Lumber Liquidators Offers Hard-Earned Advice
Jill Witter, chief legal and chief compliance officer of Lumber Liquidators since August 2015, says she never thought of the wood flooring or home furnishings industries as “highly regulated” industries. “But the reality is, we are highly regulated,” she told nearly 250 industry executives at a joint industry workshop on the new federal formaldehyde regulation January 19.
When Witter joined Toano, Virginia-based Lumber Liquidators, the company was already in the thick of a media firestorm surrounding claims it was selling flooring that exceeded California formaldehyde emission limits. In March 2016, the company paid the California Air Resources Board (CARB) $2.5 million to settle the case, which ultimately centered on the company’s failure to take “reasonable prudent precautions” to ensure its imported wood products met the state’s formaldehyde law.
“(As an industry), we haven’t had a lot of guidance on ‘reasonable prudent precaution’ … until now,” said Witter, noting that California officials are likely to reference the Lumber Liquidators case in providing guidance to other companies seeking best compliance practices.
Lumber Liquidators developed and implemented a “Fabricator Laminate Evaluation and Audit Program” and a “Composite Core Testing Research Program” as part of its CARB settlement. At the heart of her company’s efforts are seven points that Witter says form the foundation of any effective compliance plan.
- Insure your program meets the federal organizational sentencing guidelines. (These can be found at www.ussc.gov/guidelines/organizational-guidelines.) The guidelines, established in 1991, offer broad principles that, taken together, describe a “good corporate citizen.” They include oversight by high level personnel; effective training and communication of compliance and ethics goals to all levels of employees; reasonable steps for achieving compliance, including systems for monitoring, auditing and reporting suspected wrongdoing without fear of reprisal; consistent governance and enforcement; and reasonable steps for responding to and preventing repeat offenses when a violation is detected.
- Use a cross-functional approach involving all areas, from sales and marketing to operations and logistics, in identifying and addressing compliance issues.
- Follow a risk-based approach to compliance improvements.
- Apply consistency.
- Apply strong management oversight.
- Insure the program is reasonable and tailored to your organization and its operations.
- Consider the application of root cause analysis in identifying and solving compliance issues.
Finally, Witter cautioned those who might be considering lowering the priority of compliance efforts because they think enforcement activities will diminish during President Trump’s administration. She suggested non-governmental organizations will step up their vigilance if they sense a weak commitment to environmental regulations on the part of the current administration. “I would not let your guard down,” she advised.