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In the Trenches: Acme employee gets in trouble by 'going green' while making extra greenbacks on the side

June 16, 2008
In this installment, an Acme employee learns the difference between minimizing trash and maximizing cash. Remember, only the names are changed to protect the innocent.

Manufacturing in this country isn’t dead yet. Just ask the folks working at the local Acme plant, where the company is doing a brisk trade in the contract manufacturing business. Survival for independent entertainment media companies and software developers involves distributing compact disks filled with audio, video and software files. Acme identified quite a few of these players and set up a publish-on-demand production line to crank out CDs. By doing this, Acme served the industry.

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But, this Acme facility also helped the community by serving as a sheltered workshop for the handicapped and disabled. It’s not beyond the ability of this group of workers to burn data onto CDs, package them, gather them into customized collections and distribute them using mailing labels furnished by the media and software companies.

Some fraction of those custom CD assortments was undeliverable as addressed and the shipping company simply returned them to Acme. The contracts with the media and software companies generally required Acme to accept the returned shipments and dispose of them. Such wastage isn’t a particularly green way to operate and the disposal added a cost to the contracts, but it was more economical than requiring Acme to open each package and restock the items. So, Acme merely tossed the returned boxes into a Dumpster.

Acme also hired the disabled and handicapped for its janitorial department. The night shift janitorial supervisor, Al Bumme, wasn’t handicapped. Passionate about environmental issues, it troubled him that the “trash” that landed in the Dumpster was destined for a landfill, a situation he couldn’t abide.

If the scavenger service hadn’t yet hauled away the Dumpster before the end of his shift, Al would load the trunk of his car with as many of the unopened, undeliverable cartons as would fit. It was like a grab bag; he never knew what he’d find when he opened them at home. Al recycled those CDs either through his eBay account or through various consignment resale shops around town, thus doing the environment a favor and converting someone else’s garbage into his own cash.

But someone in Acme’s accounting department took notice. Joe Jobah, a summer intern, was assigned to handle the paperwork from both the shipping company and the scavenger service. After studying recent bills, Joe couldn’t reconcile what he saw as a discrepancy between the number of undeliverable mailings and the number of Dumpsters needed to haul them away. The returned CD count remained at historical levels, but the number of Dumpsters required began trending downward. Joe reviewed the records covering the past few years and was able to identify the onset of this apparently anomalous pattern.

In spite of knowing that a smaller bill from the scavenger service is good for Acme’s bottom line, Joe reported his findings in hopes of justifying his presence on the staff and the paycheck he so much needed for college next fall. One thing led to another and Acme’s IT department found itself installing miniature, wireless surveillance cameras at the dock where the shipping company returned the undeliverable CD packages and at the Dumpster out back. It wasn’t long before Acme had a lot of time-stamped footage that showed Al removing boxes from the Dumpster and shoving them into his car.

After Al was confronted with the evidence of what Acme considered to be theft of garbage, an examination of his car turned up nearly 150 of the undeliverable packages. Al freely admitted taking them, citing as his reason that they were going to be dumped into a landfill, an act that was neither consistent with his philosophy nor with contemporary concerns about the environment and sustainability. Recycling, Al argued, is the right thing to do in every case.

Acme terminated Al, arguing that he put the company at risk of being accused of harboring an employee who infringed various copyrights for personal gain.

How could this situation have been avoided? When is salvaging trash a crime? Should Acme have had a clear policy in place? Was Acme wise to terminate Al for this offense? Does either Acme or Al owe compensation to the media companies and software developers for lost profit on sales of undeliverable CDs headed for a landfill? Is it likely that eBay and resale shop purchases of CDs would reduce sales at traditional outlets?

An academician says:

This is a very interesting and tricky situation. Let’s start with Economics 101. If Acme is producing discs in large volume, then unit cost to produce them is probably pennies (remember economies of scale?). Thus, it might cost less to produce a new disc than it does to open and restock the returned discs. So, turning the returns into trash makes good economic sense.

But, why not sell the returns at a deep discount to someone who will resell them so the CD producer or media company can make some money on the deal? Let’s assume the media company can sell a new CD for $20, and let’s assume it costs $1 to produce. Thus, there’s a $19 markup on the CD. Let’s also assume some reseller would buy the returns for $2 per unit. That means the media company will make $1 on each return sold to the reseller. That’s better than turning them into trash, isn’t it?

But suppose the reseller sells the returned CDs at $10. Customers will buy from the reseller at the cheaper price, thus depriving the media company of many sales and nice profits. In this case, the media company made $1 per unit when it could have made $19. So the media company is cutting its own throat by selling the returns to a reseller. And further, the artists are deprived of their royalties. Bottom line, the media company is much better off in trashing these returns.

Where are we going with this economics lesson? Well, the media company needs to have (and probably does) a contract with Acme that says the CDs are the property of the media company, and any returns will absolutely and positively be turned into trash, and won’t be given, or taken or sold to anyone. That should be made clear to Acme, its employees, the waste hauler and the landfill. That would resolve the legal aspects of the problem in this case.

The lack of such contract is also interesting. If the Dumpster is on Acme property and there’s no such contract, would taking the CDs be considered theft? What if the Dumpster is on public property — are the CDs now public property and anyone has a right to take them? I will let the lawyers sort that out.

It makes economic sense to dump the returns, but I’m sympathetic to the environmental concerns. Here one has to look at the short-term economics as well as the long-term. Now that’s a real problem for Joe, the intern, to work on: How can Acme restock the CDs at a cost lower than producing a new disc? If Joe really wants to impress his bosses and his professors, as well as help Acme and the environment, that’s the problem to solve.

Professor Homer H. Johnson, Ph.D.
Loyola University Chicago
(312) 915-6682
[email protected]

An attorney says:

As in many legal disputes, everyone involved in this scenario was at fault to some degree. Let’s start with Acme.

Legally, the CDs that the janitorial staff tossed in the Dumpster were abandoned property. This is no different than a man walking down the street who tosses his broken umbrella into a trash bin. Anyone who retrieves the umbrella from the trash isn’t a thief and hasn’t committed the crime of theft.

Some employers have policies prohibiting employees from removing even discarded or defective items from company premises without permission, but it doesn’t appear that Acme had such a policy. Given the fact that Al was saving the company money by reducing the number of Dumpsters it needed, Acme’s action in firing him makes little business sense.

On the other hand, Al could have avoided any problem whatsoever had he approached his supervisor and informed him that he was rescuing the homeless CDs. At that point, Acme could have determined whether there was a copyright problem or whether, as a matter of policy, the company wanted to prohibit Al from “recycling” the CDs. On the other hand, Acme could have opened up the opportunity to take the discarded CDs to the rest of the workforce as well.

I’m no expert on copyright law, but it seems to me that no one was illegally copying the material on the CDs and consumers had already paid for them, thus providing income to the artists, but were merely unable to take delivery of the merchandise.

Finally, we come to Joe Jobah’s less-than-stellar performance. “In spite of knowing that a smaller bill from the scavenger service is good for Acme’s bottom line,” Joe nevertheless blew the whistle on Al in hopes of furthering his own standing in the company. An employee’s duty of loyalty lies toward the company, not himself.

One other issue rears its head in this scenario. Videotaping the activity at the Dumpster with small, wireless surveillance cameras could be argued to violate Al’s right to privacy. However, Al had no reasonable expectation of privacy when working at the company dock, and he has no legitimate claim against Acme for recording his activities.

This scenario proves the old adage that one man’s trash is another man’s treasure.

Julie Badel, partner
Epstein Becker & Green, P.C
(312) 499-1418
[email protected]

A corporate consultant says:

People who understand root cause analysis know that there’s seldom only one way to avoid an event. For instance, Acme could have ensured the policy about removing trash from company Dumpsters was communicated to all employees. Acme could have done a better job securing the disposed-of media. Al Bumme could have asked for authority to remove materials from the Dumpster. For that matter, Acme’s customers might have done a better job aligning their customer list to reduce undeliverable packages (which they are paying for).

The question comes up: When is salvaging from the trash a crime? Well, I’ll have to leave the technical explanation to my attorney co-contributor. From a non-lawyer perspective, I’d say that a company’s Dumpster is private property and not normally available to be raided. When copyrighted materials of value are involved, there are likely a number of other issues. My advice to individuals is to avoid the temptation to raid the corporate Dumpster.

I’m not sure that Acme was best served by terminating Al for his Dumpster-diving. Obviously, he’s passionate about recycling. I have a rule about disciplining employees; first determine if the issues are related to a knowledge problem or a motivation problem. Knowledge problems include misunderstanding the situation. Motivation problems can be truly identified only when all probable knowledge issues have been eliminated; motivation problems are really attitude problems. Al didn’t appear to have a motivation problem. Channeling Al’s passion for reduced waste might be an opportunity to find appropriate solutions to the waste issue; not just the CDs but for other waste as well.

In my opinion, Acme has overall responsibility for the unauthorized sale of copyrighted materials. The company didn’t safeguard the waste products and their employee benefited from the resale of these materials. The firms and individuals who own the copyrights are entitled to compensation when products of copyrighted materials are sold. Acme should discuss the issue with its customers, take the high road and be honest about what happened. In the short term, it might cost Acme some royalty fees; in the long run, though, integrity pays off through increased trust between customer and service provider.

Many product brands are vigorously guarded, and companies might not appreciate their products being sold at a discount or through resale locations. Whether people who shop on eBay or consignment shops would purchase audio, video or software from another retail merchant is irrelevant. Acme had a duty to secure copyrighted materials; the copyright owners are entitled to compensation regardless of how they were sold.

Tom Moriarty, PE, CMRP
Organizational Reliability Professional Services Consultant
(321) 773-3356
[email protected]

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