Why you need a compliance training program

A conversation our GRC reps often report having with senior managers and executives goes something like this:

“I know we need a compliance program – but in reality, we’ve never had a serious breech or been investigated by a regulator. Our people seem to do the right thing – why distract the business with another round of training they don’t want, before we really need to?”

As a compliance professional, how can you answer that? Here is one way.

In some ways, compliance training is like insurance. If all is going well, consumers might lament the cost. However when disaster strikes and that consumer is saved by the assistance provided by their insurance provider, they will no doubt be thankful for their insurance policy. If you’re the consumer that chooses to run the gauntlet and save money by not taking out an insurance policy, you will be the one that suffers most if something does go wrong. It’s a classic case of ‘you don’t need it till you need it’.

That’s where the compliance / insurance similarities end – compliance training offers much more than an insurance policy. Yes – a legally authored and properly managed compliance program will help to protect companies against the fines, penalties and brand damage caused by compliance breaches. Yes – a legally authored compliance program will help company directors and executives avoid potential jail. Beyond this, a well-managed compliance program can help to drive improvements in staff performance, workplace culture and business operations, and ultimately help create value, decrease costs and increase profits for your organisation.

If the threat of personal fines, liabilities and even prison still isn’t enough to rouse your senior managers and company directors to get serious and motivated about your compliance program (really???) – then here are some real life examples of companies which have been charged and fined as a result of breaches of workplace laws.

These are real companies who have been named and shamed to the national Australian audience. The laws mentioned below are topics that apply to all organisations and undertakings in Australia.

Example 1 – Competition and Consumer Law

An Australian electronics retail giant advertised in brochures that buyers of 3D televisions would be able to watch AFL and NRL grand finals in 3D, knowing 3D broadcasts were only available in six cities and used “fine print” exclusions. The Courts ruled a breach of competition and consumer laws, labeling their conduct as extensive, misleading and deceptive, characterised by blatant and deliberate disregard for the truth. Their company chairman insisted breaches were not intentional.

Outcome – Company was fined a total of $1.25 million; $500,000 over the 3D TV promotion, and $750,000 for contravention involving “fine print” advertising.

Additional Potential Civil Penalties – For Anti-Competitive conduct, the greater of: $10,000,000, three times the value of the gain made by the organisation from the breach, or 10% of the annual turnover of the organisation for the previous 12 months.  For Misleading, Deceptive or Unfair Conduct: $1,100,000 for corporates and $220,000 for individuals.

Example 2 – Competition and Consumer Law

An Australian energy company recruited a marketing company to carry out door-to-door selling. Salespeople working for the marketing company made a number of misleading and deceptive comments to potential customers, including the claim they were not there to sell anything and false statements about rival energy providers overcharging customers. Salespeople were also found to have attempted to engage consumers despite ‘Do Not Knock’ signs on front doors.

Outcome – Company was ordered to pay $1.55 million in combined penalties, and the marketing firm was also fined $200,000 for its role. In addition, companies were ordered to pay the ACCC’s court costs and run corrective advertising and compliance programs.

Additional Potential Civil Penalties – see example 1.

Example 3 – Privacy

An Australian TelCo company contracted external call-centres to conduct telemarketing calls. Numerous complaints were made to the Australian Communications and Media Authority by consumer who claimed to have received telemarketing calls, despite being registered on the Do Not Call Register. After an investigation, the competition watchdog found that external call centres contracted by the large TelCo had breached the Do Not Call Register Act 2006.

Outcome – TelCo was fined $101,200 and told to engage an external consultant to review company systems and procedures for compliance with laws, for a period of three years.

Additional Potential Civil Penalties – For corporations: $1,100,000 and for individuals: $220,000.

Example 4 – Equal Employment Opportunity

A young female staff member lodged a sexual harassment law suit against a national retail chain, claiming the CEO made repeated and unwanted sexual advances and that the company took no action to address the alleged inappropriate behaviour. The female was seeking more than $37 million in damages.

Outcome – this case was very high profile, with most major news outlets reporting as a major headline. The CEO resigned from what the market considered a successful role at the company, missing out on major incentives and bonuses. The company avoided paying $37 million by settling out of court for a reported sum of around $850,000. However, brand damage was significant to both the company and the former CEO.

Additional Potential Penalties – EEO offences are criminal charges, meaning penalties are determined by the severity of the individual case.

Example 5 – Workplace Health and Safety

A labourer was employed by a labour hire company, who sent the labourer to work for a host employer in their warehouse. Despite not having experience or qualifications to use the machinery, the labourer was asked to place a pallet on the top shelf of the warehouse using a forklift. While in operation, the forklift began to tip over. The labourer attempted to jump clear but his right leg was trapped and so severely injured it had to be amputated below the knee.

Outcome – Worksafe Commissioner said both the labour hire company and the host employer were responsible for ensuring a safe workplace. Both failed to fulfill their obligations to ensure that the host workplace was safe for their workers. The labour hire company and the host employer were fined a total of $120,000.

Additional Potential Civil Penalties – For corporation: $3,000,000; for officers: $600,000 or 5 years imprisonment; and for workers: $300,000 or 5 years imprisonment.