May an employer dismiss an employee for a conflict of interest?

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Employees, just like most other people, tend to look after their own interests first.  They are, in most cases, working to satisfy their own needs, whether such needs are financial, self actualising or based on other motives. For this reason common law, while recognising the employee’s right to look after his/her own interests, balances out this right with the employee’s obligation to ensure that the satisfaction of his/her interests does not conflict with those of the employer.

Employers quite rightly get very angry when they discover that their employees have been conducting private businesses during working hours, stealing the employer’s customers or in other ways have been acting in conflict with the best interests of the employer. A key obligation of the employee is to serve the best interests of the employer. Therefore, conflict of interests is seen by many managements as gross misconduct meriting dismissal. However, a number of CCMA cases show that this is not as simple an issue as it may seem.

In the case of Steyn vs Crown National (Pty) Ltd (2002, 5 BALR 546) the employee was guilty of planning, together with a colleague, to set up a spice business in competition with her employer. After she was dismissed for conflict of interest she referred an unfair dismissal dispute to the CCMA. The arbitrator found that the dismissal was unfair because the employee had only contemplated the opening of her own business and had not actually competed with her employer. The employer was ordered to pay the employee compensation equal to six months’ compensation.

In Devine vs SA Breweries and another (2003, 2 BALR 130) the employee was dismissed for being involved in a private business selling computers to colleagues. The CCMA found that the dismissal was unfair because the computer business was so different to the employer’s business that it did not constitute a conflict of interests. The employee was reinstated with full back pay.

In SAMA obo Craven vs Department of Health (2005, 12 BALR1259) a prison medical officer was dismissed for asking for payment from inmates for private medical services rendered. However, the CCMA found that the dismissal was unfair because the employee was unaware of the rule against taking such payments for private work. The employee was reinstated with back pay.

Conflict of interest is generally accepted as a serious enough offence to merit possible dismissal. However, the above case law shows that there are a number of important conditions that must be satisfied before the CCMA will accept such a dismissal.

These include the requirements that:

  •  The employee must already have jeopardised the interests of the employer by the time the charges were laid. For the employee merely to be contemplating competition with the employer’s interests may not be sufficient to constitute conflict of interest. In such a case the employer would need either to wait until the employee sets up the competing business before acting or prove a specific loss caused by the employee’s mere plans for a competing business. 
  • The employer must also prove that the employee’s private business in fact conflicts with the employer’s business interests. Merely showing that the employee runs a private business is not enough to prove conflict of interests. 
  • The employer should show that the employee knew the rule prohibiting conflict of interests. This is a disturbing requirement as employees ought to be aware that competing with the employer is wrong even if there is no specific rule to that effect. However, where the industry is such that it is often acceptable for employees to carry out private work, an employer that has a rule to the contrary would need to show that the employee was aware of this.

In Biyela vs Nelson Mandela Children’s Fund (2004, 10 BALR 1210) the employee was dismissed for conflict of interests. Her husband had been found to have been the head of one of the fund’s service providers. The arbitrator agreed that she should have revealed her husband’s position. However, her failure to do so was not serious enough to warrant dismissal. It was found that her husband’s position did not constitute a conflict of interest because the employee could not have gained any advantage from her husband’s position that could have conflicted with the interests of her employer. The arbitrator therefore ordered the employer to pay the employee six months’ remuneration in compensation.

 In view of the foregoing, employers cannot simply fire employees for conflict of interest or what appears to be conflict of interest. They first need to consult with their labour law experts to ensure that:

 Hard facts are gathered that show the employee to have damaged (rather than advanced) the employer’s interests

  • The employee knew of the rule he/she was alleged to have broken
  • The correct charge is chosen and is properly worded.

 

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: ivan@labourlawadvice.co.za. Go to: www.labourlawadvice.co.za.

 To book for our 5 April Johannesburg seminar on CHANGES AND DANGERS IN LABOUR LAW please contact Ronni via 0845217492 or ronni@labourlawadvice.co.za

 

 

 

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