Economic uncertainty and employee misconduct go hand-in-hand: Here’s how to prevent it

In today’s uncertain economic environment, you don’t have to look far to see examples of mass layoffs. Over 200,000 tech employees were laid off in 2022 and more cuts are expected this year.

For obvious reasons, layoffs are an especially difficult time for employees and the company. While most HR people are (rightfully) focused on how to approach these difficult moments compassionately, there’s oftentimes a less apparent compliance issue lurking around the corner: employee misconduct.

Layoffs, and economic downturns generally, are rife with employee misconduct for a variety of reasons. Periods of change make employees feel pressure to “bend the rules;” they are more likely to feel distrustful of management and disconnected from their peers. HR and Legal can be viewed as scary authorities versus trusted partners. This is particularly poignant in today’s world of remote work. Research from Gartner in the earliest days of the pandemic showed that “higher frequency of career moments (not including promotions) is correlated to rates of observed misconduct and negative views of corporate integrity.” Moreover, this type of misconduct has increased significantly since 2012.

Whether your organization has gone through a layoff, is on the cusp of one or is simply unsure of what next year looks like, there are a number of steps you can take now to prevent misconduct versus scramble to react. Let’s tackle this by examining some key areas of misconduct, how and why they happen and how HR teams can take action.

Sexual harassment

Let’s play out this scenario: a woman’s boss starts making inappropriate comments and repeatedly asks her out. Under more normal economic times, she would hopefully feel comfortable bringing the issue to a senior leader or HR. But given recent layoffs and ongoing uncertainty about the company’s future, the employee isn’t sure where to turn because she’s fearful for her job. She continues her work and the harassment worsens.

The question becomes how can companies ensure it’s not missing these cues to prevent a situation like this from happening in the first place? It starts with training. That same research from Gartner notes that “Employees who believed they received the right amount of information following a career moment were 62% more likely to report misconduct than those who were neutral.”

Unfortunately, most training is, to put it plainly, really bad. Gallup, for example, shows that 90% of employees can’t tell the difference between training and not training. Given training’s power to prevent sexual harassment, this is a huge miss.

Fortunately, however, there are steps companies can take to ensure their training is effective. The Department of Justice advises companies to examine these aspects of training to ensure their compliance training is truly effective:

• Is training risk-based or one-size-fits all? Best practice is to have training that’s calibrated for the risk an employee actually faces.
• Is the content in the form and language that’s best tailored to the audience? For example, if your employees learn through a multimedia approach, does the content allow for that?
• Does the company specifically communicate about actual instances of misconduct that have happened? Scenarios are a great way to do this.
• Finally, do employees have access to resources and guidance?

Consider revisiting your compliance training to ensure it meets these guidelines. While that’s always best practice, it’s especially important to do during economic times that make misconduct more likely.

Insider training

In times of turmoil, employees are likely closer to letting material nonpublic information (MNPI) slip than they might imagine, even if unintentional. Imagine a situation where an employee grabs coffee with someone outside of their company and shares that they know the company is about to do significant layoffs, including to certain teams.

This is the time for senior leadership to be visible. They need to remind employees what MNPI is and acknowledge the reality that employees may be exposed to more of it during this time than usual. Most importantly, they should remind employees of their responsibility to safeguard this information as well as what the consequences are of failing to do so.

The point is not to scare employees but rather to keep them and the company protected.

Code of Conduct

For all the reasons listed above, layoffs and times of uncertainty are usually when a company’s Code of Conduct can feel less important than just “keeping the ship afloat.” But obviously, that’s not the case. Oftentimes, these are handed out as booklets or PDFs as a part of onboarding and rarely revisited after.

As Codes of Conduct have become more common — required for public companies, and best practice for strong teams — leadership, legal, compliance, and HR teams have had to confront how to ensure that these codes get woven into company culture. Ideally, this happens as a regular practice but layoffs are when it becomes even more important.

The best practice is to get a pulse on how employees are feeling before these situations occur. Consider doing pulse surveys to monitor metrics like these:

• I know how to raise a concern
• I am worried that if I raise a concern, I will face retaliation
• The company behaves in an ethical manner
• My manager strongly encourages their team to behave in an ethical manner

If your company, as a whole, is comfortable reporting incidents, but you have one team that has a really low “willingness to report” score, that’s where you may want to prioritize training, coaching and engagement.

Read more: 6 common employee handbook mistakes to avoid

As economic uncertainty rises, companies will be at an increased risk of misconduct. But effective communication and training can help employees and companies navigate these hard times and emerge with a strong culture.

Roxanne Petraeus is the CEO and co-founder of Ethena, a startup modernizing compliance training. She is also a former U.S. Army combat veteran.