Ann Kotlarski Quoted in HR Magazine

The article ("Management Tools: Reporting for SOX Duty") in the June issue of HR Magazine addresses the impact that SOX regulations has on the day-to-day conduct of employees of publicly traded companies.  When Congress passed the Sarbanes-Oxley Act of 2002, the new law unleashed a panoply of corporate obligations and responsibilities, not the least of which affected the day-to-day conduct of employees of publicly traded companies. When most U.S. workers hear the name Sarbanes-Oxley, or “SOX” as it’s often abbreviated, the first thing that comes to mind is financial and operational controls and disclosure requirements. And while financial measures and reforms in corporate governance standards make up a majority of SOX initiatives, documented codes of ethics are also a mainstay of the act.   To comply with the new law, publicly traded companies must publish a code of conduct and ethics, often referred to as a business conduct statement, that in turn must be proactively communicated to all employees. 

SOX contains management certification requirements to confirm that no potential conflicts of interest exist that could threaten the validity of a corporate filing. To avoid defective certification, a CEO must verify that the information contained in a financial report is accurate and complete.  And the only way your CEO can do that is to poll the workforce and ask employees to certify that they in turn have no conflicts of interest that could interfere with the larger corporate filing.  So what does a potential conflict of interest look like? “A conflict of interest exists when your outside business or personal interests adversely affect or have the appearance of adversely affecting your judgment at work,” says Ann Kotlarski, litigation partner in the employment practice of Seyfarth Shaw LLP in Los Angeles. “It’s critical that you disclose in writing anything that could place your company at risk, and having an undisclosed family relationship with co-workers, customers, suppliers or competitors of the company is typically the No. 1 issue,” says Kotlarski.  How do you handle such situations? Simply report these potential conflicts on any employee certification form that your company asks you to complete. “To be on the safe side,” advises Kotlarski, “even if you’re not given a formal disclosure form, e-mail the issue to your supervisor so that you have an electronic record of the disclosure to protect yourself.”

Bear in mind that whatever you commit to e-mail becomes an electronic record of the company’s. Plaintiffs’ attorneys are taking advantage of the gold mine of discoverable information available from poorly thought out e-mails. Your best bet? Avoid putting anything into e-mail format that you wouldn’t put on company letterhead because of its questionable nature. Just pick up the phone and call instead. If you still feel a need to use e-mail to document your message, speak with your corporate general counsel about making the communication an attorney-client privileged document. Remember as well that any extraordinary attempts to destroy pertinent e-mail communication could be seen as an obstruction of justice, and employees of both publicly owned and privately owned companies could face fines and imprisonment of up to 20 years. It doesn’t matter if you delete the e-mail, clear out your recycle bin, or even instruct someone in IT to delete the information from the primary and backup servers. Warns Kotlarski: “All you’ll be doing is creating an electronic record of your efforts to impede an investigation since the meta-data will ultimately remain traceable.”