How to Make Sure Your Employees Don't Have Conflicts of Interest: Expert Advice

Summary

Conflicts of interest can be damaging to many organizations, and it's important to properly vet potential candidates. Conflicts of interest are defined as a situation in which a person or an organization has two or more interests that could potentially compete against each other. It's important to conduct conflict checks before hiring a candidate to make sure no potential conflicts of interest arise.

Employers can take a few steps to help mitigate the risk of conflicts of interest. To begin, employers should thoroughly vet each potential candidate, including conducting background checks and understanding their resume and prior work experience. In addition, employers should understand the candidate's motivations, financial situation, and any prior relationships they have with competitors. It's also important to ask the candidate directly about any potential conflicts of interest and make sure there is a clear understanding of their responsibilities.

Once a candidate is hired, employers should have an ongoing process in place in order to identify and assess any potential conflicts that may arise. This includes employee education to help employees understand the importance of avoiding conflicts of interest, disclosure of potential conflicts, and regularly monitoring and assessing those conflicts. Additionally, employers should have a policy in place that outlines how conflicts of interest should be handled, and proper disciplinary action for any violations.

Organizations should also train their staff to be aware of potential conflicts of interest and how to deal with them. Regularly training staff to identify potential conflicts and understand how to address them is critical to avoiding potential conflicts of interest. Employers should also clearly document any conflicts of interest and ensure that the proper actions are taken to address them.

In conclusion, conflicts of interest can be damaging to organizations and it's important to properly vet potential candidates and have policies in place to identify and assess any potential conflicts of interest. Employers should understand their candidate's motivations and prior relationships, have a policy outlining how to handle potential conflicts, and regularly train their staff in order to properly assess any potential conflicts of interest.
 

Contentious Legal Matter: Avoiding Conflicts of Interest

Conflicts of interest can be one of the most contentious legal matters that your company can face. From the dangers of public perception to the possibility of legal claims, there is a reason why companies take conflicts of interest seriously. To help ensure that your company is compliant with all applicable laws, it is critical to understand conflicts of interest, its legal implications, and how to prevent them.
 

What is a Conflict of Interest?

A conflict of interest occurs when an individual or organization has a stake in more than one decision-making situation. Conflicts of interest can arise in personal, professional, and business settings. Conflicts of interest can involve financial, legal, ethical, and moral issues, making it difficult for all parties involved to make sound decisions. Compliance with applicable laws is essential for any business and can involve both federal and state laws.
 

Types of Conflicts of Interest

Conflicts of interest can encompass various types of agreements and situations, such as: personal financial interests in a company, nepotism, self-dealing, or bribery. In some cases, a conflict of interest can involve a situation where a person is taking advantage of their position or misappropriating resources for personal gain. It can also involve a conflict between fiduciary and private interests, where a fiduciary is expected to maintain a higher standard of trust and loyalty than other business relationships.
 

The Risk of Legal Claims

When a conflict of interest is present, there is a significant risk of legal claims. As a result, companies must take precautions to detect potential conflicts of interest and take corrective action where necessary. This can involve conducting a conflict of interest check, which examines a person's relationships, associations, and financial and business dealings. This can help identify potential conflicts of interest and can prevent costly legal claims.
 

The importance of conflicts checks is increasingly apparent, and the repercussions for failure to do them properly are increasingly severe. "There have been situations where courts have taken larger firms to task for not doing conflicts checks," said Flamm. "If a conflict arises during the course of a litigated case, it virtually always will result in disqualification, or the courts will inquire into the conflict and order the firm to withdraw." If a firm fails to do so, it may face a malpractice suit and severe damage to the firm's reputation. Courts have also ordered firms to repay clients in light of conflicts of interest.

A number of firms, particularly larger ones, are tackling potential conflicts of interest by hiring conflicts specialists or analysts who may devote their entire workdays to conflicts checks. "We maintain a database that contains all of the firm's client matter info," said Beth Hartke-Faircloth, Conflicts Department Manager at Jenner & Block, LLP. "We're responsible for clearing all new clients and matters to the firm, and we're the first people contacted within the administration to get the ball rolling." Conflicts specialists may draft waiver letters, interview lateral attorney and legal staff hires, gather and analyze information, and help implement screens around potentially "tainted" employees. Typically, conflicts analysts have top-notch research skills and some legal experience—"the same skills that entry-level law librarians would have," Hartke-Faircloth said.

While nothing beats having a conflicts analyst on hand, doing so is simply not feasible for many firms. Conducting conflicts checks often falls on the shoulders of an associate or qualified non-attorney, who may be inexperienced in the task. "A conflicts check is only as good as the person inputting the info," said Flamm. "These days, firms are concerned about a lot more detail." Experts recommend continuous education and reading about conflicts of interest. "Become knowledgeable about what conflicts are and how they arise," recommended Flamm. "If you don't know what to look for, a conflict could surface that could have been avoided."

Legal staff must be vigilant about doing the task right. "Be assertive and aggressive [about getting information,]" Flamm advised. "Meet with every partner, and get as much info as you can about who has been represented in the past." For new hires, a thorough background check is highly recommended—and that doesn't just apply to attorneys. The rules may be different for secretaries, paralegals, and other non-attorney employees, but "they can still bring in a conflict," Flamm said. If a conflict of interest or potential for one is found during a check, most experienced legal staff will turn to an attorney. "The decision of whether it's a conflict or not is a legal decision," Hartke-Faircloth explained. "We will heighten awareness to the attorney, but it's ultimately the attorney's decision."

But the person behind the conflicts check is only half of the equation: the firm's database and other methods of checking for conflicts and managing data are equally important. "If you're just starting out, to do a good conflict check, you're only as good as the database you're using," said Hartke-Faircloth. "Almost every larger firm has conflicts software in varying degrees of sophistication," said Flamm. Smaller firms may often opt for a self-established computer database or even an old-fashioned conflicts card catalog. Whatever the option, legal staff conducting conflicts checks must know their firm's system and gather all information that the system requires for each new client, matter or representation, and hire.

"Even today, with all the discussion of conflicts of interest, the seriousness of the problem is still underestimated," Flamm believes. With trained employees and reliable databases in place, proper conflicts checks can help firms stay out of hot water.