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Policing Abroad

In the case of overseas misconduct, whose law prevails? Theirs? Ours? The answer is there is no simple answer.

Thursday, November 1, 2007
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They had him dead to rights. Or so they thought. The U.S. firm that employed him in one of its offices in Germany intercepted his e-mail and got the evidence it needed to prove that he was conducting his own business on company time, just as suspected.

But instead of being able to fire the employee, or at least punish him, the company itself was charged with a crime.

"The 'proof' wasn't obtained legally," says Don Harris, president of HR Privacy Solutions, a New York-based consulting practice that helps large multinational companies address global privacy challenges. "You don't expect to have much privacy in American workplaces, but you can't say that about Europe."

The German case involved one of his clients, a multinational banking institution, which he declined to identify. No one went to prison in the incident, but the situation was very serious for the company, he says.

"A common phrase in Europe is, 'The right to privacy doesn't stop at the doorstep of the workplace,' " he says. "It's different than in the United States."

What is a company operating outside the United States supposed to do when it suspects an employee of wrongdoing?

The answer is not simple; it varies by country and by type of suspected wrongdoing.

And there is growing pressure on human resource departments to take a leadership position in understanding at least what questions to ask, and how.

"You need to proceed very cautiously," says Harris. "Privacy laws are stronger in Europe than they are here, so investigating allegations of wrongdoing may require different strategies abroad than they do here.

"It doesn't mean an employer can't carry out investigations, but there are legal requirements that have to be satisfied. They vary country to country, but in Europe, there tends to be a single law that encompasses all types of privacy issues, in all contexts and situations, while in the United States, privacy laws are focused on a particular context or technology -- for instance, a law regarding video privacy, a law regarding medical records privacy. Typically, a law is enacted here after an abuse occurs.

"It's a challenge for any one person, or even a whole HR department, to try to keep up," says Harris. "You need to get good local counsel that understands the local laws.

"And even then, don't expect things to go smoothly."

Mulling the Misconduct

There are three basic kinds of wrongdoing that employees are likely to be accused of abroad. One is the straightforward workplace complaint involving harassment or discrimination.

Another might involve a U.S. government contractor working abroad who is accused of being involved in a crime in which the U.S. government is the victim.

The third involves an employee accused of engaging in criminal conduct -- murder, assault, stealing from the company, etc. -- in a foreign country.

Each kind is handled differently, according to Douglas Mishkin, co-chair of the Employment Law Practice Group of the Washington-based law firm Patton Boggs.

"In general," says Mishkin, "if someone engages in criminal conduct in a foreign country, that person is subject to the criminal code of that country," although the U.S. Foreign Corrupt Practices Act prohibits the bribery of foreign government officials by U.S. citizens.

"The real question that HR executives have to consider, however," adds Mishkin, "is: What is the liability of the company if one of its employees engages in illegal conduct? And the answer to that is -- it depends.

"If somebody engages in mass violence and kills people, if the person was an employee of the company, the company may be faced with liability issues. Did it negligently hire this person? Was security negligent or nonexistent at the time the incident occurred?

"There can be other factors, too," he says. "Maybe our laws will mean greater recovery here, or maybe the negligence occurred here although the incident occurred there. It's tricky, and you need counsel familiar with the laws of the particular country you are in."

On the other hand, while allegations of criminal activity may be treated differently from country to country, three major U.S. employment laws have applications to U.S. companies abroad.

They are Title VII of the Civil Rights Act of 1964, prohibiting discrimination in employment based on race, color, national origin, religion or sex; the Americans with Disabilities Act, prohibiting discrimination based on disability or perceived disability and requiring employers to provide "reasonable accommodation" to enable an employee to perform his or her job; and the Age Discrimination in Employment Act, which makes it unlawful to refuse to hire or to fire, or to discriminate against people because of age.

"HR executives have to understand that [just] because you have people abroad, [that] doesn't mean your workplace obligations are different there than they are here," says Mishkin. "What this means in terms of investigating allegations of wrongdoing is that HR executives have to ask themselves, 'If this occurred at home, what would I do?'

"Sometimes we're faced with cultural differences," Mishkin says. "For instance, what happens when you take an employee from New York and send him or her to some place where everyone thinks it's OK to touch each other?

"Usually, the cross-cultural issues we bump into have to do with gender; in some countries, the treatment of women is not what it is in this country; sometimes, it's the reverse [in terms of female independence, opportunity and protection of rights]," he says. "We bring in somebody from elsewhere and their cultural norms are stricter than ours.

"A person who allegedly engages in harassment might say, 'Where I come from, this is considered appropriate behavior,' but the HR executives have to say, 'I don't care what happens there; I care what happened here.' "

Like Harris, Mishkin says privacy laws abroad, in general, are stricter than they are here, and therefore sometimes thwart attempts to investigate possible wrongdoing.

"Intellectual property stuff is a very big deal these days, and it's something we're all dealing with. It's not an international issue per se because of the ease with which you can move documents," he says.

"You can e-mail stuff to your home computer or to a computer 15,000 miles away with the same ease. It's something that haunts us in the 50 states as well as abroad.

"In Europe, that's a big deal," he says. "It's not such a big deal here. European lawyers have very strong data-protection issues that are not necessarily a big thing here."

Staying Savvy

What is essential for HR executives in multinational companies abroad is to be knowledgeable about both the legal and the political systems in the countries in which they are working, according to Susan Gaskell, principal of Gaskell Consulting in Reading, Mass.

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Gaskell, who worked in human resource management for 25 years at the Massachusetts Institute of Technology in Boston, currently is a faculty member at Suffolk University in Boston, where she coordinates the Human Resource Graduate Program. She recently developed a certification program in global HR at Suffolk, which, she says, is a burgeoning field because so many companies are going global.

"When conflicts arise in a workplace abroad," she says, "people of other cultures tend to think the issue is different from what we in the United States think it is. So it's important to help them see things in terms of their own cultural understanding. Some countries don't think the way we do about sexual harassment, for instance. So, a huge amount of study and education needs to be done ahead of time, and HR needs to lead the process."

In addition to being knowledgeable about the culture and the formal, written code of the country, multinationals should closely watch the political activity occurring in the foreign countries where they operate, she says.

"Many multinationals actually engage in political activities to gain an advantage," says Gaskell.

"For example, it is not unusual in some countries where organizations desire to do business to expect to have to pay sizable 'fees' [or bribes] in order for the existing laws and regulations to be relaxed so that the business may be granted exceptions or special privileges that will allow their presence. Some businesses, such as those found in France, actually budget for these fees up front, accepting them as a cost of doing business."

Be that as it may, many multinational companies operate within their own corporate frameworks, despite what the prevailing local custom is.

"Having practiced HR in South America and Asia, I can tell you that, generally, large companies have [more punitive] policies and procedures than the law requires or local custom allows," says the recently retired HR vice president of a major international financial services company, who asked not to be identified because he is no longer with the company.

"I had a situation in one country [in which generating] business in this male-dominated industry required bringing customers to, let's call them 'strip clubs,' where various degrees of service could be provided," he says. "It was culturally acceptable in that country for that kind of behavior. But our policy won't permit it, so we took action -- warning people that it was against our code of conduct. We had to sanction people and even fire some, and I was comfortable doing it because it was the right thing to do."

According to the HR executive, most multinational companies go by corporate policy unless local law requires it to do otherwise, as is the case in several Asian countries.

"In some instances, in the American context, we may not be obligated to take certain actions, but in the Korean context, we might have to. Or if someone we engaged violated Japanese law, but not U.S. law, we would have to report it to Japanese securities officials.

"Sometimes you have to take action right away. In some instances, in the U.S. context, we might decide to fully investigate alleged wrongdoing in-house before bringing the matter to authorities, while in Singapore, if you have any suspicion, you have to report it to the Ministry of Security right away.

"It makes the HR process quite complex, which is why you should have somebody on staff who is an HR expert in the geography in which you are operating."

HR executives need to know how specific regimes and governments operate and how strong their judicial systems are, he adds.

"Say a Japanese employee figures out how to embezzle money from us," he says. "From a felony perspective, we can prosecute that individual and he will be punished in Japan. He violated our securities law, so we could prosecute in the United States -- but to what purpose? It just depends."

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