Duty To Report Employee Misconduct

Lesley Brovner & Mark Peters
April 21, 2022

Under what circumstances must an employer report the misconduct of an employee?

There are a number of circumstances in which an employer must or should report the conduct of an employee.  For example:

SEC

Several SEC rules suggest that reporting employee SEC violations is a best practice that the regulator expects employers to abide by.  The SEC has identified various criteria to consider in determining, on a case-by-case basis, whether, and how much, to credit a company’s self-policing, self-reporting, remediation, and cooperation. Some of these considerations include:

  • The nature of the misconduct involved
  • How the misconduct arose
  • Where in the organization the misconduct occurred
  • How long the misconduct lasted
  • How much harm has the misconduct inflicted upon investors and other corporate constituencies
  • How was the misconduct detected and who uncovered it
  • How long after discovery of the misconduct it took to implement an effective response
  • The steps the company took upon learning of the misconduct
  • The processes the company followed to resolve these issues and ferret out necessary information, and whether it did a thorough review of the nature, extent, origins, and consequences of the conduct and related behavior
  • Whether the company promptly made available to SEC staff the results of its review and provided sufficient documentation reflecting its response to the situation

FINRA

Various securities violations must be reported to the Financial Industry Regulatory Authority (FINRA), an independent financial regulator of securities firms in the United States.  For example, FINRA Rule 4530(b) states that “each member firm shall promptly report to FINRA, but in any event not later than 30 calendar days, after the firm has concluded or reasonably should have concluded that an associated person of the firm or the firm itself has violated any securities-, insurance-, commodities-, financial-, or investment-related laws, rules regulations or standards of conduct of any domestic or foreign regulatory body or self-regulatory organization (SRO).”  Employers must report conduct that has or may have widespread impact on the member, its customers, or the markets or that arises from a material failure of the firm’s systems, policies, or practices involving numerous customers, multiple errors, or significant amounts of money.

OHSA

  • While there is no express self-reporting requirement regarding workplace violence, OSHA does list some best practices which include:
  • Assigning responsibility and authority for the various aspects of the workplace violence prevention program to ensure that all managers and supervisors understand their obligations
  • Maintaining a system of accountability for involved managers, supervisors, and workers
  • Establishing policies that ensure the reporting, recording, and monitoring of incidents and near misses and that no reprisals are made against anyone who does so in good faith
  • Determining who needs to be notified, both within the organization and outside (e.g., authorities), when there is an incident
  • Understanding what types of incidents must be reported, and what information needs to be included
  • Developing a standard response action plan for violent situations, including the availability of assistance, response to alarm systems, and communication procedures
  • As part of their overall program, employers should evaluate their safety and security measures:
    • Top management should review the program regularly and, with each incident, to evaluate its success.
    • Responsible parties (including managers, supervisors, and employees) should reevaluate policies and procedures on a regular basis to identify deficiencies and take corrective action.

More generally

There are numerous obligations to report employees who access child pornography on work computers.  Reports should be made to the CyberTipline operated by the National Center for Missing and Exploited Children in partnership with the FBI and other law enforcement agencies.  The number is 1-800-843-5678.

All of these reporting obligations are very fact specific and you should consult with an attorney before proceeding.  If you have questions about your legal obligations to report employee misconduct, contact the lawyers at Peters Brovner LLP who can help you in these matters for a consultation.