Bribery Act 2010: Employment Implications

Employment Implications

February 18, 2011

Seeking to introduce for the first time in this country robust mechanisms to prevent and prosecute against corruption and bribery by persons connected to the UK in the public and private sectors, the Bribery Act 2010 (the Act) is currently due to come into force in May 2011 (although this date is likely to be pushed back). Significantly, bribery will not need to take place in the UK for the Act to apply. While it may not appear to be of immediate concern to HR professionals, the Act will significantly impact employment practices. Employers and their HR teams should consider how the Act will impact their organisations and how they recruit, control, manage and discipline employees.

The UK has been criticised internationally for years regarding its antiquated and lenient laws in this area, and its inability to prosecute effectively against corruption. Previous legislation and case law prevented the prosecution of a company unless the person who committed the offence was sufficiently senior to direct the “mind and will” of the organisation. The Act will change this as it will apply to all representatives of an organisation equally. The Act will bring UK legislation up to, and in some cases exceed, the robust and well-respected U.S. anticorruption legislation, the Foreign Corrupt Practices Act 1977.

Criminal Offences Under the Act

  • Active bribery: Including offering, promising or giving an advantage. Interestingly, offering small facilitation payments, which in many countries is considered necessary to persuade officials to perform their duties (or to perform them swiftly), is included within the scope of prohibited acts. This will significantly impact some organisations, as these payments are often seen the only way to get business “done”.
  • Passive bribery: Including requesting, agreeing to receive or accepting an advantage.
  • Bribery of a foreign public official: This is likely to overlap considerably with the active bribery offence.
  • Failure by a commercial organisation to prevent a bribe being paid to obtain or retain business or a business advantage: Such offences can be defended if an organisation can show it has adequate anti-bribery procedures in place.

Liability for the offences are an unlimited fine and/or up to 10 years imprisonment. The Act does not have retrospective effect, but it will apply equally to persons and bribes in the public and private sectors. Further, as its scope is not limited to bribery which takes place in the UK, the Act has considerable extra-territorial effect.

In addition to offences that take place in the UK, the Act will apply to offences carried out by persons who carry out services on behalf of an organisation and who are: (1) ordinarily resident in the UK; (2) British citizens; (3) bodies incorporated in the UK; or (4) companies which carry out part of their business in the UK, even if the offence committed is not carried out for the benefit of the UK part of the business.

Employment Policies & Procedures

For businesses to use the defence to the corporate offence of having adequate anti-bribery procedures, employers will need to have detailed policies and procedures in place. This is likely to entail the creation of new anti-bribery policies, as well as a review of other existing business and employment policies to ensure compliance. Depending on the size and nature of each employer, HR professionals should help establish such policies. Even if HR personnel are not involved in establishing relevant policies, they should be aware of the necessary requirements so they can implement and enforce policies effectively.

What Such Policies & Procedures Address

The Ministry of Justice issued draft guidance as to what such a policy should cover and what procedures should be implemented. The final wording is due to be published shortly. While the draft guidance contains six principles employers should consider (below), it is important that each organisation’s policies and procedures are tailored to address its individual risks.

1. Risk Assessment

Businesses are expected to carry out detailed risk assessments to identify areas that may expose the organisation to liability under the Act. Special focus should be given to areas which deal commercially with third parties (e.g., sales and marketing departments, where employees are expected to reach targets which they may seek to meet by means which would fall within the scope of the Act), and the methods used to obtain and procure contracts. Means of obtaining contracts from foreign companies or doing business in foreign countries, where corruption may be more common and a business’ control over its employees and representatives may be weaker, are likely to be of particular concern.

Businesses should consider preparing risk reports which identify areas that pose the most significant risks. It is important that HR managers are familiar with the contents of the risk reports so that they properly understand the key risk areas employment policies should focus on and the areas where it will be particularly important to raise awareness.

2. Top Level Commitment

Senior management must be involved in establishing appropriate policies and procedures to show they are committed to ensuring implementation and compliance, as it is considered that such involvement is needed to create and maintain an ethical compliance culture. Senior HR management should be involved in this process.

3. Due Diligence

Businesses should carry out due diligence enquiries in relation to their business partners, supply chain members, agents, intermediaries, joint venture partners, contractors, suppliers, and those involved in key decisions. This should include carrying out due diligence on their HR consultancies and recruitment agents. Businesses should also carry out appropriate due diligence when appointing new employees. This should seek to identify to what extent such persons may pose risks in relation to the Act, assessing the nature of the role they will be conducting, and carry out suitable background checks. This, in turn, is likely to result in businesses being more reliant on companies that carry out background checks.

4. Clear, Practical & Accessible Policies & Procedures

Policies and procedures should provide clear, practical and accessible guidance to prevent bribery and other corrupt acts by personnel and all entities the organisation controls and/or relies upon. HR managers are likely to be closely involved in drafting and amending such policies, which should cover political and charitable contributions, gifts, business favours, hospitality and promotional expenses, whistleblowing procedures, recruitment, financial controls and remuneration structures, as well as procedures to deal with the escalation, investigation and taking action (including disciplinary action) when policies and procedures are breached.

5. Effective Implementation

Organisations will be expected to show they have effectively implemented and enforced their anti-bribery policies and procedures, making certain they are understood and “embedded” throughout their business. Responsibility for enforcement should be allocated to key individuals with direct reporting to the board or senior management. It will be particularly important to carry out regular and role-specific training and to ensure that action is taken when policies are breached. HR personnel are likely to play key roles in training employees and disciplining those who do not comply.

6. Monitoring & Review

Anti-bribery policies and procedures should be subject to regular monitoring and review. A compliance programme must be a living and breathing part of the business, which grows and adapts with the business. Monitoring compliance will establish the extent to which policies and procedures are working and whether they are ensuring compliance with the Act and other relevant laws. Responsibility for monitoring may be given to an internal audit team or ethics committee, or external advisors may be consulted.

Tests should be conducted regularly to ensure that: due diligence is properly undertaken; new employees and board members receive appropriate training at induction; third parties (e.g., agents and subcontractors) are made aware of the policies and procedures and receive appropriate training; and policies and procedures have been implemented to address areas of risk identified in the risk assessment and are being followed.

It is important for businesses to properly document all incidents and violations, including those that were successfully caught by existing controls and procedures. By documenting these experiences, businesses and in particular HR managers can develop expertise on how to address situations when they arise and businesses can use these experiences to improve existing contracts and procedures with a view to minimising violations.

Other Employment Implications

Due diligence regarding the bribery risks of potential future recruits, enforcing bribery policies against employees, organising employee training on the policies and protecting employees who report suspected bribery (whistleblowers) will be key requirements of the Act which HR personnel are likely to lead. HR personnel should work closely with those responsible for implementing anti-bribery policies and related procedures to ensure that they understand the key risks for the organisation and their own responsibilities.

It will also be essential that HR personnel understand the scope of the role each potential recruit will undertake so that the potential risks for that role can be identified and the necessary due diligence, background checks and training can be tailored accordingly. HR should ensure that recruitment policies also address offering employment, internships and work experience to relatives or friends of business contacts, or similar arrangements carried out as favours to clients or business contacts, or to gain work.

HR personnel should also ensure that the new anti-bribery policies are incorporated into employees’ contracts and that it is clearly stated in employment contracts that breaching policies will be grounds for disciplinary action, including summary dismissal. It is also likely that anti-bribery matters will play a more important role in whistleblowing complaints. HR professionals should ensure that they are prepared to deal with these issues.