Ethics

Human Resource
Management
ELEVENTH EDITION
1
GARY DESSLER
BIJU VARKKEY
Part 5 | Employee Relations
Chapter
14
Ethics, Justice, and Fair Treatment
in HR Management
© 2009 Dorling Kindersley (I) Pvt. Ltd.

All rights reserved.
After studying this chapter, you should be able to:
1. Explain what is meant by ethical behavior at work.

2. Discuss important factors that shape ethical behavior
at work.
3. Describe at least four specific ways in which HR
management can influence ethical behavior at work.
4. Employ fair disciplinary practices.
5. List at least four important factors in managing
dismissals effectively.
© 2009 Dorling Kindersley (I) Pvt. Ltd. All rights reserved. 14–2
Ethics and Fair Treatment at Work
• The Meaning of Ethics
 The principles of conduct governing
an individual or a group.
 The standards you use to decide
what your conduct should be.
 Ethical behavior depends on a
person’s frame of reference.
• Ethical Decisions
 Normative judgments
 Morality
FIGURE 14–1
The Wall Street
Journal
Workplace-
Ethics Quiz
Note: The spread

of technology into
the workplace
has raised a
variety of new
ethical questions,
and many old
ones still linger.
Source: Wall Street Journal, October 21, 1999, pp. B1–B4. Reproduced with permission via Copyright Clearance Center.
TABLE 14–1 Specific Observed Unethical Behaviors
Abusive or intimidating behavior toward employees 21%

Lying to employees, customers, vendors, or to the public 19%
A situation that places employee interests over organizational interests 18%
Violations of safety regulations 16%
Misreporting of actual time worked 16%
E-mail and Internet abuse 13%
Discrimination on the basis of race, color, gender, age, or similar categories 12%
Stealing or theft 11%
Sexual harassment 9%
Provision of goods or services that fail to meet specifications 8%
Misuse of confidential information 7%
Alteration of documents 6%
Falsification or misrepresentation of financial records or reports 5%
Improper use of competitors’ inside information 4%
Price fixing 3%
Giving or accepting bribes, kickbacks, or inappropriate gifts 3%
Source: From 2005 National Business Ethics Survey: How Employees Perceive Ethics at Work, 2005, p. 25. Copyright © 2006, Ethics
Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave., N.W., Suite 400, Washington, DC 2006,
www.ethics.org. Reprinted in O. C. Ferrell, John Fraedrich, and Linog Ferrell, Business Ethics (Boston: Houghton Mifflin, 2008) , p. 61.
Ethics and Fair Treatment at Work (cont’d)
A behavior may be legal

but unethical.
A behavior may be illegal

but ethical.
Ethics and
the Law A behavior may be both
legal and ethical.
A behavior may be both

illegal and unethical.
Ethics, Fair Treatment, and Justice
Components of
Organizational Justice
Interactional
Distributive Procedural
(Interpersonal)
Justice Justice
Justice
FIGURE 14–2
Perceptions
of Fair
Interpersonal
Treatment
Scale
Source: Michelle A. Donovan et al., “The Perceptions of Their

Interpersonal Treatment Scale: Development and Validation of
a Measure of Interpersonal Treatment in the Workplace,”
Journal of Applied Psychology, 83, no. 5 (1998), p. 692.
What Shapes Ethical Behavior at Work?
Individual
Factors
The Organization’s Organizational

Culture Ethical Behavior Factors
At Work
Ethical Policies The Boss’s

and Codes Influence
FIGURE 14–3
How Do My
Ethics Rate?
Source: Adapted from A. Reichel and

Y. Neumann, Journal of Instructional
Psychology, March 1988, pp. 25–53.
With permission of the authors.
TABLE 14–2 Principal Causes of Ethical Compromises
Front- Prof.
Senior Middle Line Non- Admin.
Mgmt. Mgmt. Supv. Mgmt. Salaried Hourly
Meeting schedule pressure 1 1 1 1 1 1
Meeting overly aggressive

financial or business
objectives 3 2 2 2 2 2
Helping the company survive 2 3 4 4 3 4
Advancing the career

interests of my boss 5 4 3 3 4 5
Feeling peer pressure 7 7 5 6 5 3
Resisting competitive threats 4 5 6 5 6 7
Saving jobs 9 6 7 7 7 6
Advancing my own career or

financial interests 8 9 9 8 9 8
Other 6 8 8 9 8 9
Note: 1 is high, 9 is low.
Sources: O. C. Ferrell and John Fraedrich, Business Ethics, 3rd ed. (New York: Houghton Mifflin, 1997), p. 28; adapted from Rebecca Goodell, Ethics in American
Business: Policies, Programs, and Perceptions (1994), p. 54. Permission provided courtesy of the Ethics Resource Center, 1120 6th Street NW, Washington, DC: 20005.
Employees and Ethical Dilemmas
• Questions employees should ask when faced
with ethical dilemmas:
 Is the action legal?
 Is it right?
 Who will be affected?
 Does it fit the company’s values?
 How will it “feel” afterwards?
 How will it look in the newspaper?
 Will it reflect poorly on the company?
What Is Organizational Culture?
• Organizational culture
 The characteristic values, traditions, and behaviors a
company’s employees share.
• How is culture revealed?
 Ceremonial events
 Written rules and spoken commands
 Office layout
 Organizational structure
 Dress codes
 Cultural symbols and behaviors
 Figureheads
The Manager’s Role in Creating Culture
Clarify
Expectations
Organize Rites Use Signs and

and Ceremonies Symbols
Provide Physical
Use Stories
Support
Human Resource Management’s Role in
Promoting Ethics and Fair Treatment
Ethics
Selection
Training
Reward and
Performance HRM–Related
Disciplinary
Appraisal Ethics Activities Systems
Workplace HR’s Ethics and

Aggression and Compliance
Violence Activities
HRM-Related Ethics Activities
• Selection
 Fostering the perception of fairness in the processes
of recruitment and hiring of people.
 Formal procedures
 Interpersonal treatment
 Providing explanations
 Selection tools
 Two-way communication
• Training
 How to recognize ethical dilemmas.
 How to use ethical frameworks to resolve problems.
 How to use HR functions in ethical ways.
FIGURE 14–4
U.S. Data Trust
Web site
Source: Reprinted with permission

of U.S. Data Trust Corporation.
www.USDataTrust.com/company.
FIGURE 14–5 The Role of Training in Ethics
Source: Susan Wells, “Turn Employees into Saints,”

HR Magazine, December 1999, p. 52. Reproduced
with permission via Copyright Clearance Center.
HRM-Related Ethics Activities (cont’d)
• Performance Appraisal
 Appraisals that make it clear that the company
adheres to high ethical standards by measuring and
rewarding employees who follow those standards.
• Reward and Disciplinary Systems
 The organization swiftly and harshly punishes
unethical conduct.
• Workplace Aggression and Violence
 Taking care that HR actions do not foster
perceptions of inequities that translate into
dysfunctional behaviors by employees.
HRM-Related Ethics Activities (cont’d)
• HR’s Ethics Compliance Activities
 Complying with various legislations.
 Requires that the CEO and the CFO of publicly traded
companies personally attest to the accuracy of their
companies’ financial statements and that its internal controls
are adequate.
 Increased the need for ethics training and verification of
training.
 Firms are using online ethics training programs to

comply with the act’s requirements.
Building Two-Way Communications
Perceptions of fair
treatment depend on:
Expectation
Engagement Explanation
Clarity
Employee Discipline and Privacy
Fair and Just

Discipline
Process
Clear Rules A System of

An Appeals
and Progressive
Process
Regulations Penalties
Guidelines for Fair Discipline
• Does evidence support the charge of employee wrongdoing?
• Were the employee’s due process rights protected?
• Was the employee warned of disciplinary consequences?
• Was a rule violated and was it “reasonably related” to the efficient
and safe operation of the work environment?
• Was the matter fairly and adequately investigated before
administering discipline?
• Did the investigation produce substantial evidence of misconduct?
• Have rules, orders, or penalties been applied evenhandedly?
• Is the penalty reasonably related to the misconduct and to the
employee’s past work history?
• Did the employee have the right to counsel?
• Did anger, hearsay, or personal impression affect the decision?
FIGURE 14–6
Disciplinary
Action Form
Source: Reprinted from www.HR.BLR.com with

permission of the publisher Business and Legal
Reports, Inc., 141 Mill Rock Road East, Old
Saybrook, CT © 2004.
Formal Disciplinary Appeals Processes
• FedEx's Multi-Step Guaranteed Fair Treatment
Program
 Step 1: Management review
 Step 2: Officer complaint
 Step 3: Executive appeals review
FIGURE 14–7
Grievance
Form as Part
of Appeal
Process
Source:
http://www.wfu.edu/hr/forms/
staff-grievance.pdf.
Accessed May 24, 2007.
Discipline Without Punishment
(Nonpunitive Discipline)
1. Issue an oral reminder.
2. Should another incident arise within six weeks, issue a
formal written reminder, a copy of which is placed in
the employee’s personnel file.
3. Give a paid, one-day “decision-making leave.”
4. If no further incidents occur in the next year, then
purge the one-day paid suspension from the person’s
file. If the behavior is repeated, the next step is
dismissal.
Employee Privacy
• Employee privacy violations upheld by courts:
 Intrusion
 Publication of private matters
 Disclosure of medical records
 Appropriation of an employee’s name or likeness
• Actions triggering privacy violations:
 Background checks
 Monitoring off-duty conduct and lifestyle
 Drug testing
 Workplace searches
 Monitoring of workplace
Employee Privacy (cont’d)
• What Is Monitored:
 Identity
 Location
 E-mail activity and Internet use
 Telephone calls
• Why Employers Monitor:
 To guard against liability for illegal acts and
harassment suits caused by employee misuse.
 To improve productivity.
 To detect leaks of confidential information.
 To protect against computer viruses.
Restrictions on Workplace Monitoring
• The Electronic Communications
Privacy Act (ECPA)
 Restricts employer interception and
monitoring of oral and wire
communications.
 “business purpose exception”
 “consent exception”
• Common law
 Provides protections against
invasion of privacy.
FIGURE 14–8 Sample Telephone Monitoring Acknowledgement Statement
Source: Reprinted with permission from Bulletin to Management (BNA Policy and Practice
Series) 48, no. 14, Part II, (April 3, 1997), p. 7. © 1997 by The Bureau of National Affairs, Inc.
Managing Dismissals
• Dismissal
 Involuntary termination of an employee’s
employment with the firm.
• Terminate-at-Will Rule
 Without a contract, the employee can resign for any
reason, at will, and the employer can similarly
dismiss the employee for any reason (or no reason),
at will.
Managing Dismissals (cont’d)
Protections Against
Wrongful Discharge
Statutory Common Law Public Policy

Exceptions Exceptions Exceptions
Grounds for Dismissal
Unsatisfactory Performance
Misconduct
Bases for
Dismissal
Lack of Qualifications
Changed Requirements of
(or Elimination of) the Job
Insubordination
1. Direct disregard of the boss’s authority.
2. Direct disobedience of, or refusal to obey, the boss’s
orders, particularly in front of others.
3. Deliberate defiance of clearly stated company policies,
rules, regulations, and procedures.
4. Public criticism of the boss.
5. Blatant disregard of reasonable instructions.
6. Contemptuous display of disrespect.
7. Disregard for the chain of command.
8. Participation in (or leadership of) an effort to
undermine and remove the boss from power.
Managing Dismissals (cont’d)
• Fostering Perceptions of Fairness in Dismissals
 Have a supervising manager give full explanations
of why and how termination decisions were made.
 Institute a formal multi-step procedure (including
warning).
 Establish a neutral appeal process.
• Security Measures
 Disable employee passwords and network access.
 Collect all company property and keys.
 Escort employee from company property.
FIGURE 14–9 Typical Severance Pay
• Nonexempt employee—one week of pay for each year with a minimum of

four weeks and maximum of two months.
• Exempt employee to $90,000—two weeks for each year with a minimum of
two months and a maximum of six months.
• Exempt employee over $90,000 to director or VP level—two to three weeks
for each year with a minimum of three months and maximum of nine
months.
• Director or VP to company officer—three weeks for each year with a
minimum of four months and maximum of a year.
• Officer—usually covered by an employment contract or Change of Control
provisions and can be all the way from one year of pay to three or four
years, with other perks that may be continued.
Source: www.shrm.org, Accessed March 6, 2004.

Avoiding Wrongful Discharge Suits
• Bases for Wrongful Discharge Suits
 Discharge does not comply with the law.
 Discharge does not comply with the contractual
arrangement stated or implied by the firm via its
employment application forms, employee manuals,
or other promises.
• Avoiding Wrongful Discharge Suits
 Set up employment policies and dispute resolution
procedures that make employees feel treated fairly.
 Do the preparatory work that helps to avoid such
suits.
FIGURE 14–10
TJP Inc. Employee
Handbook
Acknowledgment
Form
Personal Supervisory Liability
• Avoiding Personal Supervisory Liability
 Be familiar with applicable statutes and know how
to uphold their requirements.
 Follow company policies and procedures.
 Be consistent with application of rules or regulations.
 Don’t administer discipline in a manner that adds
to the emotional hardship on the employee.
 Allow employees to tell their side of the story.
 Do not act in anger.
 Utilize the HR department for advice regarding how
to handle difficult disciplinary matters.
The Termination Interview
Guidelines for the Termination Interview
1 Plan the interview carefully.
2 Get to the point.
3 Describe the situation.
4 Listen.
5 Review all elements of the severance package.
6 Identify the next step.
Termination Assistance
• Outplacement Counseling
 A systematic process by which a terminated
employee is trained and counseled in the techniques
of conducting a self-appraisal and securing a new
job appropriate to his or her needs and talents.
 Does not imply that the employer takes
responsibility for placing the person in a new job.
 Is part of the terminated employee’s support or
severance package and is often done by
specialized outside firms.
Termination Assistance (cont’d)
• Outplacement Firms
 Can help the employer devise its dismissal plan
regarding:
 How to break the news to dismissed employees.
 Dealing with dismissed employees’ emotional
reactions.
 Instituting the appropriate severance pay and
equal opportunity employment plans.
Interviewing Departing Employees
• Exit Interview
 Its aim is to elicit information about the job or related
matters that might give the employer a better insight
into what is right—or wrong—about the company.
 The assumption is that because the employee is
leaving, he or she will be candid.
 The quality of information gained from exit
interviews is questionable.
FIGURE 14–11
Employee Exit
Interview
Questionnaire
Source: http://www.fin.ucar.edu/forms/HR/
exit_form/exit.pdf. Accessed May 24,
2007.
FIGURE 14–11
Employee Exit
Interview
Questionnaire
(cont’d)
Source: http://www.fin.ucar.edu/forms/HR/
exit_form/exit.pdf. Accessed May 24,
2007.
Lockouts, Layoffs, Retrenchments and Closures
Industrial Disputes Act, 1947 regulates lockouts, layoffs,
retrenchments and closures in India.
Lockout
• Lockout is the closing of a place of employment or suspension of
work or refusal by an employer to give work (Section 2 (I)).
Layoffs
• Layoffs are the failure, refusal or inability of an employer to give
employment to those whose name appear on the employment roll
of the establishment. Laid-off employees are entitled to
compensation.
Retrenchment
• Establishments are allowed to retrench employees by giving one
month’s notice and by paying compensation at the rate of 15 days’
salary for each completed year of service.
Closure
• Establishments employing more than 100 workmen are allowed
closure only after obtaining prior permission of the government
(Section 25FFA).
The Plant Closing Law
• Worker Adjustment and Retraining Notification
Act, (1989)
 Requires employers of 100 or more employees to
give 60 days notice before closing a facility or
starting a layoff of 50 people or more.
 The law does not prevent the employer from closing
down, nor does it require saving jobs.
 The law is intended to give employees time to seek
other work or retrain by giving them advance notice
of the shutdown.
Layoffs and Downsizing
• Bumping/Layoff Procedures
 Seniority is usually the determinant of who will work.
 Seniority can give way to merit or ability.
 Seniority is usually based on the employee’s hiring

date, not the date he or she took a particular job.
 Companywide seniority allows an employee in one
job to bump or displace an employee in another job.
Layoffs and Downsizing
• Alternatives to Downsizing
 Voluntarily reducing employees’ pay.
 Concentrating employees’ vacations.
 Taking voluntary time off.
 Releasing temporary workers.
 Offering early retirement buyout packages.
Adjusting to Downsizings and Mergers
• Reduction in Force Guidelines
 Identify objectives and constraints.
 Form a downsizing team.
 Address legal issues.
 Plan post-reduction actions.
 Address security concerns.
Adjusting to Downsizings and Mergers
(cont’d)
• Guidelines for treatment of departing
employees during a merger:
 Avoid the appearance of power and domination.
 Avoid win–lose behavior.
 Remain businesslike and professional.
 Maintain a positive feeling about the acquired

company.
 Remember that how the organization treats the
acquired group will affect those who remain.
KEY TERMS
ethics wrongful discharge

ethics code unsatisfactory performance
distributive justice misconduct
procedural justice insubordination
interactional (interpersonal) termination interview
justice outplacement counseling
organizational culture exit interviews
nonpunitive discipline bumping/layoff procedures
Electronic Communications downsizing
Privacy Act (ECPA)
dismissal

Ethics

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Human Resource

Part 5 | Employee Relations

© 2009 Dorling Kindersley (I) Pvt. Ltd.

1. Explain what is meant by ethical behavior at work.

Note: The spread

Abusive or intimidating behavior toward employees 21%

A behavior may be legal

A behavior may be illegal

A behavior may be both

Source: Michelle A. Donovan et al., “The Perceptions of Their

The Organization’s Organizational

Ethical Policies The Boss’s

Source: Adapted from A. Reichel and

Meeting schedule pressure 1 1 1 1 1 1

Meeting overly aggressive

Helping the company survive 2 3 4 4 3 4

Advancing the career

Feeling peer pressure 7 7 5 6 5 3

Resisting competitive threats 4 5 6 5 6 7

Advancing my own career or

Organize Rites Use Signs and

Workplace HR’s Ethics and

Source: Reprinted with permission

Source: Susan Wells, “Turn Employees into Saints,”

 Firms are using online ethics training programs to

Fair and Just

Clear Rules A System of

Source: Reprinted from www.HR.BLR.com with

 Step 2: Officer complaint

 Step 3: Executive appeals review

Statutory Common Law Public Policy

• Nonexempt employee—one week of pay for each year with a minimum of

Source: www.shrm.org, Accessed March 6, 2004.

Guidelines for the Termination Interview

1 Plan the interview carefully.

2 Get to the point.

3 Describe the situation.

5 Review all elements of the severance package.

6 Identify the next step.

 Seniority can give way to merit or ability.

 Seniority is usually based on the employee’s hiring

 Concentrating employees’ vacations.

 Taking voluntary time off.

 Releasing temporary workers.

 Offering early retirement buyout packages.

 Avoid win–lose behavior.

 Remain businesslike and professional.

 Maintain a positive feeling about the acquired

ethics wrongful discharge

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