No one wants to allow fraud, which has reputational costs as well as financial ones — but how do you prevent it? Monitoring employees is one common answer, but where does monitoring cross the line into illegal invasion of privacy. In order to deter fraud without putting your company in legal jeopardy, you must understand the boundaries set in employment law.
Balancing competing needs
Employees’ privacy rights are protected by law. Most employment laws attempt to balance employers’ need to protect the company’s assets and maximize productivity with employees’ need to be free from intrusion into their private affairs.
Setting clear policies early on — before problems arise — both establishes your authority to conduct searches or monitor Internet activity, for example, and communicates openly to your employees where they can have an expectation of privacy, and where they can’t. Of course, in designing these policies it is always wise to consult your attorney and confirm they are allowable under state and federal laws.
What can employers do?
Federal law generally allows employers to take the actions listed below, although state and local laws may set different limits.
Electronic activities monitoring. As a general rule, you can’t monitor employees’ use of electronic devices (such as tracking Internet use) without their knowledge. If your company clearly states a policy to monitor communications, an employee is usually considered to have consented by remaining in the job. Outside that consent, there are two other notable exceptions: First, you can monitor if you have a legitimate business need to do so (for example, to record a client’s buy/sell instructions to a stockbroker). The second exception is when one party to a communication consents to the monitoring.
Phone call monitoring. You’re generally allowed to monitor business-related phone conversations to and from the workplace. However, you can’t monitor personal calls and must hang up as soon as it’s apparent the call isn’t work-related, unless the employee has given you permission to listen in.
Physical searches. Exercise extreme caution before searching an employee’s person. If you feel a body search is necessary, don’t threaten or apply physical force or prevent the employee from leaving the room or workplace. Aside from possible referral to law enforcement, keep the search results confidential. This is to prevent leaks that could form the basis for libel or slander suits.
Surveillance. You can install cameras in your company’s offices or production areas, but usually not in “private” areas such as restrooms and locker rooms. As with other searches, surveillance records must be kept confidential. Only individuals who must know the information to properly perform their duties should have access to evidence of possible wrongdoing.
Avoiding land mines and finding better solutions
To avoid legal land mines, consult an employment law attorney when developing your company’s fraud deterrence. Also remember that appropriate internal controls, designed as part of a comprehensive risk assessment and ongoing internal audit program, play a critical role in deterring and preventing fraud — and those internal controls don’t carry the same risks for employee relations.
To find out more about preventing fraud at your company, contact Weaver’s Risk Advisory Services practice. Our professionals can help you identify the most effective measures for your company’s unique situation.
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