Business project 3

Course Resource

Electropic LLC

Notice: Contains Confidential Information

Electropic LLC is a respected and profitable website design and hosting company in Colossal Corporation’s technology group. Melissa Aldredge has been a project manager at Electropic LLC for several years and was recently considered for promotion to a senior project manager position. Ultimately, the promotion was awarded to another long-term employee, June Pyle. June and Melissa have a history of one-upping each other and sharing an internal rivalry within the company.

Melissa recently reported internally that she had learned that June, who was given the promotion over her, had never finished her MBA degree. All of June’s business cards have “MBA” after her name, and the signature line of her email reads “June Pyle, MBA.”  

Electropic LLC’s policy manual states that potential employees must submit transcripts for all degrees listed on their resumes. However,  this requirement was not in place 10 years ago when June Pyle was hired. June has a history of stellar performance and was promoted not because of her MBA, but because of her consistently exemplary work. June has received excellent performance evaluations during her time at Electropic LLC, and her leadership has led to increased revenue as well as positive press for the company. Her record of success is what led to her promotion.

As a result of Melissa’s report, the director of human resources sent an email to all employees who were hired prior to the policy change requiring transcript validation, asking that they provide transcripts to validate their credentials. June did not respond to the director’s request for transcripts and was called into the director’s office. In a very tense and tearful interview, June confessed to the director that she does not have an MBA. She admitted that she was 12 credits away from completing her degree, but when her dad got sick, she had to drop out. She said that she really needed a job to support her family and she put the MBA on her resume hoping it would help her find a job. She shared that she always intended to go back to school but became so busy with work that she didn’t have time. Once she was hired, she felt that there was no turning back and she had to keep the lie going by placing “MBA” in her email signature line and on her business cards.

An MBA was not a requirement for the assistant project specialist job June was hired for 10 years ago, but four years ago, it was made a requirement for the senior project manager position she holds now. Two of the current senior project managers do not have MBA degrees because they were promoted before this requirement was in place.

Vice President Dodger has asked you to write a memo with your recommendations on how human resources should handle this issue. June has a record of excellence with Electropic LLC, and her superiors would be unhappy to lose her; however, ethical practice and the law must be considered here as well.

Learning Topic

Résumé Fraud

Fraud, often called misrepresentation, is a very broad legal concept that incorporates a variety of types of fraud and misrepresentation, both civil and criminal. There are considerable variations across the states as to the specific categorization of types of fraud as either civil or criminal law violations, or both. The federal government criminalizes a variety of types of fraud including mail and wire fraud, bankruptcy fraud, and securities fraud. These federal laws apply to everyone in the United States, regardless of the state in which the fraud occurs. Although there is variation as to which explicit types of fraud are criminalized within each state, in all states, some types of fraud unquestionably carry both civil and criminal penalties.

Résumé fraud is a specific type of fraud that may result in civil or criminal penalties, or both, depending on which state the fraud occurs in. In its most primal form, résumé fraud is a type of common law, civil fraud wherein the intentional misrepresentations of material facts are made in a résumé, and justifiably relied upon in the hiring of an individual for employment. In the absence of any statutory provision specifically addressing résumé fraud in a given state, the common law provides the remedy for résumé fraud typically in the form of damages (monetary compensation). However, many states have statutorily imposed sanctions specifically for committing résumé fraud. For example, in New Jersey, both persons and legal entities are prohibited from intending to deceive by falsely representing the receipt of a degree, credential, or certification, which one has not actually acquired “in connection with any business, trade, profession or occupation” (N.J.S.A. 18A:3-15.2). A violation of this provision is treated as a civil law violation, and each instance of résumé fraud carries with it a $1000.00 civil fine (N.J.S.A. 18A:3-15.5). On the other hand, in the state of Kentucky, “fraudulent use of an educational record” is considered a Class A misdemeanor, which is punishable by up to 12 months in jail and fines (KY Rev. Stat. Ann. 434.442). The Kentucky statute explicitly includes making false written representations for certain educational achievements, such as a degree, in employment applications. The states do differ as to how they treat résumé fraud, but whether it is treated as a civil violation or as a criminal violation, résumé fraud is a dishonest practice that should be avoided.

At-will employees should be particularly aware that résumé fraud provides a justifiable basis for termination that may undermine otherwise legitimate arguments for wrongful discharge (or other exceptions to the employment at will doctrine). For contract employees, résumé fraud is often considered “just cause” for termination of an employee who would otherwise be protected from termination by contractual “just cause” provisions. Finally, in addition to the legal consequences of résumé fraud, the reputational damage of lying on a résumé could undermine one’s career prospects as it did for former Yahoo CEO, Scott Thompson, whose résumé represented that he had a double major, including a degree in computer science, from Stonehill College, a degree that was not awarded from until several years after he graduated. After being exposed by a Yahoo shareholder, Thompson stepped down from his position in disgrace (Mackay, 2012).

References

Mackey, M. (2012, May 15). Ex-Yahoo CEO Scott Thompson and seven other cases of resume fraud. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2012/05/15/yahoo-ceo-scott-thompsons-resume-fraud_n_1516061.html

Resources

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Résumé Misrepresentations

·

What is Fraud?

Learning Resource

What is Fraud?

Transcript

Fraud
Video Transcript

Okay. So what is the intentional tort a fraud? Well, that’s the intentional activity of misrepresenting a material fact to someone. And the person to whom you represent misrepresent that fact materially relies on that fact to his or her detriment.

Okay. So you use that misrepresentation to induce someone perhaps to enter into a contract or to undertake some form of activity, such as investing money with you. So I misrepresent facts and you invest that money and then I later steal that money. So that would be fraudulent, or I give you information about the situation that’s totally not true.

You rely on that information, that material information, and it causes you to invest money. You lose your money and then, of course, I defrauded you out of your money. Okay. In many cases, it can be simply to fail to disclose a material fact that’s known to you. So perhaps I go to the bank and I ask for a bank loan. And I disclose everything about my business except some key material facts that would probably cause the bank to not want to loan me the money.

Now if they do loan me the money and then those material facts come to light, I have defrauded the bank or I’ve committed fraud on the bank in order to get that money. So that could be actionable by me. So in any of those situations, there is a representation or misrepresentation that is material. You rely on it and induces action that you wouldn’t have taken but for that misrepresentation. Okay.

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Transcript
Fraud
Video Transcript
Okay. So what is the intentional tort a fraud? Well, that’s the intentional activity of misrepresenting a material fact to someone. And the person to whom you represent misrepresent that fact materially relies on that fact to his or her detriment.
Okay. So you use that misrepresentation to induce someone perhaps to enter into a contract or to undertake some form of activity, such as investing money with you. So I misrepresent facts and you invest that money and then I later steal that money. So that would be fraudulent, or I give you information about the situation that’s totally not true.
You rely on that information, that material information, and it causes you to invest money. You lose your money and then, of course, I defrauded you out of your money. Okay. In many cases, it can be simply to fail to disclose a material fact that’s known to you. So perhaps I go to the bank and I ask for a bank loan. And I disclose everything about my business except some key material facts that would probably cause the bank to not want to loan me the money.
Now if they do loan me the money and then those material facts come to light, I have defrauded the bank or I’ve committed fraud on the bank in order to get that money. So that could be actionable by me. So in any of those situations, there is a representation or misrepresentation that is material. You rely on it and induces action that you wouldn’t have taken but for that misrepresentation. Okay.

Close

Ask Yourself

· How do feel about the requirement that fraud be intentional? Should a misrepresentation that is reckless and unverified be considered fraudulent, even if it is not intentional? Why or why not?

· Daryl is selling a poster bearing the signature of a known celebrity athlete. Daryl advertises that the poster is 15 years old and was signed when the athlete was a rookie. In reality, the poster was signed recently, following the athlete’s retirement. If someone buys the poster based upon Daryl’s representations, is there a tortious act? Why or why not?

Licenses and Attributions

Business Law: An Introduction

 by TheBusinessProfessor.com, Jason M. Gordon & Colleagues has been adapted with permission from Jason M. Gordon. © Business Professor, LLC.

The video Fraud has been adapted with permission from Jason M. Gordon. © 2016, Business Professor, Inc.

Learning Resource

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Résumé Misrepresentations

Robert Irvine’s Stretched Résumé 

For many job seekers the first—and maybe the only—chance they get to impress a potential employer is a résumé. What are the ethics of presenting your qualifications on a sheet of paper?

Robert Irvine is a muscled chef from England who you may have seen hosting the Food Network’s popular Dinner: Impossible. It’s a good job. The TV show generates free publicity for his cookbook Mission: Cook! and affords him the credibility to open his own restaurants. That was the idea he brought to St. Petersburg, Florida, in 2008. His was to open two new restaurants in South Florida: Ooze and Schmooze. Ooze was going to be the accessible, entry-level place, and Schmooze the highbrow complement. His biography—the summary of his professional life and experiences that he presented to potential investors—was impressive. According to the St. Petersburg Times, he advertised his résumé as including the following credentials (Montgomery, 2008):

· a bachelor’s of science degree in food and nutrition from the University of Leeds

· royal experience working on the wedding cake for Prince Charles and Princess Diana

· a title of knight, as in Sir Robert Irvine, Knight Commander of the Royal Victorian Order, handpicked by the Queen

· several Five Star Diamond Awards from the American Academy of Hospitality Sciences

· a tenure as a White House chef.

Everything came to an end, though, at least temporarily, when the Food Network fired him for lies on his résumé. Here’s the truth about the items listed above:

· The bachelor’s of science degree? According to a press officer at the University of Leeds, “We cannot find any connection in our records between Robert and the university.”

· The royal wedding cake? Well, he did help pick some of the fruit that went into it.

· The knighthood? No.

· The Five Star Diamond Award? True, but it’s not the AAA’s prestigious Five Diamond Award or Mobil’s five stars. The American Academy of Hospitality Sciences is actually a guy’s apartment in New York, and the award is granted to anyone who pays a fee.

· White House chef? Kind of. But he didn’t prepare sophisticated dishes for the president or anything like that; he cooked food for the cafeteria line, serving military workers at the White House.

Certainly, Robert Irvine isn’t the first guy to stretch his résumé, but he does an excellent job of exploring the many ways people can misrepresent themselves when trying to get a job. Generally, there are two kinds of résumé abuses. Positive résumé misrepresentations are those items on a résumé that simply aren’t true:

· false credentials—These are certificates of accomplishment that don’t exist. Irvine said he had a BS degree. He didn’t. This kind of misrepresentation is especially tempting for job seekers who didn’t quite finish their degree. One of the obvious practical problems is that claims like this can be verified or disproven by human resource departments. (Or, as in Irvine’s case, by inquiring newspaper reporters.)

· false experience—Untruthfully claiming to have participated in projects. Irvine asserted that he’d been a White House chef, meaning he’d planned sophisticated menus and prepared dishes for dignitaries. He didn’t. He cooked assembly-line food in the cafeteria for White House staff workers.

· embellished experience—This is the easiest kind of résumé misrepresentation. Irvine really did work on the royal wedding cake, but only picking fruit, not actually making it. His claim, therefore, isn’t directly false, but incredibly misleading. The same could be said about the Five Star Diamond Award. While technically true, it’s not the meaningful award that people imagine it to be.

· false chronology—Anyone who’s suffered long periods of unemployment—or just been fired from a job and taken a while to find another one—has surely been tempted to adjust the dates on their résumé to make it seem as though they went smoothly from one post to another.

· false references—Listing someone to vouch for your experience who really won’t or can’t. Irvine said he’d been selected by the Queen of England for a knighthood. It never got to the point where someone actually called her to ask, but if they would’ve, she would’ve drawn a blank. Of course people don’t normally list royalty as a reference, but in everyday life, it’s easy to commit the same misrepresentation. One fraternity brother could list another as a former boss, for example.

Negative résumé misrepresentations are those items that would appear on a complete résumé, one listing all your working experience, but that conveniently get left out of the one you submit to a potential employer. If you were fired from your first job at McDonald’s years ago because you kept forgetting to take the fries out of the oil pit, no one’s going to object when you drop those months off your work history. On the other hand, if, up until two months ago, you were in charge of the vehicle fleet for a hotel and you were fired for taking your girlfriend out in the company limo after hours, leaving that off your résumé is misleading to new prospective employers.

In the case of Irvine, things worked out for him in the end. After he publicly recognized the truth and cleaned up the most outrageous resume claims, he got his TV show back.

The Ethics of Stretching the Résumé

It’s hard to define all the ethical lines dividing what should and shouldn’t be included in a job applicant’s résumé, but steps can be taken to control the situation. If you’re sitting at your desk trying to figure out whether there should be any deleting, fudging, or exaggerating, two questions can help get a hold of the situation:

1. Who will be affected by my decision?

2. Does it matter what everyone else is doing?

The first person affected by your decision is you, and everyone’s most immediate ethical responsibility is the one they hold to themselves, the responsibility to respect their own dignity and abilities. One way of taking that responsibility seriously is to look back at the jobs you’ve held and ask what kinds of tasks they entailed and how those experiences and the skills taken from them might be stated in a broad and appealing way. Irvine probably went overboard when he translated the fact that he’d chosen fruit included in a royal wedding cake into the claim that he participated in assembling and cooking it. But it also seems like it’d be a mistake to say that he’d been a fruit picker on a wedding cake job. In the culinary world, his was important fruit picking. Irvine’s mistake, in other words, wasn’t that he tried to make himself look good, it’s that he couldn’t find a way to do it without essentially lying about his experience.

The duty to present yourself positively to potential employers may also justify the decision to leave certain, let’s say, unfortunate aspects of your professional life off the résumé. Irvine doesn’t talk much about how his endeavor to create restaurants in St. Petersburg fell apart in a sorry mess. If tomorrow he goes out and tries to stir up investors for a new pair of restaurants somewhere else, he has an obligation to be honest with them about what happened last time. But if he’s looking for a job as a TV cook, or just as a cook in a restaurant, then he may be able to justify leaving that bad episode unmentioned. The reasoning? The fact that he’s bad at mounting restaurants doesn’t mean he’s a bad TV personality or an error-prone cook. The one job has little in common with the others. So if he’s applying to be a cook, he could possibly leave the negative information about his other business ventures out based on the idea that it’s simply not applicable to the employment being sought.

The duty to yourself, finally, points toward a résumé presentation that sets your accomplishments and skills in boldface while not dwelling on extraneous shortcomings.

Another person affected by your résumé decisions—the choice about how much truth to tell and hide—is the person doing the hiring. If you claim experience you don’t really have and skills you don’t possess, the supervisor who oversaw your contracting won’t just be disappointed and angry as he or she watches you stumble and trip over tasks that should be easy. The botched hiring will also reflect negatively on him when superiors evaluate his or her performance and make decisions about pay raises and promotions. They are going to suffer because you lied. There is, in other words, a loser when you scam to get a job that you’re not really qualified for. Moreover, that harm accrues to the company as a whole. Maybe costs will increase because more training than expected will be necessary. Maybe an account will be lost when you fumble an assignment that should be automatic.

Your potential future workmates also have a stake in your application for a job. If you claim, as Irvine did, to have worked on the Charles and Diana wedding cake, it seems fair for your boss to assume you’ll be able to manage producing first-rate cakes for ordinary people. If you can’t, if you have no idea how to serve up even a simple layer cake, someone else on the team is going to have to step in and do your work for you. They probably won’t get your paycheck at the end of the month, however.

Other applicants for a job also have a stake in your own application. It’s a competitive world, and while you’re the one who can best make the case for your ability, making false claims doesn’t just give you an opportunity you may not otherwise receive: it takes an opportunity away from someone else.

What’s Everyone Else Doing?

The first step in getting control of your résumé’s relation with the hard truth is working through how any particular decision affects those involved. The second step is determining whether it matters what everyone else is doing. The question is important because applying for jobs doesn’t happen in a vacuum. If everyone stretches their qualifications to the extent Irvine demonstrated, then obviously you may want to consider whether you need to do the same just to get a fair shake.

A web page with a very truthful URL, Fakeresume.com, takes up the question about how much fibbing is going on out there: “Over 53 percent of job seekers lie on their résumés. Over 70 percent of college graduates admit to lying on their résumés to get hired. Can you afford not to know the techniques, tricks, and methods they use?” (“The Ugly Truth,” n.d.).

Fair question. Of course no one knows exactly how much cheating goes on, but as Irvine exemplifies, there’s definitely some out there. So should you get in on it? The argument in favor roughly corresponds with the web page’s pitch. If everyone’s doing it—if exaggeration is expected—then employing the same misrepresentations that guide everyone else isn’t really lying. Like driving sixty down a fifty-five miles-per-hour highway when all the other cars are going that fast too, your exaggerations are following the rules as everyone seems to understand them. From this point of view, you may even have a duty to exaggerate, because not doing so, as the web page claims, isn’t being an ethical hero, it’s just being outsmarted. And in a competitive environment, you at least have the moral obligation to not let yourself be snookered.

On the other side, where do these percentages—53 percent, over 70 percent—come from? The web page doesn’t say, and if they’re not true, then doesn’t the whole argument reduce to an excuse to lie?

In the case of Fakeresume.com, it couldn’t be more obvious what’s going on. The site is offering you a way to not tell the truth and not feel bad about it. Instead of offering moral guidance, it’s inventing a way for you to justify taking the easy path, to justify padding the résumé without having to consider whether that’s the right thing to do.

In the midst of résumé-stretching dilemmas, what other people are doing matters. Hiring is relative; there’s hardly anyone who’s perfect for any job, and recruiters take the applicant who’s best suited. Your obligation—to yourself and to the recruiter—is to show why you may be the best suited of the applicants. That may mean (using the language of Fakeresume.com) using the résumé-enhancing techniques commonly employed. It doesn’t mean, however, just imagining that everyone else is lying their pants off and then using that as an excuse to lie yourself.

Résumé Verification and the Law

One problem Robert Irvine faced was his very public personality. To stir up interest in the restaurants he planned for St. Petersburg, he had to stir up interest in himself. All the commotion drew the attention of a local newspaper reporter who ended up blowing the whistle on the résumé exaggerations and concoctions.

More ordinarily, job applicants don’t need to worry about reporters prying into their claims. Most medium and larger companies do, however, pass résumés through human resources departments which typically confirm the significant, objective claims of job seekers. Items like degrees obtained can typically be verified, as well as dates of previous employment and job titles. Every company will follow its own internal guidelines, of course, so it’s impossible to make a table listing the misrepresentations that will and won’t slip through. But it’s certain that objectively false information may come to light sooner or later.

If false information does come to light, are there legal complications? Probably not. Because résumés aren’t binding, signed agreements between the applicant and employer, they’re generally protected by free-speech guidelines. In the case of Irvine, if he claimed he was Superman, there’s nothing the police could do about it. That said, efforts have been made to take some action against the most extreme cases of résumé misrepresentations. A number of legislative measures have been proposed to punish those who lie about a military record and honors received. In Washington State in 2006, legislation was advanced to fine and briefly imprison applicants found guilty of claiming advanced degrees they didn’t actually earn, though the measure ultimately failed (Heckman, 2006).

Most résumé misrepresentations don’t cross into illegality. This is one of those areas in the business world where legal right and wrong diverges clearly from ethical right and wrong.

Ethical Egoism and Résumé Misrepresentations

Ethical egoism means your moral responsibility is to act in your own interest no matter what that may require. This provides a license for outright résumé invention (a false BS degree and imaginary knighthood for Irvine). But, as is always the case with egoism, the question must be asked whether job seekers really serve their own interests when they claim things that may later be revealed to be false or when they land jobs they later won’t be able to perform because their qualifications were fake.

One specific warning for the egoist comes from the admissions department at the Massachusetts Institute of Technology. One of the world’s elite universities, the task of selecting each year’s freshman class is as daunting as it is important for a school dedicated to preserving its reputation. The head of that office in 2007 was Marilee Jones. One of her central skills was the ability to distinguish high schoolers who’d truly excelled from those who got great grades by taking easy classes. Her widely admired skill, in other words, was filtering out grade sheets (which are students’ résumés) that misleadingly stretched the students’ classroom accomplishments. She went on using that skill until it was discovered that twenty-eight years earlier, when she’d first applied to work at the school, she’d invented a few degrees for herself. She was fired on the spot (Bombardieri & Ryan, 2007).

Key Points

· There are multiple kinds of positive résumé misrepresentations and negative résumé misrepresentations.

· Managing the dilemmas of crafting a résumé requires accounting for obligations to all those who will be affected by the résumé.

· Circumstances involving the specific post being sought, along with commonly accepted practice, may determine the extent to which misrepresentations are ethically objectionable.

Ask Yourself

· Who are the people affected by résumé truth decisions?

· What are five distinct ways you may choose to misrepresent yourself on your résumé?

· What’s the difference between legal and ethical approaches to the question about padding the résumé?

· Why might a job seeker have a duty to blur parts of his or her work history?

· Why might an egoist lie on the résumé and why not?

References

Bombardieri M., & Ryan A. (2007). MIT Dean of admissions resigns for falsifying resume. Boston Globe. Retrieved from http://www.boston.com/news/globe/city_region/breaking_news/2007/04/mit_dean_of_adm.html.

Heckman, C. (2006, March 3). Lying on résumé could land you in jail. SeattlePI. Retrieved from http://www.seattlepi.com/local/261747_diplomamill04.html.

Montgomery, B. (2008, February 17). TV Chef Spiced Up His Past Exploits. St. Petersburg Times. Retrieved from http://www.sptimes.com/2008/02/17/Southpinellas/TV_chef_spiced_up_his.shtml.

The ugly truth about how people are outsmarting you! (n.d.). Retrieved from fakeresume.com.

Licenses and Attributions

“The Résumé Introduction”

from Business Ethics is available under a

Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported

license without attribution as requested by the site’s original creator or licensee. UMUC has modified this work and it is available under the original license.

Learning Topic

Badaracco’s Right vs Right Framework

There are a variety of ethical frameworks that may be used instrumentally to analyze those difficult questions that businesspersons must regularly address. Some ethical issues present clear yes or no answers, a clear right and wrong, but other ethical issues are much more difficult to address.

Professor Joseph Badaracco developed a framework for addressing those more difficult questions, and particularly those questions of “right versus right”; that is, when an ethical dilemma could result in multiple “right” responses, based in attempted adherence to multiple, conflicting ethical values that cannot simultaneously be fulfilled. Badaracco’s framework aims to resolve ethical dilemmas involving conflicting yet legitimate moral values.

Resources

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Harvard FSS: Defining Moments: A Framework for Moral Decisions

Learning Topic

Employment at Will

Transcript

At-Will Employment – State Employment Laws

Video Transcript

What legal obligations exist between an employer and an employee and particularly with regard to continued employment or continued benefits as initially described in the employer/employee relationship? Well to start with if there is any form of agreement or contract between the employer and the employee it controls those are the terms of the employer/employee relationship. In the absence of specific contractual terms between the employer/employee, state law with regard to employment practices controls.

Now many of us have heard the concept of an at will employment state. Well, what that means is that an employee is free to leave an employer at any time and the employer is free to discharge or fire an employee at any time without cause or without reason. So the term at will employment the way it’s used is often times misused or misunderstood because in many ways most states are at will employment states, that is it doesn’t put extensive limits on the ability of the employee to leave or the employer to fire the employee but the degree to which a state limits that ability varies the nature or the extent of their at-will status.

So there are three primary factors that determine what protections a state provides to employees of an employer and which of these exceptions the state recognizes will vary the extent to which a state is at will versus less at will or not at will employment. So to start with there’s a public policy reason for promoting healthy employer/employee relationships. So what this means is that the employer cannot knowingly fire or discharge an employee for reason that runs afoul of or against public policy.

For example if an employee were required to testify or provide evidence or served as a witness or something like that for an investigation and the employer didn’t like it and discharged or fired the employee, well public policy dictates that we should pursue the administration of justice. So this could be a violation of public policy for the employer to exercise this level of bad faith or their intent as violating public policy in firing the employee. So in this way it could run afoul of employment laws in a given state. It depends on the extent to which a state recognizes the public policy doctrine.

So that’s one level and one exception to the general principle that an employer and employee can leave or fire the other at will. The second exception would be the implied contract theory. Now the implied contract theory is that any employer/employee relationship is part of a contractual agreement and absent some cause or reason to rupture that agreement then discharging an employee for example without reason or cause to do so would violate that implied contract. Now the terms of the contract would be whatever communications or information or material or understanding exists between the parties.

So an employee comes in, the employer hands the employee and employee handbook that has certain procedural rights as far as if the employee is written up for any reason or reprimanded or anything like that or provides the employee assurance that if the employment relationship ends that there’s always a 30-day notice or two week severance or whatever, any of these things, then these could become part of the contractual relationship or agreement between the parties, part of an implied contract. So again this level of implied contract theory would severely limit the extent to which a state is recognized as at will. And then lastly there is a good faith doctrine or theory and that theory implies that the employer/employee relationship is somewhat fiduciary in nature or it’s a trust-based relationship. So in that way the employer and the employee in dealing with each other owe each other a duty of good faith, particularly the employer should not exercise bad faith or any level of deceit for example in hiring and then firing the employee.

So for example if an employer were to simply hire an employee temporarily, to keep that employee from going to a competitor and once the competitor’s position is filled with someone else and the employer feels confident that the employee that they just hired will not run to the competition, they fire the employee. So the entire time there was no good faith in negotiating the employer/employee relationship. It was all a product of deceit.

So that would be an example of acting in bad faith and bad faith could take on any number of situations or examples but again the state’s recognition that these duties of good faith exist between the employer and employee again would limit the at will doctrine. So these are just some simple basic examples to limit the concept of an employee can leave at any time they want to and in employer can fire an employee any time you want to so you’ve got an express contract between them, the parties that controls, otherwise a public policy exception may apply, otherwise in implied contract theory may apply and lastly a good faith theory may apply to the employer/employee relationship.

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Transcript

At-Will Employment – State Employment Laws

Video Transcript

What legal obligations exist between an employer and an employee and particularly with regard to continued employment or continued benefits as initially described in the employer/employee relationship? Well to start with if there is any form of agreement or contract between the employer and the employee it controls those are the terms of the employer/employee relationship. In the absence of specific contractual terms between the employer/employee, state law with regard to employment practices controls.
Now many of us have heard the concept of an at will employment state. Well, what that means is that an employee is free to leave an employer at any time and the employer is free to discharge or fire an employee at any time without cause or without reason. So the term at will employment the way it’s used is often times misused or misunderstood because in many ways most states are at will employment states, that is it doesn’t put extensive limits on the ability of the employee to leave or the employer to fire the employee but the degree to which a state limits that ability varies the nature or the extent of their at-will status.
So there are three primary factors that determine what protections a state provides to employees of an employer and which of these exceptions the state recognizes will vary the extent to which a state is at will versus less at will or not at will employment. So to start with there’s a public policy reason for promoting healthy employer/employee relationships. So what this means is that the employer cannot knowingly fire or discharge an employee for reason that runs afoul of or against public policy.
For example if an employee were required to testify or provide evidence or served as a witness or something like that for an investigation and the employer didn’t like it and discharged or fired the employee, well public policy dictates that we should pursue the administration of justice. So this could be a violation of public policy for the employer to exercise this level of bad faith or their intent as violating public policy in firing the employee. So in this way it could run afoul of employment laws in a given state. It depends on the extent to which a state recognizes the public policy doctrine.
So that’s one level and one exception to the general principle that an employer and employee can leave or fire the other at will. The second exception would be the implied contract theory. Now the implied contract theory is that any employer/employee relationship is part of a contractual agreement and absent some cause or reason to rupture that agreement then discharging an employee for example without reason or cause to do so would violate that implied contract. Now the terms of the contract would be whatever communications or information or material or understanding exists between the parties.
So an employee comes in, the employer hands the employee and employee handbook that has certain procedural rights as far as if the employee is written up for any reason or reprimanded or anything like that or provides the employee assurance that if the employment relationship ends that there’s always a 30-day notice or two week severance or whatever, any of these things, then these could become part of the contractual relationship or agreement between the parties, part of an implied contract. So again this level of implied contract theory would severely limit the extent to which a state is recognized as at will. And then lastly there is a good faith doctrine or theory and that theory implies that the employer/employee relationship is somewhat fiduciary in nature or it’s a trust-based relationship. So in that way the employer and the employee in dealing with each other owe each other a duty of good faith, particularly the employer should not exercise bad faith or any level of deceit for example in hiring and then firing the employee.
So for example if an employer were to simply hire an employee temporarily, to keep that employee from going to a competitor and once the competitor’s position is filled with someone else and the employer feels confident that the employee that they just hired will not run to the competition, they fire the employee. So the entire time there was no good faith in negotiating the employer/employee relationship. It was all a product of deceit.
So that would be an example of acting in bad faith and bad faith could take on any number of situations or examples but again the state’s recognition that these duties of good faith exist between the employer and employee again would limit the at will doctrine. So these are just some simple basic examples to limit the concept of an employee can leave at any time they want to and in employer can fire an employee any time you want to so you’ve got an express contract between them, the parties that controls, otherwise a public policy exception may apply, otherwise in implied contract theory may apply and lastly a good faith theory may apply to the employer/employee relationship.

Close

Employment at will is a doctrine of common law that allows either the employee or the employer to terminate an employment relationship at any time, for any reason, with or without notice, and even for a morally reprehensible reason, so long as the ending of the relationship does not fall into an exception to the employment-at-will doctrine.

Employment at will is the prevailing legal doctrine concerning employment relationship termination in 49 US states (not Montana). In the overwhelming majority of the United States, employment at will and its exceptions govern the rules by which one may legally terminate an employee.

The generally accepted exceptions to employment at will include

· express contract,

· implied contract,

· promissory estoppel,

· public policy violations, and

· good faith and fair dealing.

We discuss these five exceptions below.

Express Contract Exception

If an employer terminates an employee in violation of the terms of an express contract between the employer and employee, then the employee can sue the employer for breach of contract (and, in some states, wrongful termination).

For example, an employment contract guarantees that the employee will be employed by the employer for a definite duration of time, with cognizable boundaries, such as a “one-year period” or “for six months.” The employer terminates the employee before the stated period has expired, and that termination is not otherwise permitted by the contract.

Likewise, consider a case where an employment contract states that an employee can be terminated only “for cause” or “for just cause,” and the employee is terminated without cause.

Implied Contract Exception

Implied contracts are contracts created by the conduct of the parties, which include any representations or assurances made by the employer prior to or during the term of employment. In some states, an implied contract is an exception to the employment-at-will doctrine.

For example, if an employer provides an employee handbook to a new employee, the provisions in the handbook may be considered part of the contractual relationship. Often, such handbooks outline a procedure for performance review, discipline, and discharge of the employee. An employer who fails to live up to procedural obligations prior to discharging an employee could be liable.

Promissory Estoppel Exception

In many states, promissory estoppel acts as an exception to the employment-at-will doctrine. That is, when an employer makes a promise to an employee of employment or a period of employment, and the employee relies on that promise to his detriment, and it leads to injustice, then an employee may be able to have that promise enforced regardless of employment at will.

For example, John is offered a job with Widget Co. He discusses with Widget’s manager that, to take the job, he needs to move from California to New Jersey and give up an already lucrative position with benefits. The manager assures John that he will have gainful employment and a substantially larger income with Widget Co. for at least a year if he makes the move. In reliance on this promise, John quits his job and moves to New Jersey to begin work at Widget Co. After one week, John is laid off. Despite being an employee at will, John may be able to recover under the theory of promissory estoppel.

Public Policy Violations Exception

Most states in the United States prohibit an employer from firing an employee if the reason for the action violates some readily accepted public policy. This prohibition prevents an employer from terminating an employee for exercising a legal right, including a right contained in state and federal laws; or for failing to perform an illegal act for the employer.

Firing an employee for performing some public duty (showing up to jury duty), for exposing illegal conduct (such as reporting violation of some law to the employer or a government agency), or for exercising her rights as a US or state citizen (such as voting) are all against public policy.

This exception to employment at will encompasses the inability to terminate an employee if doing so would violate her state or federal statutory rights. If an employee is terminated because of her race, this may be a violation of Title VII of the Civil Rights Act of 1964, and so an otherwise at-will employee would have a claim against the employer for violating a federal statute.

Moreover, it is against public policy to terminate an employee for refusing to commit an illegal act, such as a crime.

Good Faith and Fair Dealing Exception

A minority of states impose upon the employer a duty to exercise good faith and fair dealing in regard to all employees. This doctrine, to varying degrees, means that an employer must treat an employee fairly in the decision to fire her. This generally means that an employee would violate these duties in firing an employer without due cause or justification.

The preceding five generally accepted exceptions to employment at will allow injured parties to seek recovery even in the face of the employment-at-will doctrine. As such, they limit the circumstances by which an employer can terminate an employee.

Licenses and Attributions

Business Law: An Introduction

 by TheBusinessProfessor.com, Jason M. Gordon & Colleagues has been adapted with permission from Jason M. Gordon. © Business Professor, LLC.

The video At Will Employment – State Employment Laws has been adapted with permission from Jason M. Gordon. © 2016, Business Professor, Inc.

Copyright 2002 Page 1

Lecture Text
Joseph L. Badaracco, Jr.: Defining Moments*

This will probably surprise many of you: I’m going to say very little
about Enron. As I understand the Enron story, if you put aside the
colossal scale of the collapse, and all the disruption and harm it caused
to thousands of people—and that’s an enormous set of things to put
aside—I don’t think it is a particularly interesting story.

From what I’ve read in the newspapers, and I’ve tried to follow this
very carefully and have gotten lots of inquiries from journalists, the
folks at Enron and some folks at Anderson did a lot of things that were
wrong. They shouldn’t have done them. It was clear what was right
and what was wrong. And for the vast majority of people, there is very
little value in talking about right and wrong. Most people fortunately
have a sense of what the difference is between the two; for those who
don’t, in most cases, it is often hopeless. You have to keep an eye out
for them. If you find them in your organization, you must usher them
toward the doorway.

I’m going to talk about a different kind of problem, a different set of
problems. And these are the kinds of problems which, in the years I’ve
spent looking at managers who take their responsibilities really
seriously, are the problems that when they recount them for you, you
get a sense that their stomachs are tightening a little bit, that they’re
breathing a little faster. It might be an experience that they learned
from, something that they were glad they did once, but in many cases,
the problem is something that they don’t want to relive again. These
problems have a simple name. I call them “right versus right”
problems.

Let me give you a couple of examples. Let me start with one; since
I’ve mentioned Enron, let’s talk about the bookend to Enron. If Enron
is the biggest and worst of the corporate ethic scandals, let me talk
just a little bit about the famous Tylenol episode of the early 1980s.
I’m sure you’ve all heard the standard story. In the fall—I believe it
was 1982—six people in the Chicago area died of cyanide-laced Tylenol
tablets. James Burke, the chairman of the company at the time, has
been widely praised as a hero for, in the standard phrase, “doing the
right thing.”

Burke is an alumnus of Harvard Business School. We have a case
study of the Tylenol episode. He’s come back and talked about it. I’ve
had the chance to interview him. And, like several of my colleagues,
I’ve put a blunt question to him. I said, “Mr. Burke, look, what you did
resurrecting the brand was phenomenal.” (Think about a brand that’s

* Edited for clarity

Copyright 2002 Page 2

been implicated in a series of deaths: That was phenomenal.) “But
surely this couldn’t have been a difficult issue about doing the right
thing. You had to get that product off the shelves. Other people might
have died if there was more cyanide. You would have been litigated to
death if you left even more of the product out there. You had to
remove it.”

Burke’s answer, surprisingly, in private conversations, is that it is
largely true; the decision to pull the product was not a difficult one.
But on one occasion he went on and told me a fascinating story that
took place a couple of days before J&J decided to pull Tylenol.

The company had decided it was going to pull the product, and Burke
decided that he ought to come down to Washington D.C. and talk to
two people. One was the head of the Food and Drug Administration;
his company’s principal regulator. The other was the head of the FBI.

He sat down with the two men. They said, “Look, Mr. Burke, we’ve
thought about this a lot. We want you to leave the Tylenol out on the
shelves.” Burke asked why.

The head of the FDA said, “We’ve got Halloween coming up. We don’t
want copycats to think that they can tamper with a product and
basically be the tail that wags the dog of a big company.”

And the head of the FBI, William Webster, said, “We don’t know
whether this is terrorism or not, but the U.S. policy is ‘we don’t accede
to terrorists.’ So could you please leave the product on the shelves?”

Burke said, still says, that at that moment he does not know what he
would have done. As a corporate officer, as a human being, he wanted
the product off the shelves. As a citizen, he was being asked by the
man who was responsible for the safety of foods and drugs, and by the
chief law enforcement officer in the United States, to leave it out
there. This was an unambiguous conflict between right and right. And
what Burke says is interesting. He says, “I got lucky.”

There was a knock on the door. Somebody handed William Webster a
note. Webster read it. He talked with his counterpart. They said, “Mr.
Burke, you can pull the Tylenol.” The note said that there had been
another poisoning, this one in California, not Chicago—strychnine, not
cyanide. They concluded that it wasn’t terrorism; that if it was
copycatting, it was already underway. It was better to get the product
off the shelves, in case any more of it was contaminated. But the key
statement is Burke’s—to this day, he still doesn’t know what he would
have done.

Now, that’s a grand, once-in-a-career sort of right versus right
problem. There are some that happen every couple of months, and I
bet many of you have counterparts to the story I’m about to tell you.
You’re at home one night. I’ll dress the story up a little. There’s a
knock on the door. You open it up. It’s somebody you’ve worked with

Copyright 2002 Page 3

who lives a couple of towns away. He actually works for you. He comes
in and says, “Look, I’m sorry to interrupt. I just wanted to talk to you
for a couple of minutes.”

“Sure,” you say. “Come on in. Have a drink.”

And what this guy says to you is he has found the house of his
dreams. And he tells you that this is what he and his wife have been
looking for. And they had to take a little money out of the kids’ college
fund, and it’s going to be a really big mortgage. But, you know, since
you’re the best boss he’s ever had and a good friend, and possibly
even the best boss he could ever conceive of having, he just wanted
you to be the first to know.

But you know that there are layoffs coming to the company, and you
know that this individual’s name is on the list. Now, I dressed this
story up a little bit. But in the last ten years, I’ve been told four
different versions of this exact same story. What’s the basic issue
here?

Well, you’re supposed to do the right thing, right? What’s the right
thing? As a corporate officer, you have a duty of confidentiality, and
under that duty you are not supposed to disclose the layoffs until all
the ducks are lined up with HR and Legal, until it makes the most
sense for the company to make the announcement. And I’m sure
everybody in here can understand why. As a friend, you owe a debt to
this person. If he were just about to jump off a financial precipice,
wouldn’t a friend reach out and pull him back?

By the way, maybe this individual has actually heard something
through the grapevine and is implicitly asking you, “What’s really
going on? Should I go ahead with this?” And if somebody asks you a
question, you’re supposed to tell him the truth. So again, this is not
right versus wrong. This is right versus right versus right.

And then there are the everyday examples: the soccer game, the
budget, and the relative you ought to visit in the hospital. That’s not
right and wrong. That’s right versus right. These problems actually go
back a long way and they have an interesting name. They’re
sometimes called “dirty hands” problems. I want to tell you just briefly
about the origin of that phrase.

It’s the title of a play by the French existentialist philosopher, Jean-
Paul Sartre, who lived and wrote in the middle of the last century. And
his play, Dirty Hands, is set in Paris during the Second World War.
Paris is occupied. There are three characters. There’s an older man
who has run a Communist Party cell during the occupation. There’s a
young man who has just joined. He’s a brand new recruit, and he’s full
of idealism and zeal. And there is a woman in the play, so there’s a
romantic rivalry going on between the two men for her affections. But
the real rivalry is between the two men over the older man’s
stewardship of this little unit.

Copyright 2002 Page 4

At the climax of the play, the young man accuses the older man of
selling out, of having done too many deals to keep this operation
afloat. And what the older man says in response is the following: “How
you cling to your purity, young man. How afraid you are to soil your
hands. All right, stay pure. What good will it do you? Purity is an idea
for a yogi or a monk. For someone standing on the sidelines wearing
kid gloves.” He goes on to say, “Well, I have dirty hands. I have
plunged them in filth and blood, but what do you think? Do you think
you can govern innocently?”

Do you think you govern innocently? I think that is such a powerful
phrase. Do you think you can have real responsibility in life and just
get served up one nice, slow underhand softball pitch, right versus
wrong, one after another, and just do the right thing? The hard
decisions that all of us can remember making are ones where one
thing was right and another was a real obligation, and so was
something else. I am really bedeviled about finding a way to do both.

These are the hard problems. And by the way, these aren’t just a nice
little category of interesting problems to talk about. They’re
managerial problems, because when they arise in an organization,
people watch very closely. The people working for you will watch you
very closely. Why? Because when you’ve got to choose between right
and right, when you’ve got to indicate what your real priorities are,
then the veils, the masks, whatever we all wear, slip a little bit. People
get a little better sense of who you are, how much they can trust you,
what the rules of the game are, and how they get ahead.

There is between bosses and the people working for them a close,
continuous, silent, observational relationship. And in these right versus
right moments, you catch some glimpses. People do watch very
carefully.

Now, I want to do two things with the remainder of my time. I want to
put in front of you a framework for thinking about these right versus
right problems, a practically-oriented framework, and then I want to
talk a little bit about the book that’s in front of you and indicate how
some of the advice and lessons and stories in that book help form an
approach to these sorts of right versus right problems.

But let me first of all give you a framework. And by the way, this isn’t
Joe’s framework. It’s not a Harvard Business School framework. I will
give credit where credit is due, because these questions of right versus
right go back a long, long, long way.

My understanding of human evolution is that at some distant point
there was sort of a disgusting pool of some gunk that had carbon
molecules in it. And then it was hit by lightning, or a volcano
overflowed into it. And then some of these molecules started
replicating. And then some of these replicators got big and

Copyright 2002 Page 5

complicated, and then somehow some of them developed
consciousness, and eventually they became us.

There are lots of mysteries to be filled in in that story; but at some
point, very, very early on there was this spark of consciousness. And
people started thinking about the dilemmas of leadership and
competing responsibilities. So I want to put in front of you—in the
form of four questions—some of these ideas that have stood the test
of time, not just centuries, but millennia. I want to make this as useful
and practical as I can.

Question number one, faced with the right versus right dilemma, get
out a piece of paper and for each plan of action you have for dealing
with this dilemma, create a list. Make a list of everybody who’s going
to win and everybody who’s going to lose, of all the costs, of all the
benefits, of all the risks, and net, net, net, net, net. Pick the plan of
action that does the most good and the least harm.

The origin of this way of thinking can be traced way back, but it was
crystallized in the early part of the 1800s by a man named John Stuart
Mill. It’s called utilitarianism, if you want to impress people. Mill said,
“The essence of responsible behavior is doing whatever promotes the
greatest happiness for the greatest number of people.” Mill went on to
talk a little bit about happiness. He didn’t mean just stuff you could
count or stuff that makes you feel good right away.

He said happiness is everything that gives beauty and dignity and
work and value to life. Do as much of the good stuff as you can and as
little of the bad stuff, and you’re doing the right thing. And I think that
if you talk with most serious, practical people who have real
responsibilities in the world, this sort of cost-benefit way of thinking,
this look-at-the-consequences approach to ethics is their natural,
intuitive way of thinking. And it’s the first question. Which way of
proceeding is going to get me the best net-net consequences?

Why four questions if the first question is such a good one? I hesitate
to do this a little but, Rick, you’re sitting right up in front here. And I
come from Harvard Business School where we use the case method.
I’m really not that comfortable lecturing. We use cold calls, Rick. I
don’t know if you can all see Rick. He’s sitting up here with kind a
slight, forced smile on his face. He’s thinking, “Why didn’t I come back
a little earlier from lunch and sit in the back with some of my friends?
I’m never going to do this again.” Rick, do you mind telling us roughly
how old you are?

RICK: I’m fifty-three.

PROFESSOR BADARACCO: Fifty-three. Do you work out?

RICK: I do.

PROFESSOR BADARACCO: You work out. And how often?

Copyright 2002 Page 6

RICK: It could be a little more frequently, shall we say.

PROFESSOR BADARACCO: OK. You watch what you eat?

RICK: Definitely.

PROFESSOR BADARACCO: You watch it in the sense of regulating it, or
you’re just sort of observing it as it goes by?

RICK: No, I watch my diet very carefully.

PROFESSOR BADARACCO: I’ve been putting all that information in this
little hand-held device here, Rick. It’s connected to an actuarial table
up at MIT that forecasts longevity. And it factors in some biotech
breakthroughs as well. And it looks as if you could easily live, keep this
up, another good fifty years, which would put you above a hundred.
That’s the good news, Rick.

The bad news is that Jerry and Doug have planned a little ceremony
for you later in the afternoon, and they’re going to take a photo of you
for your loved ones and give you a nice medal, and then we’ve got a
Washington D.C. police officer who’s going to escort you out to a D.C.
police ambulance. It’s going to take you to a hospital. In that hospital,
we’ve got seven people on life support. They’re in urgent need of
organ transplants.

I’m assuming you’ve got the complete set. I should have checked that
out earlier. I apologize. And we calculated again, the greatest good for
the greatest number of people, certified MIT, online, real time. They’re
going to live about 350 additional years. So we’re going to have a nice
little ceremony. I see some of your coworkers are kind of getting into
this, Rick.

RICK: You have no idea.

PROFESSOR BADARACCO: Rick, why can’t we do this to you?

RICK: Well, I have a wife. I have a son.

PROFESSOR BADARACCO: He says he has a wife and a son.

RICK: They sure would like to have me around a little longer.

PROFESSOR BADARACCO: They’d like him around a little longer. Well,
that’s an empirical question. We could check that out. These other
seven, Rick, are married.

RICK: I see.

PROFESSOR BADARACCO: Big families.

RICK: You’re telling me I should have had more children.

PROFESSOR BADARACCO: Well, actually, Rick, one of them is a Nobel
Laureate. He’s already got one Nobel Prize. He’s working on a second,
on infectious diseases around the world.

RICK: My son is an honor student.

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PROFESSOR BADARACCO: His son is an honor student. Very good.
Rick, why can’t we do this to you? Anybody want to help Rick out?

PROFESSOR BADARACCO: All right, phone a friend. And the answer is
exactly right. Individual rights. In fact, what you do, Rick—you get this
right—is you pound on the table, “I am a human being. I have rights.
You can’t do this to me.” And everyone behind you would rise up like a
chorus and say, “Of course you cannot do this to Rick.” The whole
point about having a right is that people can’t do things to you, no
matter how spectacular the consequences are for everybody else.

And the second big question you’ve got to ask that has always been
asked in these right versus right situations is which groups and which
individuals in which groups have rights that we must absolutely
respect, that we cannot violate, whatever we do to wrestle with this
right versus right problem?

What’s the origin of this idea of rights? I don’t know. You can find it in
the Declaration of Independence. If you stay here a couple of days you
can go read it in the original version. You can go across any ocean, go
south of this country. You can find ideas of human rights in the
foundational political documents of many countries. But you can go
back much further to every religious tradition that says human beings
are special. They may have come out of a slime pool, but at some
point, they got a divine spark. You can’t just chop them up, no matter
how great the consequences are.

And we in America today, people doing business in this part of the
world today, live in a world where we are surrounded by rights: human
rights, political rights, and economic rights, the rights of the people
who invest in an organization to earn high, sustained, legal, risk-
adjusted returns.

So the second big question faced with right versus right has to do with
whose rights you’ve really got to respect. Now, I suspect there’s some
folks in the audience who have a mathematical background or
engineering training, and you might be thinking that now we are pretty
close to a really practical and analytical way of dealing with these
problems. You could almost write a formula. Maximize the net-net
consequences for everybody affected, subject to the constraint of not
violating anybody’s rights. That sounds pretty good.

Let me try another little story out on you. Again, true story, set in the
Second World War, in a Greek village. It’s recounted in a book by a
man named John Knowles. The book is called The Magus.

Imagine that you were the mayor of a small Greek village. Your village
has been occupied. A couple kids from your village got hold of a
weapon, and they killed a couple of the soldiers in the occupying force.
The commander of the occupying force is furious. He brings you, the
mayor, into the town square. He rounds up a hundred women and
children and puts them in the town square. He picks two kids at

Copyright 2002 Page 8

random out of the crowd, puts them in front you about twenty feet
away, and then he hands you a rifle. And he says, “Either you execute
these two criminals for killing my soldiers, or I’m going to have my
soldiers shoot into the crowd.”

Now, what do you do? Assume we exclude all the sort of
action/adventure options that involve swinging from ropes and
concealed weapons. It’s a stark choice and in fact it was a real choice.
Now, in terms of consequences—one hundred people or two—you
should probably fire that rifle. In terms of human rights, they’re
innocent. It’s wrong. You can’t take their life from them.

The mayor, as the story goes, picked up the rifle, aimed it at the two
kids, pulled the trigger, but all he heard were clicks. There was no
ammunition in the rifle. And the mayor was told by the soldier, “If
you’re going to kill the two kids, you’ve got to club them to death.”
True story. Horrible story. The room always goes silent at this point.

If we had more time, if we had smaller groups, and we were using a
case method, I’d push you a little bit. To those of you who said, “Look,
horrible choice, but I’d sacrifice two to save a hundred,” I’d say, well,
shouldn’t you do the same thing here, even if you’ve got to do it in this
awful way?

What’s interesting is that people won’t let you off that easily. Try this
yourselves sometime. Try this little story out. They’ll say, “Wait a
minute. If you, as the mayor, as the leader of this organization, do
something that despicable, that vivid”—I mean talk about dirty
hands—“you’re going to destroy the soul of a village, the soul of the
villagers.” Other people say, “If you do that, you’re going to get down
on the same level as your captors.” One person said, “If you do this,
what you’re going to do is you’re going to become an animal. It is
subhuman.”

And the mayor in the story—the story, I’m told, according the book, is
real—put down the rifle. There was a line that he couldn’t cross. The
soldiers did fire into the crowd. They did kill a few people and injured
some others, but they spared most of the lives. So the mayor was
spared the full horror of what might have happened.

There’s a third question, and it’s implicit in the fact that the mayor put
down the rifle, in these answers about becoming an animal, getting
down on the same level as your captors. The origin of this question in
the Western tradition goes back to Aristotle. In the East, it dates back
to Confucius. For Confucius and Aristotle, ethics—doing the right thing,
responsibility—were not really about finding the right rule. It wasn’t
really about maximizing net-net consequences or doing what people
were owed because of the rights they had.

It was about character. It was about the character of individuals and
the character of organizations. And basically, Aristotle’s answer to
what a good decision is—it’s a decision made by a person with good

Copyright 2002 Page 9

character, after reflection, in a good organization. And the right thing
to do ought to be sort of instinctive. It ought to be spontaneous, not a
matter of deliberation and calculation.

Now, when you’re in an organization, when you’re in a situation like
the mayor, you’re in a funny sort of place because you’re going to
make an irrevocable decision. It’s part of his life, his career, and the
life of this village. It is, in effect, a defining moment. And the third
question, faced with one of these right versus right decisions, is what
messages do I want to send about what I stand for, what we stand for,
about our ideals and our principles going forward? It’s writing a little
bit of your personal autobiography. But you’re not doing it on a word
processor. You’re doing it with pen and ink. You can’t go back and
change it. It is a defining moment. People will later talk. You won’t be
there to clarify. They’ll say, “Well, we’ve had decisions like this before,
and you know what so-and-so did.” Those will reverberate for a long,
long time. So that’s the third question. It’s not about consequences.
It’s not about rights. It’s about integrity. It’s about what individuals
and their organizations or their units stand for.

The fourth question will surprise you a little bit because of its origins.
It’s Nicolo Machiavelli’s question. That’s right, I’m going to spend a
little bit of time in this talk on ethics referring to the high priest of
sleaze, and the stiletto between the ribs in the dark alley late at night,
and the poisoned chalice, and all that good stuff. But let me ask you
this, do you think Machiavelli’s name would be known to anybody
today if all he said was that you can get ahead in life by being sleazy?
I don’t think that that is news to anybody. I think the ancient Greeks
knew that. The Israelites knew that. The Romans knew that.

Little kids think that that’s how the world works, you know the little
trail from the cookie jar—not the cookie jar, the Pepperidge Farm
package, excuse me. They think they can get away with that kind of
stuff, too. And you gradually try to teach them that isn’t the case.
Most of us, unfortunately, know people who, because they’re smart
and worked hard and had the right sponsorship and were sleazy, had
nice long runs in life. It’s fortunate when they get their comeuppance,
but sometimes that doesn’t come or it comes far too late.

So the idea that all Machiavelli preached was that sleaze will get you
ahead, that doesn’t have much traction. If you go to The Prince—and I
suspect many of you can recall this from having read it in college—
Machiavelli is saying something different. What he is saying is that
sometimes if you’ve got real responsibility in an organization—he was
talking about Renaissance Italian city-states—you find yourselves in
circumstances where what you want to do as a human being, you may
not be able to do and really take your responsibilities seriously. And
then you’ve got to find something that will work.

And Machiavelli’s enduring question is, what will work in the world as it
is? That’s the fourth question. What will work in the world as it is? But

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I want to come back to Machiavelli, because if you leave with just that
question, people can easily misinterpret it. They can think, well, what
will work in the world as it is? That means the lowest common
denominator, the easy way out. They’re looking for the back door exit.
That’s not Machiavelli. If you look at The Prince, the people that he
admired, the people he called leaders were the people who were
willing to take chances. Not reckless, but prudent chances. He said,
“Fortune favors the bold.”

So Machiavelli’s question, what will work in the world as it is, means
what will work if you bring initiative and imagination and creativity,
willingness to shake the tree, willingness to take prudent risks to the
party? What will work then?

Now, those are four questions, one about consequences, one about
rights, one about character, one about pragmatism. That’s a way of
getting an initial grasp of the problem. But you’re managers, and the
key question as you full well understand is, once we’ve done some
analysis, once we’ve thought about it, once we’ve talked with other
people about what will work best, the payoff question is, what do we
do? In fact, that’s part of the reason that Machiavelli’s question has
really stood the test of time because he focused so sharply, so acutely,
so realistically on what works in the world as it is.

Let me just finish this little story of “the house of my dreams.”
Whenever people bring this story up, I ask them, “Well, what did you
do?” And surprisingly in every case, they have done the same thing.
And it’s roughly what I would like to think I would do. They
compromised. They bought a little time. They bent the rules a little bit.

They said something like the following: “That’s wonderful. I hope
everything works out great for your family.” They talk a little bit about
how great the house is. But…there’s a but coming. And the “but”
wasn’t “there’s a layoff and your name is on the list,” because that
would violate confidentiality. The “but” was, “you know, I’ve even been
a little nervous these days about how long I’m likely to have my job
here. Are you sure you want to do it?” Or “there have been layoffs at
competitors. I’m a little nervous.”

Pick your own favorite, devise your own. Use your own imagination
and creativity. Is this heroic? I don’t think it is heroic. Is it fudging a
little bit? Yes, it is fudging a little bit. But with these right versus right
kind of problems, you don’t have the easy, do-the-right-thing, charge-
the-hill alternatives.

Four people came to me with this story. I’m not even sure they
resolved it as they said they did. But maybe they gave a small warning
to an individual and his or her family. Maybe the family didn’t go over
the financial brink when the breadwinner was laid off. Is that World
War II heroism? No. Is it an act of decency? Did it involve
imagination? Did it involve some political savvy? Did it involve an

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acute sense of how things work in the world? Did it make the world, in
a small way, a better place? It clearly did.

Let me close by saying three things quickly about the whole set of
ideas I’ve put in front of you, the four questions, and then the
guidelines that are in the book. First of all, I noticed some of you
taking a few notes. I hope you didn’t just write down your favorite
question or two. That’s dangerous. You really have to use the four
questions together. They balance each other.

If you think only about net-net consequences, you can run over the
rights of individual human beings. If you think only about rights,
especially in America today, a highly litigious country, you can easily
be paralyzed. I live up in Brookline, Massachusetts. We have little
parks. We have a dispute in the town now, not about whether dog
owners have the right to let their dogs run free, but whether the
dogs—the dogs!—have a right to run free and to socialize. We will
settle this eventually, but you can be paralyzed if you only think about
rights.

If you only think about your conscience, what you can live with, your
sense of integrity—I’d have to ask what makes you so special that
your sense of integrity triumphs over consequences and rights of other
people. And if you think only about what will work in the world as it is,
not balanced by the other considerations, you can end up like our
friend Jeff Skilling from Enron—one of our graduates, sorry to say—
and lots of other people. You need all four questions.

The second thing I want to leave you with is another facet of these
four questions. They are great communication devices. I think these
questions have been around so long because they capture something
that is etched into our psyches. You can say to a group of people, “We
had a hard problem. We thought about it. We worked on it. And we
decided to do what was best for everybody affected.” That has got
face plausibility.

You can say, “We worked on this hard problem and we had to do the
following because we have obligations to some people with rights, and
we had to make good on those obligations.” People will understand
you. You can say, “Look, we thought hard. Given the kind of
organization we are trying to be, this is what we did.” People will
understand you. You can look people in the eye and say, “Look, it was
a tough decision, nobody’s going to like it, but this was the best, the
most practical choice in the world as it is.” They’ll understand you.

You have to fill in the details, but these are four powerful ways of
communicating. They are not just analytical tools.

Let me have one final minute, because I have covered a lot of things,
and what I would like to do is close in as useful and practical a way as
I can. And I’d like to summarize everything I’ve said in the form of
three little tests. You can use them for the everyday right versus right

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and the big right versus right. And I think they will help put you on
some of these quieter, more effective paths.

Test number one is the newspaper test. What plan is going to work
best if it’s going to be published on the front page of your local paper
tomorrow? That’s a way of picking up on the full set of consequences,
especially in our media-saturated world. It’s also a way of picking up
on the Machiavellian question of what will work in the world as it is.
The newspaper test is a very pragmatic one.

The second test is either the Native American advice to walk a mile in
the other person’s shoes or the golden rule, do unto others. Or
another version of it is, if your kids were the people who were going to
be affected by the decision, how would you want them to be treated
by somebody like you making the decision? All three of those are ways
of picking up on rights. Interests that other people have, real interests
that you ought to pay attention to.

The final question can be quite somber. It is the obituary test or
sometimes called the best friends test. What’s the right way of dealing
with this issue from the long term, the perspective of you looking
back, people you care about, whose admiration and respect you care
about, how would they have wanted you to make the decision? That’s
a way of picking up on what’s the right thing in terms of character.
Your character and the character of an organization.

Three tests. It took a minute. They are not the answer, there are no
answers. Ultimately, I vote with Aristotle, it’s ultimately a matter of
character and judgment, but a good organization and good leadership
will make it easier for people to find the right thing, or to pick the
writer of the right things, or sometimes to move in the form of quiet
leadership, in, roughly speaking, the right direction.

So, that said, I feel I have put in front of you maybe 10 percent of
what may be helpful in wrestling with these problems. The other 90
percent is up to character, experience, hard work, and good judgment,
which is something I suspect that all of you already knew. Thank you
for your time, your attention. Rick, I was just kidding.

Write Your Electropic LLC Report

Use your outline and research notes to prepare your report. Be sure to meet the following requirements laid out by the VP:

· Using Badaracco’s right vs. right framework and your legal analysis, prepare a report.

· Include APA-formatted in-text citations and an APA-formatted reference list (do not format the body of the report using APA style, just the reference list). See

references and citations

for details.

· Include in your report a detailed analysis of all four questions and three tests of the Badaracco framework; also include an analysis of the legal issues.

· Include a specific recommendation on what actions, if any, HR should take based on your legal and ethical analysis and conclusions.

· The report should be no more than 10 pages (double spaced, 12-point font; the reference list does not count toward page limit).

· Use only the resources/ learning resources provided.