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Editor's Note: When assessing compliance obligations, companies should consider state laws, which may be consistent or more stringent than federal laws and regulations. Such laws may complement existing federal law or contain additional compliance requirements. In some cases, state laws may contain penalties (e.g., punitive or treble damages) that are more severe than their federal counterparts. The following checklist is intended to help companies consider a number of substantive areas where state laws may affect an ethics and compliance program. This checklist is not exhaustive, but hopefully a start in the right direction. Companies should consult local counsel to consider areas where the company may have compliance obligations.
Adapted from Corporate Practice Portfolio Series No. 103, Corporate Compliance: Building a World-Class Borderless Ethics Compliance Program, by Jack Quinn, partner, Manatt, Phelps & Phillips, LLP; and Suzanne Rich Folsom, Senior Vice President and General Counsel, Philip Morris Inc.; et al.
⃞ Antitrust: Laws aimed at protecting consumers and commerce from unfair competition and anti-competitive business practices.
Comment: The main reasons to establish an antitrust compliance program are first, to prevent hard-core cartel activity that can lead to criminal charges; and second, to educate employees about basic antitrust principles and specific types of conduct that raise additional antitrust concerns so that they can identify these more complicated issues and contact counsel for further guidance. Note that anti-competitive conduct during a crisis (e.g., natural disaster or pandemic) might trigger action by several levels of enforcement—local, state, and federal.
⃞ Anti-Money Laundering: Prohibitions on activities meant to conceal the source of money obtained through illegal means as well as related obligations to prevent, detect and report such activities.
⃞ Environmental Laws: Various laws aimed at protecting the environment by, for example, controlling different types of pollution and safeguarding natural resources.
Comment: Environmental compliance can be a complicated area, given that local, state and federal regulation tend to overlap considerably.
⃞ Corporate Formalities and Governance: Laws requiring businesses to comply with various formalities for creating, operating and/or managing a business in a particular state or local jurisdiction.
Comment: For example, registration and annual filing requirements, licensure requirements to operate a particular type of business and duties owed by managers and directors.
⃞ Government Contracting: Legislation regulating public procurement and performance of contracts with state and local governmental bodies.
Comment: A compliance program for government contracts is critically important, as a singular violation can potentially bring about irreparable harm (e.g., imprisonment, fines, diminished goodwill and loss of contracts)—to both individuals and the organization.
⃞ Health and Safety Laws: Regulations intended to protect employees and consumers from workplace hazards and risk of injury as well as determining resulting compensation if such injury should occur.
Comment: Implementation of emergency authority in response to widespread crisis events may change the obligations of an employer regarding physical plant, employee health, and public health.
⃞ Information Security / Trade Secrets: Laws prohibiting companies from misappropriating confidential information or trade secrets and protecting companies from others’ unauthorized use of their confidential and proprietary information.
Comment: The right to keep ideas secret and yet benefit from them is the underlying rationale of trade secret law. Continuous protection of a trade secret is the key to retaining its value. The types of assets that deserve protection under trade secret law include, obviously, a secret process or formula, but also information such as sales plans, business policies, procedure manuals, customer lists and forecasts.
⃞ Data Privacy: Laws regulating how companies collect, protect and disseminate personally identifiable information (e.g., medical or financial data) of employees, customers, suppliers and others.
Comment: PII is typically defined as unencrypted or unredacted information in any form consisting of an individual's name and either their social security number or their driver's license or state ID number; or information that would allow access to financial accounts. Data privacy regimes diverge, overlap, and conflict on any of the myriad subtopics related to PII, and the global impact of regional or local laws is now to be expected.
⃞ Political Activity / Lobbying: Laws regulating lobbying and other political activities at the state and local level, including the provision of contributions, gifts and entertainment to public officials by individuals and entities.
Comment: Since any corporate political activity involves an expenditure of resources, management must be able to withstand a derivative lawsuit based upon theories such as waste of corporate property or ultra vires action, and management should be aware of the increasing trend for shareholders, including institutional shareholders, to use the proxy process as a means to increase disclosure or control of corporate political activity.
⃞ Real Estate: Laws covering the buying, selling, leasing or other activity related to the use of company property.
⃞ Securities Laws: Regulations designed to protect investors against fraudulent sales practices and activities and licensure requirements for other financial activities like brokerage firms and investment advisers (i.e., “blue sky” laws).
⃞ Tax: Laws regulating the collection of contributions owed to state and local governments (e.g., income tax, property tax, sales tax).
⃞ Labor and Employment: Laws regulating employment relationships and the rights of employees, including laws prohibiting discrimination and retaliation in the workplace.
⃞ Human Rights: Laws and regulations aimed at ensuring and/or protecting freedoms and rights that are thought to be vital for all human beings, such as political and civil rights, the right to life and liberty, and other social, cultural and economic rights (e.g., California Transparency in Supply Chains Act)
Comment: A company's code of conduct and ethics or a supplementary labor and human rights policy must require that all of its employees, and all individuals in its supply chain, are paid in accordance with applicable laws, are working in safe labor conditions and are working of their own free will.