Violations, Fines, and Legal Fees: Can You Defend Your Compliance Approach?


Violations, Fines, and Legal Fees- Can you Defend Your Compliance Approach

Every year, in an effort to emphasize the seriousness of corporate compliance, state and federal agencies increase fines for violations of regulations that ensure the fair treatment of employees and consumers. Furthermore, lawsuits against an organization for damages of noncompliance can be costly and devastating to a business. It’s crucial that entities not only implement and enforce an effective corporate compliance program but that they are also able to defend it to enforcing agencies, such as the Equal Employment Opportunity Commission (EEOC), Federal Trade Commission (FTC), and Department of Justice (DOJ), as well as in a court of law.

Fines for violations are often stated in regulations, but legal fees and damages can vary. Generally, monetary damages can be categorized as follows:

  • Compensatory damages – Awarded to victims who can show that an entity’s breach of duty resulted in their loss or injury. Usually includes repayment of out-of-pocket expenses such as medical bills.
  • Liquidated damages – Monetary reimbursement for a loss or injury to a person’s rights or property, awarded by a court decision or by a contract breach stipulation.
  • Punitive damages – Financial retribution awarded to punish entity for reckless or unconscionable actions or conduct.

Documented Operational Policies and Procedures

In order to defend its corporate compliance approach, a business must be able to show that it has documented, implemented, and uniformly enforced policies and procedures in accordance with agency guidelines. Policies and procedures should be:

  1. Understandable or written in a way that is easily comprehensible to employees, including localized translations for those who speak a different language. Giving examples that are specific and relatable to the work environment can help reinforce expected conduct.
  2. Clear about consequences for violations. A company must also make sure that it follows through in enforcing stated consequences and that it applies them fairly and uniformly.
  3. Communicated to all applicable individuals, including employees, managers, and vendors. Communication—which can be done through training, employment manuals, contracts, or written notification—should be repeated at least annually or any time there is a change to a policy or procedure.

It is prudent to obtain proof that policies and procedures have been conveyed by having recipients acknowledgment, whether electronically or in writing, that they have received the information and understand what is expected of them.

Remember that policies can be viewed as a form of contract in a court of law, so businesses must make sure that they don’t imply a meaning that wasn’t intended (e.g., referring to employees as “permanent employees” or indicating that terminations will only occur for specific offenses).

Proof of Training

Training is an integral element of any corporate compliance program. It doesn’t matter how well the program is structured; if employees don’t know their roles and expected conduct, then the program won’t be successful and will subject the business to unnecessary risk.

It’s been said that we should never stop learning, and this is especially true in the workplace. Training should be continuous to reinforce and update information. It’s also essential that training is adaptive, meaning that it is customized to the learner and the environment in which they work. A “one size fits all” approach is not as effective because individuals will lose focus and retention when the information they are given isn’t applicable to their situation. Likewise, every person learns in a different way and at a different pace, so when possible, it’s important to structure the training to the learner. This will ensure that training is done efficiently and total comprehension is achieved.

A training program should also evolve as the workplace evolves and new situations arise. In this rapidly changing world, programs can quickly become obsolete if they aren’t continuously updated. Working with a trusted third-party compliance partner can help a business assess the efficiency of its training and uncover new risks that may put the company in jeopardy. Sophisticated training platforms are now able to measure performance and ROI through data and analytics.

Transparent Communication Throughout the Organization

An all-too-common defense in court by a company that is in violation of a compliance obligation is “I didn’t know ...” It didn’t know procedures weren’t being followed, it didn’t know that there was confusion, or it didn’t know there were issues that weren’t being addressed. The court, however, doesn’t often view this as an acceptable argument.

Just as a business must inform its employees and representatives of their roles and responsibilities, so too should employees and representatives feel comfortable discussing issues and questions with upper management. The first step in achieving this outcome is fostering transparent communication throughout the organization. The following are some key areas of the business that provide opportunities to promote transparent communication:

  • Employee involvement in developing policies and procedures – Though training is instrumental in informing personnel of company policies and procedures, providing clarity of those rules should be an ongoing conversation. Moreover, it’s important that the conversation is as much about listening as it is about talking. Employees who feel that they are being heard by upper management and that their opinions are taken into consideration will be much more comfortable discussing issues, giving feedback, and adhering to the guidelines.
  • Continuous performance feedback – Training that depends solely on lectures and slide presentations requires learners to passively receive content. For optimal retention, learning should provide the opportunity to relate to and apply what is being taught. Therefore, managers and supervisors should provide continual feedback to their workers so that understanding of the information is constantly reinforced and knowledge gaps are quickly identified.
  • Effective reporting mechanism – Most government agencies advise entities to provide reporting mechanisms that allow employees to inform upper management of compliance violations without fear of reprisal. This allows a company to address a potentially damaging issue before it escalates. For this to be effective, a business must take reports seriously and conduct prompt and thorough investigations.
  • Reward and punishment communication – In order to reinforce a company’s commitment to enforcing policies and procedures, it’s a best practice to be transparent about rewards and discipline. Giving praise for effectively following corporate compliance guidelines will encourage others to replicate positive behavior, whereas proof of disciplinary actions taken for violations will dissuade carelessness.

Encouraging open communication not only benefits the employees but also provides transparency of potential areas of risks to those running the business. It may also serve as evidence that the company’s corporate compliance approach was proactively communicated and employees had a voice in the process, which will show a good faith effort to abide by agency guidelines.

Always Be Prepared

A business never wants to be in a position to defend its compliance approach but should always be prepared to do so. By documenting policies, being able to provide proof of effective training procedures, and fostering transparent communication, companies can avoid damaging violations and costly consequences. Additionally, conducting internal audits of these practices will identify areas of risk and provide the company peace of mind that it is taking every precaution necessary to keep its business safe. 

Take the Compliance Maturity Assessment


Subscribe Here!