Can Violating a Work Rule Make You a Criminal? Part II

Posted by Chris Morales on Mon, Dec 09, 2013 @ 12:58 PM

Skilling Precludes Criminalization of Work Rules

Straightforward application of Skilling bars prosecutors from using the mail fraud statute to transform violation of work rules into federal offenses. When prosecutors accuse employees of violating an obligation imposed by their employer, they are charging a breach of the duty of faithful and honest service. Failing to adhere to established work rules is no different from the breach of the duty of faithful and honest service. Failing to adhere to established work rules is no different from the breach of fiduciary duty deemed insufficient to give rise to criminal liability in Skilling. Both are premised on the dishonest performance of a work duty- action by an employee that furthers his own personal financial or other interests in violation of a duty owned to the employer. Skilling makes crystal clear that employers can no longer base criminal charges on such acts of disloyalty absent bribes or kickbacks. Thus, violating of a workplace rule, by itself, is not punishable under the mail or wire fraud statutes.

Any comfort that prosecutors may derive from the Carpenter decision is illusory. The defendant in Carpenter was a Wall Street Journal reporter who was charged with securities fraud and mail and wire fraud fro providing confidential republication information to his con-conspirator who bought and sold stocks based on the information and then shared the profits with him. The defendant argued that his conduct in revealing the prepublication information”was no more than a violation of workplace rules” and did not amount to a scheme to defraud the Journal of money or property as required by McNally. The Supreme Court rejected this argument and found that criminal liability was not premised on the defendant’s breach of fiduciary duty but rather the fraudulent appropriation of the Journal’s confidential information. Since confidential information was within the reach of the mail and wire fraud statutes.

Carpenter merely interprets McNally and cannot fairly be read as endorsing the criminalization of work rules. In any event, the more recent decision in Skilling puts to bed the notion that an employee commits fraud when he violates a fiduciary or other duty owned to his employer.

This is not to say that a mail or wire fraud charge is never appropriate in the workplace setting. If, for example, a job applicant submits via the U.S. mail a false certification that he possesses a necessary job qualification and the employer is deceived into hiring the applicant based on the false representation, the job that he obtained may be considered property and the false certification may supply the scheme or artifice to defraud necessary for a mail or wire fraud prosecution. This was the rationale for affirming the convictions of city officials who awarded jobs on the basis of political support notwithstanding a prohibition against patronage hiring practices in Sorich and Del Valle. The culpable conduct in these cases was the false representation - not the breach of an accepted work rule.

Treating a work rule as a Crimes Violates Due Process

Basing a criminal prosecution on alleged violation of a work rule is a plain violation of due process The problem is that employees are given no notice that their conduct may subject them to criminal penalties. It has been recognized that “a criminal statute must given fair warning of the conduct that makes it a crime” Justice Holmes Explained:

Although it is not likely that a criminal will carefully consider the text of the law before the murders or steals, it is reasonable that a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed. To make the warning fair, so far as possible the line should be clear.

There are three manifestation of the fair warning requirement. First, the vagueness doctrine bars enforcement of “a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application.” Second, the rule of lenity ensures fair warning resolving ambiguity in a criminal statute in favor of the accused. Third, due process bars courts from applying a novel construction of a criminal statute to conduct that neither the statute nor any prior judicial decision has fairly disclosed to be within its scope. In each case, the touchstone is whether the statute at issue made reasonably clear that the defendant’s conduct was criminal.

When it comes to workplace rules, there is nothing in Title 18 or anyplace else that puts employees “on notice” that a violation of those rules can turn employees into criminals.

Employment policies do not warn employees that they may be exposed to criminal punishment if they depart from their employer’s directives. Rather, employee handbooks routinely state that violations will result in discipline “up to and including dismissal.” Many employers have progressive discipline policies that provide for increasingly serious penalties for repeated violations (verbal warning, written warning, suspension and then termination), but criminal punishment is never mentioned. Even employee handbooks that expressly reserve to employers the right to report illegal activity (for example, theft of employer funds or possession of illegal drugs) to law enforcement do not put employees on notice that they may face criminal punishment if they violate work rules that do appear in the criminal code.

Furthermore, employees have no way of knowing which conduct tips the scale from an internal employee disciplinary matter to a crime. For example, if an employment policy prohibits the use of company equipment for non business-related reasons, does an employer commit a crime whenever he or she makes a personal phone call or sends a personal email? Or does the conduct have to be regular and pervasive to allow for prosecution? Where is the breaking point? Does the employer have to suffer an economic loss for it to be a crime? How can employees tell the difference between what can get them fired and what might result in incarceration?

Most importantly, basing criminal charges on employee handbooks improperly delegates to employers the authority to delineate conduct that may be deemed criminal. This cannot be squared with the U.S. system of government that empowers Congress with the exclusive authority to “determin[e] what types of activities are morally reprehensible that they should be punished as crimes.”

The Morales Law Firm would like to thank The national Association of Criminal Defense Lawyers CHAMPION for sharing this article with us.

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Tags: defendant, Criminal Charges, defraud, fraud, charged, due process