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How to Handle an Employee Conflict of Interest

An employee conflict of interest (COI) can be complex. Follow these steps to identify and resolve a COI in the workplace.

Posted by Ann Snook on September 9th, 2019

According to the Association of Certified Fraud Examiners’ 2018 Report to the Nations, corruption (including conflicts of interest) goes on an average of 22 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.

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.

 

Encourage ethical employee behavior with a strong conflict of interest policy. Download our free template to get started.

 

Conflict of Interest Disclosure

 

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.

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

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.

 

Download our conflict of interest disclosure form template to help employees declare their actual, perceived or potential COIs.

 

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

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

 

Learn more about how case management software leads to more effective ethics investigations in our free eBook.

 

Resolve or Mitigate the Issue

 

Once you’ve determined 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.

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

  • give the employee a warning
  • ask the employee to relinquish their conflicting private interest
  • allow restricted involvement in the conflicted project or task
  • remove the employee from the project or task
  • 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. Where reasonable, relevant and necessary, communicate the details of the COI and how it was addressed to the entire organization for transparency.

 

RELATED: The Complete Guide to Conflict of Interest Investigations

 

Avoid Another Employee Conflict of Interest

 

The easiest way to handle conflicts of interest in your organization is to avoid them completely. Establish a culture of ethics in your workplace to save time, money and stress.

First, implement a clear code of ethics, code of conduct and conflict of interest policy. 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 noncompete agreements. These are confidentiality agreements that restrict employees from working for or with competitors while employed at your organization.

 

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.


Ann Snook
Ann Snook

Marketing Writer

Ann is a marketing writer at i-Sight Software. She writes about issues related to investigations of fraud, employee misconduct, corporate security, Title IX, ethics & compliance and more.

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