Worldwide Code of Conduct Reasonable Exercise of Management Rights
Many multinational corporations have issued company-wide codes of conduct setting out baseline rules that apply to all of their global operations. A recent Ontario arbitration decision provides a good precedent for employers who may be concerned about balancing corporate governance interests against the rights of unionized employees when instituting universal codes of conduct.
In Candu Energy Inc. v. The Society of Professional Engineers and Associates, Arbitrator Keller approved the right of a multinational employer to institute a code of ethics applicable to all its employees, including its unionized workforce, concluding that it was a reasonable exercise of management rights.
SNC-Lavalin Inc. (“SNC”), Candu’s parent company, introduced a company-wide Code of Ethics (the “Code”) providing guidelines on professional and ethical standards expected of all SNC employees, whether unionized, non-unionized, managerial or executive board member. The Code applied to employees in all units of SNC and all subsidiary and associated companies around the world, including Candu.
The Union did not take issue with the right of the employer to impose the Code but challenged the reasonableness of three key provisions: (1) the obligation to disclose and obtain consent in relation to any actual or contemplated secondary employment relationships or directorship of any third-party organization; (2) the prohibition on engaging in activities that are in competition with SNC; and (3) the prohibition on soliciting political contributions during work hours or on the employer’s premises.
The Union argued that the provisions were overbroad and reached excessively into employees’ private lives. The Union also advanced the argument that the Code, on its face, was overbroad because it extended beyond Candu (the employer and the party to the applicable collective agreement) to SNC (the parent corporation).
Candu argued that the provisions were necessary to protect a legitimate business interest; namely, safeguarding the corporate family’s reputation by promoting integrity and transparency in the conduct of the SNC business and its relations with employees, directors, shareholders and business partners.
Arbitrator Keller began by affirming a parent corporation’s right to enforce a universal code of conduct that applied across all of its various subsidiaries and affiliates, including those with unionized workforces. The Arbitrator went on to find that all three grieved provisions were reasonable, giving significant weight to the employer’s legitimate business interests throughout.
First, the Arbitrator concluded that the prohibition on political solicitation during work hours or on the employer’s premises was reasonable. The prohibition was limited to soliciting political donations and therefore did not impinge employee free speech and was directed at the employer’s legitimate business interest in maintaining a reputation for political neutrality and ensuring that employees are not influenced in the workplace.
The Arbitrator addressed together the requirement that employees disclose and obtain consent for all secondary employment and directorship activities and the restriction on secondary employment in competition with SNC.
The Arbitrator recognized that the corporate governance of SNC was of critical importance if SNC, and each of its subsidiaries, including Candu, was to succeed in the worldwide marketplace. On that basis the Arbitrator found that while the provisions intruded on employee privacy, this intrusion was reasonable in light of the “extremely important emphasis on corporate governance”.
The Arbitrator also rejected the Union’s argument that employees should only be required to disclose actual or potential conflicts of interest, noting that Candu employees may not be aware of all of SNC’s business activities and therefore would not have enough knowledge to be able to determine whether their secondary employment or directorship created a conflict of interest, real or perceived. As a result, it was reasonable to require proactive disclosure of all secondary employment and directorships as the employer was in the best position to determine whether a conflict exists.
The Arbitrator did note two caveats: First, employee information disclosed under the provision must only be shared with those individuals charged with assessing whether or not there is a conflict of interest. Second, the assessment itself must not be overbroad in that the employer should only disallow secondary employment or a third-party directorship that “will, not might” result in a real or perceived conflict of interest.
Overall, the decision is a useful precedent for any employer seeking to institute a code of conduct in a unionized environment and, in particular, for employers that are members of a multinational corporate family required to adhere to a single global code of conduct.
Copy of the full decision is available canduconflictofinterest
Candu was represented by McCarthy Tétrault's Tim Lawson.
Candu Candu Energy Inc Candu Energy Inc v The Society of Professional Engineers and Associates SNC Lavalin Inc Tim Lawson