United States Representative Mark Green of Tennessee recently made headlines for violating the STOCK Act, which requires congresspeople to disclose personal stock trades no later than 45 days after making them. Green waited nearly two months to disclose his purchase of stock in NGL Energy Partners, valued at up to $250,000.

While the House Ethics Committee has not yet taken action, Green can expect a fine of $200. This penalty is the standard for other members of congress who have violated the STOCK Act, 67 of which violations occurred since 2021 alone.

The STOCK Act serves as a conflict of interest policy of sorts, something that every organization should have. Just like the act, your policy should outline clear rules and consequences.

If you suspect an employee conflict of interest (or they disclose one to you), it can be hard to know how to move forward. A timely, well-documented analysis of the situation ensures your organization will only end up in the news for the right reasons.

What are Examples of Conflict of Interest?

Conflicts of interest aren’t always straightforward. They can be real, perceived, or simply possible based on the employee’s personal decisions and behaviors.

When they clearly have relevant private interests that conflict with those of the company, the employee may have an actual conflict of interest.

For instance, say Mike works full-time as a salesperson. He also has a “side hustle” as a freelance sales consultant, where one of his organization’s direct competitors is a client. Mike has a COI because he is making money by helping his employer’s competition.

When you can’t be certain about the employee’s private interests but they appear to be conflicting, they may have a perceived conflict of interest.

For example, say Michelle is hiring a new analyst to her team. She goes through the entire process and decides to hire her niece. Michelle chose the most qualified candidate with the best interview answers. However, her colleagues or other candidates might think she made the choice based on the relationship rather than what’s best for the company, which is a COI.

Finally, if the employee doesn’t show a COI now but it’s reasonably foreseeable that their private interests could become relevant in the future, they may have a potential conflict of interest.

For instance, say Mary, the head of HR, is in charge of finding new vendors. Her husband owns a cleaning business; if she were to hire his company, she would have a conflict of interest, as her family would make money from that decision. Though Company A isn’t hiring new cleaners right now, Mary could have a potential COI if/when they do.

Remember, COIs don’t just apply to employees. Board members and even other major stakeholders such as partners and key vendors should also be held to your conflict of interest policy. While they don’t work for your organization, they do impact its operations, so putting their personal interests above the company’s could still have a negative impact.

Receiving Conflict of Interest Disclosures

Step one of handling an employee conflict of interest is to know it’s there. Encourage employees to talk to their manager if they think they have an actual, perceived, or potential COI.

You can also set up a hotline or other reporting tool for tips. Employees who suspect a coworker of a COI may be hesitant to come forward, so offer multiple reporting avenues (e.g. webform, phone number, designated email address) with the option to remain anonymous.

Within 30 days of discovering their potential COI, an employee should report it to their manager. If the issue is straightforward, the manager can review the situation and direct the employee on how to resolve or mitigate the situation.

In more complex scenarios, such as when it’s unclear if a COI is present, the employee should fill out a conflict of interest disclosure form for your human resources or ethics department to review.

Once you know about a conflict of interest, take action ASAP. Even if it turns out to be nothing, you could save your organization from a scandal, a fraud scheme, or thousands in lost funds.

Reviewing the Conflict of Interest Declaration

Sometimes spotting a conflict of interest isn’t easy, even for the employee involved.

In this case, management, HR and/or the ethics department should review the situation. Evaluate the employee’s position and disclosure statement in a timely manner, documenting the process well and staying consistent with your company’s policies.

First, identify the employee’s job duties and responsibilities. Then, analyze the situation your organization is facing. Ask:

• Does this employee have relevant private interests?
• If so, do they interfere with the employee’s duties? Do they interfere with the company’s interests?
• What is the severity of harm this could cause the organization?

Be sure to have a set of (preferably written) procedures for addressing COIs. For example:

• Who receives the disclosures?
• Who analyzes them?
• How long does the analysis process take?
• What should the employee do in the interim?
• What are the consequences for not disclosing a COI?
• How often will you update your conflict of interest policy?
• How often do employees have to acknowledge that they’ve read and understand the policy?

By having this information predetermined, you’ll be able to work more efficiently and effectively, since everyone knows their responsibilities and deadlines. Employees will also know what to expect if they have a COI, making the process less stressful for them as well.

How to Resolve an Employee Conflict of Interest

If you determine that an employee has a conflict of interest, you need to take steps to either resolve or mitigate the situation.

Always start by consulting your conflict of interest policy. This document should describe how to handle COIs of different types and severities. Ensuring you follow your policy consistently also reduces your risk of the employee claiming wrongful discipline or termination.

Depending on the details of the employee’s COI, you may need to:

• give them a warning
• ask them to relinquish their conflicting private interest (e.g. Mike giving up his side job)
• allow restricted involvement in the conflicted project or task (e.g. Michelle not having final say on her new hire)
• remove the employee from the project or task (e.g. choosing someone other than Mary to choose the new cleaning vendor)
• fire the employee
• talk with a lawyer about the legal implications of the conflict of interest

Document your decision in the employee’s personnel file, including the reasons for the conclusion and actions taken. Then, communicate the decision to the employee in writing. A strongly-documented, by-the-book decision process should keep employee pushback (or lawsuits) to a minimum.

Where reasonable, relevant, and necessary, communicate the details of the COI and how it was addressed to the entire organization for transparency. For example, if Martin was terminated for accepting too many gifts from a client, you might share this information with all staff as a reminder of your gifts policy.

Avoiding Employee Conflicts of Interest

According to the Association of Certified Fraud Examiners’ 2022 Report to the Nations, corruption (including conflicts of interest) goes on an average of 12 months before it’s investigated.

In that time, the conflicted employee could cost your company thousands of dollars in stolen time and perks. Your organization could also face hefty fines if you fail to disclose an employee’s conflict of interest. To avoid these negative consequences, try to prevent COIs as much as possible.

The first step? Establish a culture of ethics in your workplace to save time, money, and stress.

To start, implement a clear code of ethics, code of conduct, and conflict of interest policy. Each of these policies has unique information about how employees should behave, but they should all work together to create a complete picture of expected conduct.

In your code of ethics, explain your company’s ethical standards and the reasons behind them. In your code of conduct, outline specific behaviors that will and won’t be tolerated in the workplace, from dress code to interpersonal interactions.

Finally, your conflict of interest policy should include:

• Definitions of COI types
• Examples of COIs
• How, where, and when to disclose a COI
• Employer procedures for addressing COIs
• Disciplinary measures if a COI is not disclosed

Train both new and current employees on these policies and have them sign acknowledgement forms to confirm their understanding. Make sure to apply policies, especially those surrounding hiring practices and gift acceptance, to employees at every level.

You can also stop COIs before they start by requiring employees to sign non-compete agreements. These are confidentiality agreements that restrict employees from working for or with competitors while employed at your organization. They often extend beyond an employee’s tenure with the company to reduce the risk that they’ll quit and run straight to a competitor with your ideas.

Having employees sign a non-compete agreement reminds them of a specific type of COI they should avoid, plus provides documentation that they agreed to follow your ethical standards.

Dealing with an employee conflict of interest can be complex and even uncomfortable. Clearly-defined policies and procedures make it easier to decide what to do when this type of situation arises.

How Case IQ Can Help

If you’re managing employee COIs with paper files or spreadsheets, important information may be slipping through the cracks.

You might miss a detail or an entire disclosure, which could give the employee time to profit off of their COI. Or, if you take too long to respond, you could not only lose money or proprietary information, but also be stuck with regulatory penalties and/or a public scandal.

Case management software ensures your investigations are timely and well-documented. With all the important information and evidence right in the case file, you won’t have to waste time searching for that disclosure form or other documents. A built-in reporting tool also decreases time spent writing an investigation report, helping you manage risk to both the employee and your organization.

Want to learn more about how Case IQ’s powerful case management solution can improve your organization’s ethics? Click here.