Everyone knows the clichés “cheaters never prosper” and “honesty is the best policy,” but that doesn’t mean employees always take those maxims to heart. Whether it’s padding an expense account, failing to clock out for lunch, or large-scale embezzling, some employees will cross the line into unethical territory. Take, for example, the case of the American software developer who outsourced his own job to China. A Los Angeles Times article reported in January that the American worker was paying a consulting firm in China $50,000 a year to do his job while he pocketed a much larger salary without having to do the work.

Because he was being paid hundreds of thousands of dollars, he didn’t mind paying someone on the other side of the world a mere $50,000 a year while he spent his workdays watching Internet videos, shopping online, and catching up on Facebook. His employer got suspicious when it noticed that someone in China was routinely logging in to its computer network. The company then brought in an expert to investigate and found invoices from the Chinese contractor on its employee’s work computer. It’s no surprise the American worker is no longer employed by the company he apparently was misleading, but the Times article reports that he had gotten away with the trick for a good while and may have had a similar deceit running at other companies.

HR’s response to cheating
How can HR deal with cheating employees? Every circumstance has to be examined case by case, but there are some tips to apply to various situations. The January issue of Hawaii Employment Law Letter carries an article on how to react to employee theft. Step one is to consult an attorney.

“If you have reasonable suspicion of employee theft, your attorney will likely suggest you investigate,” the article says. An investigation will include meeting with the accused employee to allow the employee to respond to any evidence. An investigation also should include meeting with other employees with knowledge of the situation.

The employer then needs to decide if there’s an explanation for what looks like theft. The employer then should prepare a report including details about the incident, the investigation, and any recommendations of actions to be taken. Also, the article points out, if theft has occurred, law enforcement may need to be alerted.

The article also warns employers about certain actions that should not be taken. For example, an accused employee shouldn’t be detained. “False imprisonment is against the law, and charges can be filed against you if you force an employee to remain somewhere (e.g., your office) and there was no reasonable basis for the action,” the article states. “Depending on the situation and the employee you’re dealing with, there may also be an element of personal danger involved in trying to detain someone. Contact the authorities or your attorney for specific advice if this situation comes up.”

Creating an ethical climate
It’s one thing to know how to deal with employee dishonesty, but it’s another to know how to encourage honesty and ethical behavior on the job. A July 22, 2011, post on the website for the Center for Positive Organizational Scholarship, which is associated with the Ross School of Business at the University of Michigan, asks the question, “How can we create ethical organizations?”

David M. Mayer, assistant professor of management and organization, writes that “Although conventional wisdom suggests that unethical behavior is the result of a few ‘bad apples,’ there is mounting evidence that in addition to the personal values of employees, the organizational environment plays a critical role in encouraging ethical conduct.”

Mayer identifies three areas that together promote ethical behavior: ethical leadership, ethical practices, and an ethical climate. He says that ethical leaders set the tone for employees.

Under ethical practices, Mayer says research highlights six organizational practices related to ethics:

• Recruitment and selection: Mayer says this includes using ethical hiring practices and seeking employees with ethical values.

• Orientation and training: Mayer says this includes ethics training for employees and discussing ethical issues with new employees.

• Policies and codes: Written codes of ethics need to be followed and enforced.

• Reward and punishment systems: Mayer writes that this includes rewarding ethical decisions and disciplining employees who violate standards.

• Accountability and responsibility: This includes holding employees accountable for their actions and encouraging employees to question authority if unethical behavior occurs.

• Decision-making: This includes discussions about ethical concerns and deciding if something is the “right thing to do.”

Mayer writes that ethical climate refers to the perception employees have about whether the organization is ethical. In an ethical climate, employees are skilled in recognizing and handling ethical issues, and they always strive to maintain high ethical standards. Also, employees in an ethical climate seldom feel pressured to compromise on ethical standards, and “success is defined not just by the results, but also the way they are obtained.”