How should an employer respond to a conflict of interest


This week Ivan Israelstam addresses questions about: the loyalty that an employer can legitimately expect from employees; what employees' rights are, for example to join a union; what a conflict of interest is, and how an employer should deal with conflict of interest.



It is inherent in the nature of employment relationships that, as the employer is paying the employee for his services, he/she is obliged to be loyal to the employer and to devote his/her efforts to the interests of the employer. The employee should therefore carry out his/her work diligently and according to the employer’s instructions, avoid bringing the employer’s name into disrepute, avoid activity that could clash with the employer’s interests. For example: 

In order to avoid corruption employees involved in procurement services should not have private relationships with the employer’s suppliers. 

Employees who do not have permission should neither carry businesses that compete with that of the employer nor carry on any other work that could impair the employee’s ability to serve his/her employer.

However, there are limits to the employee’s duty of loyalty. That is: 

The employee is not obliged to carry out any illegal instructions. 

The employee would not be obliged to forego his own legal rights to work limited overtime hours.

Where a managerial employee joins a trade union this could well result in a conflict of interests. This is because often management and trade unions become adversaries. That is: 

they bargain against each other at wage negotiation time 

unions organize strikes against management 

management sometimes dismiss union members who go on strike 

managers prosecute misconduct hearings against union members and union representatives attend these hearings to defend their members.

It is therefore natural for management to discuss confidentially the tactics they will use to protect the employer from union action. A manager who attends such meetings and then informs his trade union of management’s plans has a conflict of interests and is behaving disloyally towards his/her employer.
In the case of FAWU vs The Cold Chain (2007, 7 BLLR 638) the employee accepted a management position, but refused to relinquish his posts of shop steward and union office bearer. He was then retrenched. The employer claimed that the employee could not properly carry out his managerial duties if he was involved in trade union activity. The Labour Court decided that: 

The employee had a right in terns of South Africa’s Constitution and the Labour Relations Act (LRA) to be involved in union activity. 

The potential conflict between the roles of unionist and manager could be dealt with via the disciplinary procedure if the employee was unable to carry out his managerial role effectively. 

The dismissal was automatically unfair. 

The employer was to pay the employee nine months’ remuneration in compensation.

In this case the Court found that the employee’s rights outweighed the employer’s concerns of conflict of interest.
In NUMSA obo Thobalo vs Equipment design & General Engineering (Pty) Ltd) (2010, 11 BALR 1136) the employee was dismissed for offering to sell an electric motors to a client of the employer for his own gain. The employee claimed that he had intended that the client would be invoiced by the employer as usual and had no idea that it would appear that he had arranged this deal for his own gain. The commissioner found that, while the employee was guilty of misconduct, there was no proof that he had profited from the scheme and that the dismissal was unfair.
From the above cases it appears that, where the law protects employee rights, the employer’s interest will often come second. However, while employers must hesitate to act against employees merely due to the employees’ affiliations, they still retain the right, in certain circumstances, to discipline employees if their affiliations actually interfere in practice with the execution of their duties. For instance, the Court in the FAWU case discussed above, said that the employer would be able to discipline the manager if he failed to do his job. For example, should the manager purposely hold back on disciplining his/her subordinates because they are his co-union members, he/she should be subject to discipline himself/herself.
As it is very difficult for employers to know in each case whether the conflict of interest is punishable or not they are advised to avoid taking any action until they have first consulted with a labour law expert.
BY   Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or on e-mail address: [email protected]. Go to:
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