Verbal instructions and the law
To be forewarned is to be forearmed! This article aims at giving insights into verbal instructions and legal implications should something go wrong.
Ways instructions may be given
Depending on various factors such as organisational structure, culture, management style, systems of governance instructions may be given in different ways. Common ones include:
Verbal or unwritten.
Written through for example emails, internal memoranda or these days through WhatsApp for example.
Through resolutions or decisions made in meetings.
These come in different ways. For example it can be face to face, over the phone or these days virtually. A superior can even send another person to tell the subordinate to carry out an instruction. The instruction can be polite or a command.
Reasons for giving verbal instructions
There are many reasons which may include those listed below.
It may truly be convenient to do so with nothing wrong at all.
It is not practical to give all instructions in written form.
In the event of an emergency where paperwork may be regularised later.
It may be deemed appropriate to give verbal instructions to manage sensitive information depending with circumstances.
Some superiors may give verbal instructions for ulterior motives such as to avoid accountability should something wrong. For example if the decision involves a lacuna not covered by policy or practice. The decision may even be prejudicial to the interests of the company. Such instructions can have far reaching implications.
Examples of verbal instructions
Verbal instructions may be given for the following tasks:
Over financial management, for example payments.
Instructions by the board, for example “not for minuting”.
Finance personnel may be given verbal instructions to process certain payments or prioritise certain suppliers. If the payments are above board, as is mostly the case, and are supported by adequate source documents and approvals this poses no danger.
Some payments may be urgent. It is when payments are made without adequate documentations or approvals, with promises to regularise, that puts finance professionals at serious risk.
Procurement is another hotbed or area infested with corporate landmines. It may happen that procurement staff is given verbal instructions to buy from certain suppliers, at certain prices or to award tenders or contracts to certain suppliers who may not meet the criteria.
Human resources is another function susceptible to verbal instructions on issues such as recruitment, promotions, salaries and benefits, etc.
Human resources is largely governed by policies. It becomes a serious issue if a decision that is inconsistent with policy is foisted upon management.
It is the human resources practitioner whose back will be against the wall when time to account comes.
In production a junior operative may be verbally instructed to produce certain products or use certain materials or methods. Problems arise with undesirable outcomes such as wastage, bottlenecks, missing targets or poor quality. The junior operative may have to answer to internal probing.
Even in treasury functions a subordinate may very well be subjected to verbal instructions in deals on issues such as nature of financial instrument, counterparty, exchange rates, interest rates, pricing or tenure.
Even board meetings may make resolutions and give tasks to management with the insistence that “not for minuting”. At times it may be justified but management beware.
Implications of verbal instructions
In the event that the action taken or implementation done pursuant to the verbal instruction goes wrong or is deemed inappropriate and the giver of the instruction does not own up then hell may break loose. A subordinate may be investigated by internal audit, forensic audit, security or an internally assembled team.
Depending on the results of the investigation an employee may for example be subjected to:
Internal disciplinary proceedings.
Court civil proceedings if the employer alleges pecuniary or financial prejudice and wishes to recover from the employee.
Criminal proceedings if the employer is of the view that the subordinate’s actions amount to a criminal offence such as theft or fraud.
The above legal processes are usually resolved on the basis of evidence. In reality documentary evidence has more probative value than word of mouth.
Where verbal instructions have been given what evidence can a subordinate adduce to prove that the action was sanctioned by the superior?
A superior with ulterior motives may deny giving the instruction or admit but give a different narrative such as “Yes, I instructed him but not to do illegal things, he should have known given his position and company policy”.
Safeguards against verbal instructions with ulterior motives
According to William Shakespeare in his book “Macbeth” — “there is no art to find the mind’s construction in the face”. Dealing in verbal instructions may not be easy especially given a superior with ulterior motive who may sit at the top of the food chain. One can even lose his or her job.
Here are some of the safeguards a subordinate may employ:
Do not ignore your sixth sense or gut feel.
Always have and maintain adequate paperwork and avoid non-compliance. Sad reality is that compliant average performers keep their jobs.
Stick to internal policies and standard operating procedures.
It may be ideal to confirm the verbal instruction in some way through an email or internal memo preferably before or if not possible then after implementation if the action is not unlawful. Another way is to report the action in a recorded meeting. Management may report the “not for minuting issue” as a matter arising or by simply including it in the papers for the next board meeting and future reference can be made to the board pack if it becomes necessary.
You can draft an internal memo for your superior to sign authorising you to carry out the action if it is not unlawful.
If something is illegal do not do it or find legal options to achieve the desired result. It may be worthwhile to consult a peer, company secretary or even your lawyer.
Verbal instructions are common largely for good reasons but may be abused. Be mindful of the legal implications. I cannot overemphasise that “subordinate beware”.
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, registered tax accountant and consultant in deal structuring and is an experienced director of companies. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]