Spring leasing season has arrived! Yeah! For FWAA members, leasing season means make-readies increase, asset managers become an ever-present reality in their daily routine, and suppliers invade their properties!
You’ve got painters in one building and flooring installers in another. Your HVAC company representatives and landscapers buzz around your properties, making the big and little improvements that keep current residents happy and turn prospects into leaseholders. These are exciting times but challenging times for our onsite teams.
We are blessed in DFW that the overwhelming majority of owner/operator and supplier interactions are ethical and professional. However, the client-customer relationship has its own minefields. Below is a fictional case study to illustrate ethical dilemmas that occur when employees have inappropriate interactions with suppliers.
This is just a friendly disclaimer: REDBOOK Blues does not provide legal advice. If you need legal advice, contact one of FWAA’s member attorneys (https://www.aatcnet.org/legal-services-program)
Quid Pro No:
After three years as an assistant manager, Gina looked forward to submitting her resume for the vacant manager position at her property.
For the first six months, she absolutely loved her job. Two years ago, she won “Assistant Manager of the Year”; this year, she won “Employee of the Year” from her management company. Lately, however, she feels she has “done her time” and has more than enough experience to be promoted.
Regional supervisor Mary decided to recruit broadly and consider both internal and external candidates for the manager position. To her great disappointment, Gina was passed over, and the job went to Wendy, a manager from a rival management company. Understandably upset, Gina asked Mary why she was not chosen. Mary replied, “Wendy has more experience. Your time will come.”
Over the next few weeks, Gina grew increasingly angry over the hiring decision. Not only would she be working for an “outsider,” she had missed an opportunity for a more prestigious title and a substantial pay raise. Rather than stay mad, Gina decided to find a way to make the most of her dismal situation.
Gina’s management company compiles a list of “preferred” vendors. This list is not exclusive—it is meant to help onsite staff make sound purchasing choices. Gina began contacting companies on the list, suggesting that because she “admired their work,” she would be willing to make a specific recommendation to her “new boss” when a product/service was needed.
Although she did not ask for anything in return, three companies promised a financial “bonus” for each contract that came their way via her recommendation. Another company offered the use of their suite at a Cowboys game for Gina and her family. Based on her referrals, one company sent her gift cards as thank-you gifts, and another treated her and her cousin to a spa day.
At first, Gina was selective in making these “recommendations,” but after two months, her scheme seemed to be going undetected, and she became bolder. She began playing one vendor against another. Soon, she bought a new car and started bragging about her weekend “shopping sprees.”
In her quarterly financial review, Mary noticed an unusual number of contracts at Wendy’s property going to only six of three dozen vendors on the preferred list. When she questioned Wendy, she said that since she was new to the property, she had taken Gina’s “advice“ about which suppliers to use.
When Mary and Wendy confronted Gina, she denied any wrongdoing and insisted that the six companies were “on the list“ and, in her opinion, each was “superior.“ Further, Gina claimed no written rules prohibited onsite employees from making personal “recommendations“ to the onsite manager.
Questions:
- Is it unethical for Gina to make vendor recommendations?
- Would Gina’s actions have been acceptable if she had not engaged in a quid pro quo?
- What action should Mary and Wendy take with Gina?
- Is there anything the management company or owner might do to prohibit this type of behavior?
Answers:
Fortunately, the REDBOOK has guidance on this issue. In the legal article “Working with Locators: Avoiding Fraud,” TAA’s legal counsel provides generic advice (beyond dealing with locators) to help prevent employee fraud of any type.
1) Prescreen all employees – TAA’s general counsel states that employees with a history of dishonesty are more likely to accept cash or offers of compensation or kickbacks from vendors and “steer business“ in their direction.
2) Review and, if necessary, update your employee policy manual – Ensure your company’s employee policy manual defines acceptable interaction between employees and suppliers. Give examples of what is allowed, such as meals and gifts of minimal value (ink pens, note pads, coffee mugs, etc.). Stipulate that other than acceptable marketing practices and bona fide association events, employees may not accept any money, gifts, or other things of value from a product or service provider. Without clear policies, it is more difficult to establish a “good cause“ for firing. Without clear policies, it is also more challenging to avoid the disaster of employment discrimination lawsuits.
3) Inform your supplier partners—make sure your supplier partners know your gift policies. Clearly communicate to supplier partners that you will no longer do business with their company if they engage in quid pro quo arrangements.
4) Report any violations – Require employees to report to their supervisor any known or suspected attempts by suppliers to pay monies, provide gifts, or other considerations to them or their onsite colleagues.
5) Training – Conduct periodic training sessions that remind your employees of their fiduciary responsibilities and remind them that they risk losing their jobs if they attempt to do anything dishonest or violate your policies. Helpful hint: Use the above scenario and questions as a basis for your training. Be sure to include supervisors along with their teams in this training. Incorporate an AMA (ask me anything) component – employees need a safe zone to ask tough questions without fear of retribution.
6) Terminate if necessary—Finally, if an employee violates any of these policies, it is grounds for immediate termination of their employment “for cause.“ Such violation will be noted in the employee’s permanent personnel file and reported to future employers who inquire about the employee’s performance with the company. Termination “for cause“ also makes an employee ineligible for unemployment benefits from the state.
Our onsite teams are superstars! They work daily to provide homes for our residents and value for our owners. FWAA has the most amazing supplier partner members. Our supplier friends work hard to earn our trust and our business. They, too, desire to operate openly and ethically. Together, all of us, from the corporate board room to the boiler room, along with our suppliers, ensure that our incredible industry thrives on honesty and integrity!
April Royal, Birchstone Residential, is FWAA’s 2024 Treasurer and Government Affairs Committee Chair.
