My employer is forcing its employees to defraud its customers, how should I handle this situation?

Question

Right now I have a really uncomfortable situation and not sure what's the best way to handle it.

I am working as a software developer for an outsourcing company based in Eastern Europe. Most of its clients are located in the United States. We develop new and interesting products for company's customers, so mostly I am quite satisfied with tasks I am working on.

What I am not satisfied with, is how the employer treats his customers and how it is doing business in general. Let me explain this in more detail.

As an outsourcing company that doesn't have their own products and charges customers for developers' hours spent, their primary way to increase profits is to sell as many man-hours as possible. Basically, company management believes that the only difference between senior- and middle-level developers is that a senior developer can be as twice as efficient as a mid-level one in terms of delivering features and bug-fixes (that's exactly what PM told me when I asked him what he thought about this business model). So, from my point of view, they don't care much about the quality — it's only the speed and pace that matters for them. Consequently, senior developers in that company typically work on more than one project — usually two (there are also some guys working on three and even more projects). This is where company starts cheating.

As a senior developer, I work on two projects. I have a standard 8-hour day, working 4 hours for each project. However, the customers I work for are not aware of this. The company charges them as if I worked 8 hours for each of them. My goal, as a developer, is to keep both customers satisfied with my productivity. Delivering quality software is not the highest priority — the main goal is, well, doing business. For reporting, I have to tell each of the customers that I work full-time exclusively on their project. So, essentially, every day I have to participate in this ugly trickery.

Almost every developer in the company works this way. It allows the developers to gain more money, and the company to save at the same time — one developer pretending to work 16 hours while actually working only 8 is cheaper than two developers who really work 16 hours a day. Don't forget to charge the real money for that imaginary extra 8 hours, and you'll get the pure profit.

The company has become really good in this business. Recently, when I joined the second project, they had a meeting for developers, teaching all of us how not to disclose the fact that we are working this way. Some of the developers don't even use their real names, because a lot of customers are located in the same US state and know each other well. The company is working really hard to prevent the situation where customers would realize that developers don't actually work full-time, because the following would be a complete failure for the company:

Customer A: Hey, developer X from company Y implemented a really cool feature for my app!

Customer B: How is that possible? He is working for my project full-time!

When I was interviewing for this company, they did not tell me they work this way. It came as a complete surprise to me. Now I'm very embarrassed and feel really bad that I have to participate in this stuff.

Do I have an ethical responsibility to quit? To notify the company's customers? What are my options in this situation?

Answer 1

From what you describe, it is very possible that this is legally fraud. As such you need to do two things. First and most critical, consult a lawyer. People who knowingly commit fraud can end up in jail. I know this because I saw several people go to jail when I worked for an auditing agency. You, first and foremost, need to protect yourself.

Next, fraud has a way of eventually being found out. When it does the reputation of this company will be in the toilet. That means your reputation will be in the toilet for having worked there. Ask the 1000s of people who worked at Enron how it affected their careers, even the ones who did not commit the fraud. (You really, really need to read about the Enron debacle, there are some very extensive books written about what happened there.) The longer you work at such a place, the worse the taint will be when they get caught. If you still work there when they get caught, the taint will be really bad. And clearly this type of corporate culture doesn't suit you and it will stress you daily to do this. My advice to you is to get out.

Answer 2

If you're not happy with the business practices of your employer and you don't think there's a reasonable chance to change them, you're almost certainly best of finding another job and then moving on; that much is easy. Unless the situation is really bad, quitting without a job to go to is always a much riskier option from your point of view.

Once you've sorted your life out, you then have to make a decision as to what to do about those business practices. There you have two real options:

• Do nothing. This is the safe option. While it might be nice to fix every problem we come across, we can't actually do that.
• Alert somebody, whether that be the customers or the authorities. This is very, very risky. If you do this, you're almost certainly going to end up needing a good lawyer and lots of money to defend yourself against the lawyers that your former employer will send after you. Don't bet on any "whistleblower" laws or anonymous tip-offs to protect you. (I'm not saying this is the way the world should be; it's a realistic view of how the world is).

Nobody here can tell you which of those two options to take; it's a decision you've got to make based on your own personal ethics and what you think the risk might be.

Answer 3

It is clear that the OP is on this site because he is either feeling morally guilty or is afraid that there may be consequences to his action or inaction. The fact that the topic has been breached for thousands to read means that the ethical boundaries to the user have already been crossed. We do not know when the OP came to this realization or how long he has thought about the issue. So let's throw out the ethical debate because the OP knows it isn't ethical, hence the question. The best I can do is answer it according to the OP just realized that this practice was defrauding clients.

1) No one is forcing you to do this. Your employer is asking you to commit fraud and you have accepted. There was no gun to your head.

2) Your best friend is probably email at this point. Some subtle emails asking why you are doing this or what clients are seeing on their side go a long way. You don't even need anyone to respond. Just them knowing is culpability. Without something digital or on paper (good luck there) the blame could fall to you. Save your pst files!

You do not say which country you are in. So the best I can do is answer as if I were working in the US.

• What your company is doing is fraud
• by delivering the fraud across international waters a US company would have several layers of fraud (RICO, IRS, federal jurisdiction, tampering)
• This is not only a criminal action but a civil action
• the civil action has substantial leeway and penalties, meaning a win could effectively put a company out of business
• if there is a trace of you willingly doing this and evidence that you knew about the scheme you could also face criminal penalties.

What I am telling you is that you came on SE with a problem but in many countries if they linked your SE account to you and investigated your company you could face prison time. My advice to you is to talk with a lawyer.

After talking with the lawyer you will be presented these options in some form:

• Continue being a criminal
• Work out a non-disclosure. This is basically company paying you off and you get another job. May not be legal at this point.
• Get another job, be a whistleblower on company.
• Get another job, forget about it, and hope you aren't involved in a trial 2 years from now.

To answer your ethical question: I for one could not work in your company for one day. I would out them first thing. I would grab a customer list on my way out and personally email each one. That is just me though. It is harder to deal with if you have worked at a place for a while and then you learn about it.

Once you make a decision to leave (if you don't leave you are a criminal and criminals shouldn't worry about ethics) you have the dillemma about working with the law vs. telling coworkers. There are many US cases were the IRS or police send employee back to work for months to gather evidence. If all of this doesn't sound fun, get another job and send the customers an anonymous email (I can help you do that right).

Answer 4

For reporting, I have to tell each of the customers that I work full-time exclusively on their project.

If you are knowingly making fraudulent reports that are used for billing, then you are committing fraud, and that sounds very much what you're being made to do. Needless to say, you should stop personally engaging in criminal behavior, even if your bosses are directing you to do it.

The issue of what all your ethical responsibilities are is kind of subjective here, but I think we can all agree that at a minimum, you have an ethical and legal obligation to not directly participate in defrauding your employer's clients.

As to your options, it sounds a lot like you may have no choice other than continue to engage in billing fraud or finding a new employer. You can, of course, talk to and express your concerns to your boss/bosses/HR, but it doesn't seem very likely to me that they'll care, and much more likely that they'd retaliate against you for bringing it up.

I've had employers try to put me in similar positions before, and my preferred approach is to take the position that I'm not being paid enough to lie and/or commit crimes on their behalf. This lets me refuse to participate in the activity, but implies that there's some negotiation room, which mitigates some of the risk of being fired on the spot. Ultimately, it's a stalling tactic - you're making them think you may be willing to commit fraud for them if you can come to terms, but I'd advise you to use this time to find a new employer, rather than actually trying to negotiate your price for participating in billing fraud. (I've yet to have one of these shady employers come back and offer me "enough" money to lie or commit crimes for them, of course. If they were willing to pay enough, they probably wouldn't be committing crime in the first place.)

Regardless of what you decide, you should heavily document this deceptive and probably illegal activity your employer is undertaking, and how they are ordering you/forcing you to participate in these questionable practices. Having that kind of documentation protects you to some degree, both from your employers, who are less likely to fire someone who has documented details of their criminal behavior, and also from the legal system in your country. If this ends up in criminal court, such documentation can be the difference between being a cooperating witness, and being an indicted co-conspirator.

Answer 5

I join the chorus of people saying that this is dishonest. However, I'd like to clearly (explicitly) point out that this is all because of one word:

For reporting, I have to tell each of the customers that I work full-time exclusively on their project.

Oh, that word "exclusively" is the pain-giver.

I have worked in a company before, filled with management that worked honestly and expected their staff to do the same. And they had no problem with occasional double-billing. In fact, they loved double-billing, or even triple-billing. It was quite hard to do, but skilled people could do it sometimes, and: the more, the merrier.

The work I'm describing was maintaining computers, and very often we would need to interact a little bit with computers, but to allow a lengthy automated process to run, and to regularly check on the progress. Meanwhile, we could do something else for another customer, especially if it was more work of a very similar nature. And as a very honest (religious) person, I see nothing wrong with it. They are being efficient.

Did we go out of our way to let people know that we were double-billing? No. And if they thought we were working exclusively on their stuff, then that is their misperception. I could do this with a straight face and not feel guilty.

The only problem with what you said is the word "exclusively". That single word makes all the difference, making your scenario a dishonest one. My morals say that you should refuse to do this, no matter what pressure the employer places on you. If you decide to be dishonest (to customers), even if the only reason is just so that you don't get fired, then the end result is that you are being a professional liar (literally). Don't do this. Don't lie.

Answer 6

You have two approaches to this:

• the customers are happy paying X dollars a week and getting the software that they are getting. The fiction of dollars an hour and hours per week are wrong, but overall the customer is getting good value and they're happy. In this case, I would not suggest that you do anything different. Billing is not your job. Looking after the customer and writing great software is your job.
• the customers are not getting value. The software is buggy because you get paid to fix bugs, you write it wrongly rather than ask a few questions to get it right the first time, then get paid to do it over when the mistakes are discovered, and so on. In this case, I wouldn't try to change the firm, but I would try to find a different place to work. No-one is going to cut their revenue in half because a developer suggested it would feel less dishonest. If you can't look after your customer and write great software, you will lose value as a worker and a person the longer you stay there.

This distinction is probably more important than how you feel about lying about your name and the time you're spending on the work. It is important to have a good relationship with your customer, I completely agree. If you can do that and let someone else worry about billing them, then the situation might be tolerable. But if you are consistently delivering something you know is not your best work, if nobody has your customer's interests at heart, and you can't be proud of how you spend your days - well, I would look for another way to spend my days.

Somewhere in your country is an outsourcing firm whose business model is to do a great job, do things right the first time, and care about the customer. They'll charge more per hour, but the customers will gladly pay it. If your own employer is actually this firm, charging (in effect) twice as much per hour, perhaps you should stay. If your employer is not, you should perhaps start to look for such a firm.

Answer 7

TL;DR:

1. Start looking for a new job immediately and aggressively. If you can't get a better salary or the same salary, take a pay cut if you have to (and can) to leave as soon as humanly possible.
2. Contact a lawyer as soon as possible, possibly together with coworkers you trust. Work with that lawyer on what to do, which is likely to involve (amongst other things) keeping an ongoing diary of what you've been told to do, when, and by whom for as long as you're still with the company.
3. There's a big gap between unethical and illegal. You (and we) are not qualified to make that determination. See #2. :-)

While I'd start looking immediately, I'd also contact a lawyer immediately and talk with them before actually leaving the job.

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In summary:

• You believe your company is defrauding its clients by billing them for time that wasn't worked on their projects.
• You believe your company requires you to participate in that fraud both by commission (saying you're working exclusively on a project when you aren't, falsifying timesheets) and by omission (avoiding disclosing information that would let those customers figure out they're being lied to).
• You believe that if you do not participate in the fraud, your job is at risk.

So the first question is whether your belief is correct. There's a big gap between unethical and illegal. If what the company is doing is illegal, you may have participated in that (don't freak out, keep reading); so you want to know. But it may well "just" be unethical.

What do you do?

1. Start looking for another job immediately and aggressively. You clearly feel the behavior is at least wildly unethical, so get out ASAP.
2. Consult a lawyer.

The lawyer would advise you on what to do next. In the U.S., UK, and EU (the legal systems I'm vaguely familiar with; I am not a lawyer), I'd expect them to suggest things like this:

• Writing a document with your recollections of events to date.
• Creating an ongoing diary for as long as you're still at the company in which you record what you've been told to do, by whom, and when. A diary written at the time has more weight than recollections of previous events.
• If and when you and your lawyer agree it's appropriate: Writing a letter to your manager asking in the most neutral terms possible what they expect of you when working on multiple projects at the same time in regard to timesheets and customer interaction. Do not accuse the company of anything; ask what's required of you. If you're in the EU, firing you for asking the question is almost certainly illegal (if you're not in the EU, I have no idea). That doesn't mean they won't do it, and so it doesn't mean you wouldn't have a sudden gap in your income, which is why you don't do this until/unless you're ready for that to happen. It just means that you'd have a legal case to get compensated for that at some point (possibly far) in the future.

But again, your lawyer will work with you on appropriate next steps where you are. If you've involved other people you trust, they'd do the same things.

You do those things to protect yourself. If there's a fraud being committed, and if you've participated in it, these actions make it clear that it's something you didn't want to do and may have fallen into incrementally and under duress. That matters. If the company ends up being prosecuted for fraud, your actions now may well make the difference in whether action is taken against you and if so, to what degree.

In the best case, you end up figuring out with your lawyer that while what's going on is unethical, it's not illegal. Whew! Get out and move on. Again, there's a large gap between unethical and illegal.

If it ends up being something illegal according to your lawyer, at some stage, probably once you and the people you trust are out of the company, you'd discuss with your lawyer whether to report what's happening to the authorities and what the impacts of doing so or not doing so are.

Answer 8

You have two good answers and this is just a different slant

• Do I have an ethical responsibility to quit?
  No I don't think you have an ethical responsibility to quit. Right now based on instructions from your company you are delivering a skewed definition of full time. Your company is over billing and that is wrong but that wrong is on the company not you. You are clearly in an uncomfortable position but not to the level of unethical. Now if your company asked you to sign a false time card (e.g. 16 hours when you worked 8) then that action (signature) would rise to unethical in my opinion.

• To notify the company's customers?
  No I do not think you have an obligation to notify customers. Billing is between the company and the customer. If you were a cook and the menu said 14 oz steak and you weighed it and it was 12 oz would you have an obligation to notify customers?

• What are my options in this situation?

  • Report this fraud but I don't see this as being a good outcome for you.
    I am not a lawyer but this is a civil not a criminal matter. I doubt you are going to find whistle blower protection.

  • Continue to work.

  • Find another job.
    In your industry in your country you may find other companies are no more ethical.

Answer 9

Additional reasons to quit soon and to consult a lawyer: 1. There is enough info in the text of your question for them to figure out who posted it. Then you're out anyway. 2. If a liar gets caught, he looks for a scapegoat. The next lie will be, "He told us he worked that many hours and we believed him." By complying with their instructions to lie to the customer, you gave them evidence they won't hesitate to use in that case. And they may produce a document with your signature (real or forged) promising to always be ethical.

Answer 10

If you're really concerned, you need to ask the tough questions or refuse to be a part of it.

1. Is this an acceptable practice in your area and industry?
2. Can I enter my hours on my sheet to reflect what I am actually doing?

They can lie to customers and change your billing sheets and submit to the client whatever they want. Clients may assume the hours are inflated.

When working with clients, you're going to have to refrain from discussing billing. You tell them you just submit your time and that's it. It's not their business if you work with other clients and I'm not familiar with the "exclusive" arrangement. Billing two clients for 8 hours and working 16 hour days is none of either of their business. Granted, that's not what you're doing.

You may want to consider yourself lucky that you only work 40 hrs a week as a programmer.

Many companies pad their estimates in the software industry. They can argue they truly did work during those hours, but can they argue they would have finished things faster knowing the additional hours are available? If only everything was open and honest, but personally, I don't want my salary being transparent.