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HR Ethical Dilemmas

How should HR professionals respond if company leaders ask them to do something illegal or unethical?

​Ralph Kellogg recalls being asked early in his HR career by an operations manager to fire a Black employee, ostensibly because the woman didn’t “represent the company well.” 

Kellogg, who holds a SHRM-SCP, says he realized what the manager meant was, “We don’t like her because she’s Black.” Uncomfortable with the request, Kellogg turned to an outside mentor, who advised him there could be legal ramifications if the employee were terminated without justification.

Kellogg also asked himself how he would feel if he fired someone who didn’t deserve it. He decided, “I’m not going to ruin someone’s life.”

He told his higher-ups he couldn’t do what they had asked, and a few months later he left the organization.

“At the end of the day, it’s your choice to act unethically or illegally,” says Kellogg, who is now assistant vice president of HR for Lutheran Family Services of Nebraska in Omaha. “If it seems slimy or it seems underhanded, there has to be a better way to address the situation.”

Facing ethical or moral dilemmas can be par for the course for HR practitioners, who may also sometimes feel as though they’re squeezed between what their higher-ups want them to do and what the law requires.

“HR professionals are often caught between the hammer and the anvil,” says R. Scott Oswald, managing principal at The Employment Law Group P.C., based in Washington, D.C. “They potentially put the careers of the people they advocate for in jeopardy—or their own career.”

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Don Herrmann, SHRM-SCP, says the most common ethical quandary he has faced during his nearly 40 years working in HR involves being asked to reclassify employees as exempt so the company doesn’t have to pay those employees overtime.

Often, the people making that request don’t understand who qualifies as an exempt employee, says Herrmann, who now heads Herrmann Advantage Consulting in Little Chute, Wis.

His response typically is to ask business leaders what the goal is. Usually, they say they want to reduce overtime costs. But since accomplishing that through a change in employee classification could run afoul of the federal Fair Labor Standards Act (FLSA), he has suggested other options, such as spreading out the work or better managing employees’ work time. 

Herrmann was also once asked to attest that employer contributions were made to workers’ 401(k)s when they weren’t. He told his boss he couldn’t do that because if he were caught, he would lose his ability to administer ­­­401(k­)s. The boss initially pressed the point. It wasn’t until ­Herrmann replied that he was being asked to break a federal law that the request was dropped. Ultimately, the company bought out Herrmann’s contract.

Despite losing his job, Herrmann says, “I don’t know of any other way to handle that situation.” Later, the business owner and the chief financial officer were prosecuted for falsifying 401(k) contributions.

Karen Young, SHRM-SCP, recalls working as an HR manager for a manufacturer and being told not to report an employee’s workers’ compensation claim or send the worker for treatment. While she and the plant manager both thought the worker was faking the injury, she knew “the right thing to do is report the claim, let the insurance company decide if it’s fake and then take appropriate disciplinary action against the employee,” she says.

Young followed that course of action and later received a written warning for exhibiting a lack of people skills. She asked what she could have done better but received no response.

When the plant manager didn’t receive his full bonus due to the fact there had been several workers’ compensation claims, Young says she got a second written reprimand and then was fired.

“Unethical things do happen,” she says. “I made the choice this was no longer acceptable to me.”

As a result of that incident, Young created her own company, HR Resolutions, a consultancy based in Harrisburg, Pa. She still encounters business leaders who push the boundaries of ethics and legality, but she simply chooses not to work with them. For example, when a client refused to pay employees properly under the FLSA, Young says, she wished the client well and declined to work together again. 

FRAME YOUR RESPONSE

W hen HR professionals are concerned that they’re being asked to do something illegal, how they respond can be just as important as what they say.

“It’s largely about trying to use the right sort of framing,” says James Detert, a professor of business administration at the University of Virginia and author of  Choosing Courage: The Everyday Guide to Being Brave at Work  (Harvard Business Review, 2021). “When you use language that evokes a sort of personal threat, you’re immediately in an antagonistic type of conversation.”

Dana Sumpter, an associate professor of organization theory and management at Pepperdine University and a former HR professional, suggests asking questions to help leaders “expand beyond their stereotypes and notions.” That way, you can nudge leaders in the direction they should be going, she says, and coach them on the long-term impact of their choices.

Detert recommends working to help business leaders understand that avoiding questionable behavior is in their own best interests.

Rather than saying the action being proposed is illegal or unethical, he recommends using phrases such as “I’m concerned that’s not who we want to be,” “I’m concerned that’s not consistent with our policy” or “That action could have ramifications we might not want.”

Try to focus on the interests executives care about, such as how the proposed action might affect employees or the organization’s reputation, Detert adds.

“If they aren’t good people—greedy or self-interested—play to that,” he recommends. An HR professional might say something like, “I’m concerned how this could turn out for you” or “That action might undermine the organization’s performance.”

“Know what the target cares about,” Detert says. “Frame it as in their self-interest.” —S.L.

A Growing Concern

Ethically questionable behavior “is a problem, and it’s getting worse,” says G. Richard Shell, a professor of legal studies and business ethics and management at the Wharton School of Business at the University of Pennsylvania and author of The Conscience Code: Lead with Your Values. Advance Your Career (HarperCollins, 2021).

With the rise in remote work during the pandemic, employees aren’t being observed as they normally would be, so “people kind of experience anonymity of conduct,” Shell says.

In times of high stress such as the pandemic, people are more likely to make quick decisions and less likely to think things through, which can lead to unethical choices, adds Dana Sumpter, an associate professor of organization theory and management at Pepperdine University and a former HR professional.

In 2020, 30 percent of 3,320 U.S. employees surveyed said they felt pressured to compromise their workplace’s ethics, according to the 2021 Global Business Ethics Survey Report by the Ethics & Compliance Initiative. That was 14 percentage points higher than in the organization’s 2017 survey. “Pressure has consistently increased over the last decade,” the authors of the report wrote. “Employees were more likely to feel pressure to compromise their organization’s ethics standards (e.g., to ‘bend the rules’) during periods of organizational change.”

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Almost half of employees surveyed last year said they observed misconduct that violated their organization’s ethics standards; 86 percent of them said they reported all or some of that behavior, up 17 percentage points from 2017. 

At the same time, retaliation has reached an all-time high, with almost 80 percent of respondents saying they experienced retaliation for reporting wrongdoing, up from 44 percent in 2017. Middle and top managers were far more likely than nonmanagers to say they experienced retaliation after reporting bad behavior.

Follow the Code

When a business leader or supervisor makes a request that doesn’t sit well, Oswald recommends consulting the organization’s employee handbook.

If fulfilling the request would result in the violation of a policy in the handbook, the HR professional can point that out when sharing concerns with the person making the request.

If that doesn’t make a difference, Oswald suggests escalating the issue to the next-highest-level executive in the organization. 

“The more sunshine the HR professional is shining on the problem, the greater the disinfectant,” he says.

Many organizations also have codes of conduct or codes of ethics, says Peter Cassat, a partner in the Washington, D.C., law office of Culhane Meadows PLLC. “When they are well done, they speak to what an employee should do” in difficult situations. 

Such codes also might contain an ethics hotline for employees who want to report potential ethics or conduct violations anonymously, Cassat says.

Before Young went into business for herself, she would try to have honest conversations about her concerns with her companies’ executives. Specifically, she would bring up the organization’s code of ethics, asking, “Is this action in line with our company values?” She also would mention statutes and regulations governing the business. If that went nowhere, she would go to the company president and make her case.

Those who make questionable requests might be looking for ways to save money or boost profits, Herrmann says, but they often don’t understand the law. Instead of accusing the individual of wanting to do something illegal, he advises, an HR professional is better off asking what the individual wants to accomplish.

“All of a sudden, you go down a different path instead of one that’s confrontational,” he explains. That way, “you’re seen as helpful, not a barrier.”

If you’ve taken time to build relationships with business leaders, Sumpter says, that conversation will go more smoothly. If you disagree with something an executive wants done, “the better you know each other, the more likely they are to be swayed by what you have to say,” she explains. She advises practicing your response in advance.

“Most people have a strong moral, ethical compass,” says Amber Karns, an associate at the Houston law office of Munsch Hardt. “Your loyalty is to the organization, not to one individual.”

4 STEPS TO A SOUND DECISION

If an HR professional is trying to figure out how to proceed in a situation that might be illegal or unethical, G. Richard Shell, a professor of legal studies and business ethics and management at the Wharton School of Business at the University of Pennsylvania, recommends following the OODA Loop, a decision-making model developed by an Air Force colonel.

The four steps are:

  • Observe.  Observe and acknowledge that there is potential misconduct.
  • Orient.  Orient and own it. That means telling yourself, “This is my responsibility. I have to do something,” Shell explains.
  • Decide.  As you contemplate what you want to do, survey available options and talk to others whose advice you value. “Never handle this kind of problem alone,” he says.
  • Act.  Carry out the decision. Bring a trusted ally with you. That provides a witness to the conversation, which increases your power exponentially. “When you’re all alone, it’s you against the world,” Shell says.

The “loop” comes in when you look at the response to what you said or did and adjust your next move accordingly. Often, Shell says, “it requires more than one round to successfully manage [the outcome].” —S.L.

Seek Legal Advice

An HR professional who isn’t able to persuade a business leader to choose the right path may have a duty to alert the organization’s compliance officer or in-house counsel to the potentially unlawful behavior, Cassat says. 

He recalls a situation when a client’s chief people officer refused to grant her administrative assistant time off under the Family and Medical Leave Act (FMLA) for a serious medical condition. Another HR team member reported the violation to Cassat, and he had a more senior officer approve the assistant’s request.

HR professionals also could bring their concerns to the organization’s outside counsel.

“I’m surprised at how infrequently they go to the legal advisor for a company. Lawyers by nature are risk-averse creatures,” Oswald says, adding that most executives won’t go against counsel instructions. 

Another option for HR professionals is to consult with an outside lawyer, Oswald says. Most attorneys will offer a free initial consultation, and the information shared is privileged and confidential.

If all else fails, an HR professional who feels stuck can take the action ordered by the boss under protest and file a written objection, Oswald says. 

“Protect your backside,” he says. It can help shield you from personal legal exposure.

Ethics graphic.png

Protective Measures

Oswald says HR professionals can face personal civil liability for violation of certain laws, including the FLSA, which covers such topics as minimum wage and overtime pay, and the FMLA, which requires employers to provide employees with unpaid leave for certain family or medical reasons. 

FLSA violations, among others, could also result in individual criminal liability. 

An HR professional who reports unlawful behavior to outside authorities is protected by various federal laws, Cassat says. One is the Whistleblower Protection Act, which covers federal government employees who report a suspected violation. The U.S. Department of Labor also has various protections, including under the Occupational Safety and Health Administration and the Wage and Hour Division.

If the HR professional is operating under a good-faith belief that there has been a potential violation of the law and the organization takes adverse action against the HR practitioner, it’s considered retaliation, Cassat says.

Most states have anti-retaliation provisions, as well, Karns adds. For example, the Texas Supreme Court has ruled that it is illegal to fire someone who refuses to take part in illegal activity. “Sometimes HR is the last line of defense,” she says.

“HR should be the conscience of an organization,” Young adds. “That’s our job.”  

Susan Ladika is a freelance writer based in Tampa, Fla.

Illustrations by Shutterstock.

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Ethical Issues in Human Resource Management

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ethical issues in human resource management case study

  • Alan Kitson &
  • Robert Campbell  

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There is little mention of ethics in the current literature in the United Kingdom relating to either human resource management or personnel management. The term ‘ethics’ is hardly referred to in the most popular HRM/Personnel Management texts (Sisson, 1989 and 1994; Torrington and Hall, 1987; Towers, 1992); the word does not appear in any of the indexes. A recent United Kingdom text by Beardwell and Holden (1994) titled Human Resource Management: A Contemporary Perspective does explicitly refer to ethics in relation to management, learning and development and job design, but devotes no more than part of four pages (out of 687) to the issue. As far as business ethics textbooks are concerned human resource management is treated only narrowly (see Chryssides and Kaler, 1993; Donaldson, 1989). There is the occasional chapter on the workplace but where this is the case the discussion usually focuses on employee rights in general or on some novel situation such as an employer’s use of polygraph tests to access employee honesty (Beauchamp, 1989).

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Watson, T. (1994) ‘Recruitment and Selection’, in Sisson (1994).

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Kitson, A., Campbell, R. (1996). Ethical Issues in Human Resource Management. In: The Ethical Organisation. Palgrave, London. https://doi.org/10.1007/978-1-349-24405-8_14

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