the code of conduct
should be posted at various locations in the workplace.
When
planning to apply a code of conduct in France, one should
distinguish between issues that are not strictly regulated
by French labor law and those which are governed by public
policy provisions. Only the first ones can be addressed in
codes of conduct.
2. Some issues that can be addressed in codes of conducts
in France:
Employment policies that may be subject to “globalization”
include:
Ø
Policies requiring employees to act with honesty, integrity
and a sense of ethics:
Companies can oblige their employees to faithfully comply
with the spirit and letter of all applicable laws and
regulations and to refrain from any illegal, dishonest, or
unethical conduct (e.g., integrity of data presented
to regulatory bodies, accounting integrity and compliance,
adherence to environmental legislation and standards, clear
process for employees to voice any concerns that they may
have in these areas).
Employees can be encouraged to seek guidance or raise
concerns directly with supervisors, company officers, human
resources or the legal department, provided that they are
not prevented from reporting violations of law or ethical
principles to employee reps., namely employee delegates (délégués
du personnel).
Indeed, under French employment law, personnel delegates
are entitled to bring a matter to the notice of the
management when they have reason to believe that there is a
violation of a person’s rights or individual freedoms,
including psychological harassment. It is strictly
prohibited to circumvent the prerogatives of employee
delegates.
Conflicts of Interest:
a conflict of interest is likely to occur when employees’
loyalties or actions are divided between the interest of the
employer and that of a third party (e.g.,
a competitor, supplier, customer or another employee).
Some of the most common conflicts from which employees
should refrain include:
¨
having any significant ownership interest in suppliers,
customers or competitors;
¨
working for a competitor, supplier, partner or customer as
an employee, consultant or sales agent, unless the employee
has been hired on a full-time basis;
¨
engaging in self-employment in competition with the company;
¨
acquiring any interest in property or assets of any kind for
the purpose of selling or leasing to the company;
¨
soliciting or accepting gifts, loans, commissions, fees,
favours or other compensation from suppliers, customers,
competitors or others with whom the company does business,
except casual entertainment or gifts of minimal value that
are consistent with accepted business practice.
However, an employee shall not be considered as facing an
actual or a potential conflict of interest by reason of his
close relationship with someone (a family member or close
companion) working with a competitor, customer, supplier, or
potential supplier.
In order to avoid conflicts of interest, employers are
allowed to require employees to sign and abide by an annual
conflict of interest form requesting employees, among other
things, to discuss with their immediate supervisor if they
are unsure whether a certain transaction, activity or
relationship constitutes a conflict of interest. A code of
conduct may also validly require employees, as a condition
precedent to employment, to sign a nondisclosure agreement.
Ø
Policies prohibiting employees from engaging in any act or
behaviour that is illegal under the laws of the US or the
host country:
A code of conduct can validly remind employees that they
should not engage in any act or behaviour that is illegal
under the laws of the US or the host country. However, in
the event of a conflict between US laws and the laws of the
host country, employees should not be punished for complying
with the laws of the host country.
In that case, any provisions of the code of conduct that are
in breach of the host country’s laws and regulations should
be suspended until they are reviewed in an attempt to bring
them in conformity with the legal provisions of the host
country.
Ø
Prohibition of employment discrimination:
Codes of conduct usually reaffirm that discriminatory
practices by employees will not be tolerated.
This should not come as a surprise since laws that prohibit
discrimination in the workplace are common to many
industrialized countries and have
been recognized in a number of international treaties.
This is the case in the European Union where, since
the early 90’s, European authorities have increasingly
turned their attention to fundamental human rights and
adopted three major anti-discrimination Directives:
§the Race
Directive 2000/43 of June 29, 2000, which establishes a
minimum standard of legal protection against discrimination
on grounds of racial and ethnic origin, in working life as
well as in other fields of social life;
§the
Framework Directive2000/78 of November 27, 2000,
which establishes a general framework for equal treatment
only in working life and vocational training.
§the
Equal Treatment Directive 2002/73 of September 23, 2002,
which sets the principle of equal treatment of men and women
in occupation and employment.
Based on the above EU regulations, the French
anti-discrimination arsenal has clearly broadened the field
of prohibited forms of discrimination as:
“no one can be eliminated from a recruitment process
[…], no employee can be discriminated against, directly
or indirectly […] due to his age, sex, lifestyle,
sexual orientation, age, family situation, membership or
non-membership, whether actual or presumed, of an ethnic
group, nation or race, of his political beliefs, trade union
activities, religious beliefs, physical appearance,
patronymic, state of health or disability”.
Therefore, a code of conduct providing general guidelines to
protect employees
against discrimination in the workplace and in every aspect
of their working life, including where individuals are
seeking employment or training , redeployment opportunities,
promotion, geographical reassignment or the renewal of their
contract is perfectly acceptable in France.
However,
discrimination laws may vary from one jurisdiction to
another because they are typically based on the host
country’s culture. Therefore, the section of the code of
conduct dealing with discrimination issues will have to be
drafted in compliance with French employment law.
Sexual
harassment
presents a unique challenge to companies going global for
the simple reason that differences in cultural norms often
make it difficult to reach a globally applicable definition
of what an “acceptable” and “unacceptable” conduct is.
Under
Article 2-3 of the E.U. Framework Directive, harassment is
defined as “any form of unwanted conduct related to any
of the grounds referred to in Article 1 [which] takes place
with the purpose or effect of violating the dignity of a
person and of creating an intimidating, hostile, degrading,
humiliating or offensive environment”. Under the
influence of the UK, the E.U. Authorities have accepted to
introduce the “hostile environment” concept into E.U
legislation.
However,
so far, France has strongly opposed the notion of “hostile
environment” in the workplace and therefore challenged the
implementation of the EU Directive for fear that this
concept could generate a flood of lawsuits overwhelming
French labor courts. The French legislation only provides
for “quid pro quo” harassment. As a result,
harassment originating from a hostile environment does not
constitute prohibited harassment in France.
Thus, in
France, the use by management of words with a sexual
connotation is insufficient to support a sexual harassment
claim if those statements did not result in a particular
professional damage to the plaintiff. To succeed in French
courts, plaintiffs must prove that the alleged sexual
harassment adversely affected their working conditions (e.g.,
ineligibility to promotion, decrease in their
remuneration …).
Generally speaking, codes of conduct dealing with sexual
harassment also establish enforcement and investigation
procedures. Those procedures should not circumvent the
prerogatives of employee reps. and in particular those of
the health and safety committee, which
employee-representative body plays an
important role in fulfilling various tasks that contribute
to the protection of the health and safety of employees in
the company, including in proposing preventive actions in
relation to sexual and psychological harassment and in
conducting investigations in cooperation with the employer.
Background checks: as
employees are recruited on the basis of their professional
skills and experience, it is legitimate for the employer to
gather relevant information on applicants throughout the
recruitment process. However, under Article L.121-6
paragraph 2 of the French labor Code, a prospective employee
must answer the employer’s questions during the recruitment
process in good faith, provided that the questions are
relevant and targeted to the job position to be filled. In
other words, codes of conduct cannot permit employers to ask
questions relating to the private life of prospective
employees, which are irrelevant to the job position to be
filled.
3. Issues that cannot be addressed in a code of conducts
in France:
Codes of conduct cannot circumvent the mandatory legal
provisions of the French labor Code or the collective
bargaining agreements.
Neither can they breach the legal provisions of the
company’s internal regulations (so called “règlement
intérieur”), which is a mandatory document in companies
with at least 20 employees. Internal regulations are a
highly regulated set of
measures taken in application of disciplinary as well as
health and safety standards. It is enforceable only after it
has been submitted to employee reps and approved by the
labor authorities. In addition, health and safety committee
must be consulted on all provisions relating to health and
safety.
The company’s internal regulations must be posted in a place
accessible to all employees and two copies of same must be
filed with the labor Court.
Any
provisions of a code of conduct that are inconsistent with
the company’s internal regulations are null and void by
operation of law.
As a
result, provisions of codes of conduct that deal with issues
that should be addressed in the internal regulations, in
particular those concerning discipline and health and safety
issues, should be removed, unless they are addressed in such
general way that they do not breach any French public policy
provisions.
Ø
Policies regulating employee discipline and termination:
Almost all large US companies have some form of rules of
conduct and performance standards which set forth the
grounds for termination (i.e., theft, dishonesty,
workplace violence and acts of moral turpitude).
However, policies that attempt to establish uniform
standards for discipline and evaluation are not subject to
globalization, as disciplinary measures against employees
are not enforceable unless they are provided for in a
company’s internal regulations, which place procedural
limits on an employer’s disciplinary power.
The French position reflects the difference in perception of
employment relationships between France and the US. In the
US, employment relationships are generally regarded as
private arrangements voluntarily entered into between
employers and employees, whereas the French believe that
there is no such a thing as an employment contract
negotiated on an arm’s length basis between an employer and
an employee. In France, it is a common belief that employees
must be protected (over protected?) against employers and
sometimes even against themselves. As a result, French
employment laws generally consist of a comprehensive and
paternalistic set of public policy provisions, which is even
more employee-friendly than … California law.
Contrary
to what happens in the US, at-will termination is prohibited
in most industrialized countries and in any the EU
countries.
In France as well as in Germany, employees may only be
terminated for “just or good cause” (e.g.,
a deficient job performance or a business necessity),
or some related concept requiring an objective and
reasonable basis for deeming the employee unsuitable for
continued employment. A cause
is “genuine” when it is true and objective and “serious”
when the cause for the dismissal makes it impossible to
continue the employment relationship.
Furthermore, if collective dismissals are culturally
accepted in the US as a routine part of doing business,
European employment laws have traditionally approached the
restructuring of a business with a strong emphasis on
minimizing the effects on the workforce. It does not mean
that implementing a reduction in force in Europe is
impossible. In most if not all European countries,
redundancy or job elimination or restructuring due to
economic, business or technical reasons unrelated to the
performance or conduct of the employee constitute a valid
ground for terminating an employment relationship,
regardless of whether the redundancy affects a single
employee or a group of employees. It only means that in a
large majority of E.U. member states, dismissals for
economic reasons are prohibited where other positions are
available for reassignment.
Ø
Policies setting wages, benefits and working hours:
US
employers are often faced with the lack of uniformity of
legal provisions on wages and employee benefits in foreign
jurisdictions: salaries paid to employees are generally
lower than in the US. Therefore, in order to compensate
employees assigned overseas for their potential loss of
income, many multinational companies have adopted
compensation policies that apply on a global basis and
address cost of living adjustments to counter inflation in
the local economy.
However,
a global policy on wages should not go too far into the
details for the following reasons:
·some
countries may require the payment of bonuses or additional
compensations such as an extra month’s pay each year and
treat them as an element of the employee's gross
remuneration;
·some
jurisdictions like France do not allow payment in US$ if the
employment contract does not have any particular connection
with the US;
·wage
payment frequency and wage deductions for social security
contribution, are often strictly regulated: in France,
remuneration must be paid on a monthly basis and social
security contributions are much higher than in the US as the
employer’s share may exceed 50% of the gross remuneration of
the employee, while the employee’s share roughly equals 20%.
As a
practical matter, US employers should also keep in mind that
in some countries like France, most collective bargaining
agreements contain salary grids specifying the minimum
salary that an employee in a particular job category must be
paid based on the point system set forth in the agreement’s
salary hierarchy. An employee covered by such a collective
bargaining agreement must receive no less than the minimum
wages set therein.
Furthermore, in some countries, the ability to freely
negotiate salary may be legally restricted: in France, there
is a statutory minimum wage which is adjusted to changes in
the monthly consumer price index in order to guarantee that
the employees receiving the lowest salaries do not lose
purchasing power.
The US
is one of the few industrialized countries not requiring
employers to grant vacation and holiday (whether paid or
unpaid). When paid holiday is granted, US companies
determine vacation time based on length of service, while
vacation time in other countries is often mandated by law,
regardless of length on the job. Therefore, in many
jurisdictions, holiday benefits granted to employees will be
considerably higher than those provided in the US (five
weeks per year in France).
In E.U.
countries, the number of regular working hours (on a daily,
weekly and/or monthly basis) and overtime hours that an
employee can work is regulated by national law. Furthermore,
working hours are generally longer in the US than in Europe:
in France, the regular workweek is 35 hours.
Ø
Policies regulating health and safety in the workplace:
Many companies have adopted global employment policies that
address employee health and safety issues such as:
Heath and safety rules and procedures: under the French
safety and security regulation, employers must draw up a
specific document identifying and assessing occupational
hazards and defining measures to prevent work accidents, in
collaboration with the
health and safety Committee. This committee can submit to
the employer proposals of preventive measures
to maintain safe and healthy working conditions.
Illegal drug and alcohol policies and testing:
in France, drug tests are not specifically regulated as it
is commonly agreed that those tests are contrary to the
dignity of the person. However, according to the National
Bioethical Agency, employees may be drug tested by
Occupational Medicine if they perform activities that are
hazardous to themselves, their co-workers and/or any third
parties. Furthermore, in companies where the use of drugs
could be particularly dangerous, systematic drug tests may
be accepted. As there is no official list of “risk
positions”, it is up to employers to establish a list of job
positions requiring systematic drug test enforcement, upon
consultation with employee representatives and occupational
medicine.
No-smoking policies:
no-smoking policies are governed by the Law of January 10,
1991 called “the Evin Law” that prohibits smoking in public
places except in designated smoking areas. Thus, codes of
conduct cannot contain provisions that would be inconsistent
with this law. The smoking ban applies in all enclosed and
covered workplaces or premises available for use by the
employees, such as lobby areas and reception areas,
lunchrooms, conference and training rooms, rest rooms and
areas, premises used for recreation, culture or sport,
sanitary facilities. Open space offices and offices shared
by two or more employees are also considered as premises for
collective use where smoking is prohibited. The employer may
face criminal liability (punished by the 7,500 euro fine for
“fifth class” offences), if smoking areas are not compliant
with the provisions of the French Code of public health,
ventilation requirements are not met or appropriate signs
(indicating no-smoking and/or smoking areas) have not been
posted.
IV. Privacy in the workplace, an example of the
difficulties faced by companies in applying world-wide
standardized codes of conduct:
While
whistleblowing policies are generally considered in the US
as a positive measure that helps expose fraudulent
practices, French employees baulk at the thought of an
internal policy that they consider provides a “carte
blanche” for malicious false accusations and vindictive
reports.
Therefore, one should not be surprised to hear that the
extra-territoriality of the American Sarbanes-Oxley Act
(SOX) raised some concerns in Europe and in particular in
France.
By two decisions dated May 26, 2005, the
French Data Protection Agency (“CNIL”),
which is responsible for authorizing automated (i.e.,
not paper-based) whistleblowing procedures in France, denied
McDonald’s France and the CEAC (Compagnie Européenne
d’Accumulateurs) the authorization to implement
whistleblowing procedures that would have allowed their
French employees to report, through
anonymous employee hotlines, any suspected or unethical
conduct in the workplace. The French Data Protection Agency
objected to the fact that the employees concerned by the
denunciation would not be immediately informed of the
collection of data questioning their professional integrity
and would not be in a position to oppose such collection,
which would be in violation of the French Data Protection
Act dated January 6, 1978.
The
French Data Protection Agency also put forward that there
are other means available to French employers to secure the
enforcement of legal provisions and the company’s rules. In
particular, the Agency pointed out that useful means to
ensure corporate governance enforcement included providing
adequate information and training to the staff, and
involving the company’s auditors, the French Labor
Inspection or Labor Courts.
In a
ruling dated September 15, 2005, the French Labor Court of
Libourne held that a note requiring employees were to report
cases of fraud or embezzlement by calling an ethic hotline
must be removed from the workplace because:
-“when
simply reading the note, it becomes clear that information
that may be provided anonymously through a free telephone
line includes, but is not limited to, accounting fraud or
embezzlement (which, by the way, are violations of law that
can hardly be detected by employees) and can also refer to
all facts “violating ethical principles, such as fraud or
theft, or the non-compliance of accounting regulations of a
more general nature”;
-
irrespective of the way the data collected in this process
are actually treated later on, such a service regulation
involves the risk for the employees who might be anonymously
denounced of having to face an internal investigation
entailing possible sanctions, without being able to exercise
their right to defend themselves;
-
furthermore, the procedure in dispute and the risk of
calumnious denunciation they involve seem disproportionate
to its purpose and unfit to prevent possible embezzlement;
-the
individual liberties of those employees who fall victim of
anonymous denunciations are at risk”.
Therefore, a real brain-storming started for the French
subsidiaries of US companies on how to comply with SOX
provisions without violating the French Data Protection Act
of January 6, 1978?
After discussions with the SEC and the European Commission,
as well as various US hotline providers and other
professional organizations, the CNIL issued, on November 30,
2005, recommendations for whistleblowing procedures, in
which it provides a number of guidelines.
On December 8, 2005, the CNIL rendered a decision that seems
to offer a compromise between US and French legal
requirements, provided that companies agree to comply with
the following principles:
·
Matters that can be reported are limited
to the whistleblowing systems based on French statutory or
regulatory obligations of internal control in the financial,
accounting, banking and anti-bribery areas, as well as to
the whistleblowing systems implemented in the accounting and
auditing sectors by companies falling under the SOX
regulation.
·
Discouraging anonymous denunciations:
the whistleblower must identify himself/herself but his/her
identity is kept confidential by the organization handling
whistleblower alerts.
·
The data that may be processed must be limited to:
-
the identity, job title and contact information of the
whistleblower, the persons incriminated and the persons
involved with the collection and/or processing of such
alerts;
-
the reported
facts;
-
elements collected to verify the reported facts;
-
account or summary of the verifications made;
-
the action taken in response to the alert.
·
Limitations on the data that can be communicated:
the persons in charge of collecting or processing the data
are recipients of all or part of the data to the extent that
such data is necessary for the performance of their duties.
This data may be communicated, within the group of companies
to which the organization belongs, to the persons
specifically responsible for managing whistleblowers’
alerts, insofar as such communication is necessary for the
verification of the whistleblower’s alert or results from
the organization of such group. In the event an external
service provider is hired to collect or process
whistleblowers’ alerts, the persons specifically responsible
for these assignments within the external service provider
will only have access to all or part of the data to the
extent of their respective powers. In the event that an
external service provider is designated to manage all or
part of the whistleblowing system, he specifically agrees,
by virtue of a written contract, to refrain from using the
data for illegitimate purposes, to ensure confidentiality,
to comply with the time limits for data storage, and to
destroy or return any and all written or computerized forms
of personal data upon termination of services. In all cases,
the persons responsible for collecting and processing
whistleblowing alerts shall be limited in number,
specifically trained, and bound by a reinforced duty of
confidentiality by virtue of a written contract.
·
Transfer of personal data outside the E.U.:
The transfer of personal data to non-E.U. countries that do
not provide adequate protection, as defined in the French
Data Protection Act of 6 January 1978, is subject to the
requirement that the legal entity where the recipient of
the personal data works has signed the Safe Harbor
framework, and has expressly included all Human Resources
data in the scope thereof or, failing that, that the
recipient has entered into a transfer contract based on the
model clauses issued by the European Commission, or the
group to which the affected entities belong has adopted
internal regulations that have been previously approved by
the CNIL as affording an adequate level of protection of
privacy and fundamental human rights.
·
Duration of data storage:
the storage of the data contained in the whistleblower’s
alert, which is deemed to be outside the scope of the
whistleblowing system, should be destroyed or archived
immediately. Data contained in a whistleblower’s alert
giving rise to verification should be destroyed or archived
by the organization responsible for managing such
whistleblowers’ alerts within two months from the closing of
verification operations if no disciplinary procedure or
legal proceedings are initiated. Once disciplinary actions
or legal proceedings are initiated against the person
incriminated in the alert or against the author of an
abusive alert, the organization responsible for managing
alerts must keep the data relating to such alert until the
end of the said actions or proceedings. Data that must be
archived should be kept in a separate and distinct
informational system with restricted access, for a period
not to exceed the statute of limitations for bringing legal
action.
·
The identity of the whistleblower should remain confidential
to prevent retaliation.
·
Any abuse of the whistleblowing system may result in
disciplinary
as well as legal action against the abusive whistleblower.
Good faith use of the whistleblowing system, even if the
facts are later proven inaccurate or are not acted upon,
will not expose the whistleblower to any disciplinary
sanctions.
·
Employees concerned by the denunciation
should be notified of the information retained
by the person responsible for the whistleblowing system as
soon as his/her personal data is recorded, so as to allow
him/her to oppose the processing of such data. This
notification, which is to be provided in such a way as to
ensure proper delivery to the relevant employee, must
specify the entity responsible for the whistleblowing
system, the acts of which s/he is accused, the departments
that may receive the alert, as well as how s/he may exercise
his/her right to access personal data to correct or delete
any inaccurate, incomplete, misleading or outdated data. The
incriminated person may not, under any circumstances, rely
on his/her right to access to obtain information concerning
the identity of the whistleblower.
Conclusion
Despite legal, cultural and political barriers, more and
more global businesses are considering implementing global
codes of conduct to create a common corporate culture and
increase business efficiency.
However, except for some employment policies (e.g.,
policies requiring employees to act with honesty, integrity
and an ethical sense or policies prohibiting employees from
engaging in any act or behaviour that is illegal under the
laws of the US, the host country or international law), most
employment policies face, sooner or later, public policy
provisions which may not be circumvented in any case (e.g.,
policies establishing uniform standards and criteria for
discipline and termination or policies establishing uniform
standards with regard to job eliminations, layoffs, plant
shutdown, policies establishing fair wages, benefits and
compensation and reasonable work hours…). As reflected in
the whistleblowing “à la française”, the best way to
reconcile French and US legal requirements is through an
efficient cooperation between authorities on both sides of
the Atlantic.
