Answer:
According to Kohlberg's research, your colleague is operating at the pre-conventional morality level.
Step-by-step explanation:
Notice that your colleague's reason for not underreporting the malfunction is to avoid punishment. This is typical of the very first stage of moral reasoning, the pre-conventional level. At this stage, the individual perceives goodness as a way to avoid being punished. Your colleague did not worry about "the right thing to be done" or that "the malfunction might harm others." His reasoning was basic and, in a sense, quite selfish.