Implications of codes of ethics.
Codes of ethics raise three major legal issues.
Antitrust issues. There are two main antitrust concerns. First, nothing in the code of ethics can lessen, restrain, or eliminate competition. The simplest example of this is a provision that regulates what the member may or may not do or that attempts to regulate how many members can compete in a given area. For instance, a code should not restrict advertising or dissemination of information, although a code may direct members to be truthful in communication.
Second, enforcement of a code should not prevent members from practicing their trade or profession as they please and where they please.
Due process issues. While associations may bring enforcement actions against members accused of violating the code, these proceedings must meet minimum due process standards. This means that, at the very least, the accused person is given notice of the charge and is given the opportunity to answer it, and that there is at least one level of review or appeal.
Another important aspect of due process is that the person deciding a case must not have an interest in the outcome that could taint the result. For this reason, someone who is a direct competitor of the accused or who can be shown to have a bias against the accused should not be in charge of a case against that person.
Associations do not have to grant applicants or members the full panoply of judicial procedures available in the regular courts. In other words, an association need not allow a member to have a lawyer present, to conduct cross-examination of witnesses, or to force someone else to turn over documents. Nor does an association have to grant in-person hearings; the association may elect to conduct proceedings by mail or telephone.
Although an association cannot prevent someone from filing a lawsuit against it, such suits are rare in ethics cases, and courts will not interfere in the proceedings if they meet the fundamentals of due process.
Tort actions. A real concern with enforcing a code of ethics is that the accused will threaten to sue the association for personal injury. The most common threat is to sue the association for defamation if it disciplines someone under its code of ethics - and especially if it publicizes its actions by publishing disciplinary results in a trade publication. Someone could also threaten to sue for interference with contract if the association disciplined the individual and that discipline had an adverse effect on his or her employment.
Likelihood of suit
Suits against associations over enforcement of their codes of ethics are so rare that they should not intimidate an association and keep it from maintaining, adopting, or enforcing a code. Perhaps more worrisome to associations are inquiries or investigations by governmental enforcement agencies, but here too, absent extraordinary circumstances, problems with a code of ethics can be resolved by negotiations without too much expense or burden to the organization.
Practical problems with codes
The practical problems that are associated with codes of ethics should not be overlooked; they may prove more compelling than potential legal risks.
First, having, policing, and enforcing a code of ethics can be time-consuming and expensive, both for the organization and especially for the volunteers who serve on the ethics committee. Often, third parties will turn personal grievances, competition, or insults into "ethical" violations and call upon the association to take action. If a hearing has to be held and a panel convened, expenses can mount.
Second, a code can put the association in a no-win situation, in which the association alienates almost everyone. If the association declines to process a charge, the person bringing it feels unfairly treated; if the association goes forward with a charge, the accused may react with indignation. Because an association can enforce a code only against its members, a code can be considered detrimental to membership: Why should someone join an association and take on the added burden and risk of having to abide by a code of ethics, when competitors outside the association have no such burden attached?
Third, the issue of sanctions can be troubling. On one hand, if punishment for violation of the code is too severe (e.g., expulsion), it can be a deterrent to membership. On the other hand, if enforcement is nonexistent or rare, the code of ethics may be perceived as ultimately useless and as an object of scorn.
George D. Webster is general counsel emeritus to ASAE and a partner in Webster, Chamberlain & Bean. This Washington, D.C., law firm is counsel to more than 200 nonprofit organizations.
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|Author:||Webster, George D.|
|Date:||Dec 1, 1995|
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