What does it mean that employees have a fiduciary duty towards the employer?

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The Labour Relations Act and other labour legislation protect employees very strongly. This legislation does so by giving employees a large number of very strong rights. Some examples of these employee rights include the right to join trade unions, go on strike, have a fair disciplinary hearing, protection from unfair demotions, be promoted under certain circumstances, minimum wages in many cases, sick leave, holiday leave, maternity leave, compassionate leave, overtime pay, consistent treatment, protection from unfair discrimination and representation at CCMA by a trade union representative.

However, labour legislation imposes on employees few obligations. They are obliged to behave and work properly, to carry out the employer’s lawful and reasonable instructions and to comply with their fiduciary duties towards the employer. Fiduciary duty refers to the employee’s obligation to behave in a trustworthy manner. Specifically, this means that the employee may not:

  • Place him/herself in a position where his/her interests conflict with those of the employer 
  • Make a secret profit at the expense of the employer 
  • Receive a bribe or commission from a third party 
  • Misuse the employer’s trade secrets 
  • Give a third party the employer’s confidential information 
  • Tell lies to the employer.

 

In the case of Pillay vs Rennies Distribution Services (2007, 2 BALR 174) the employee was accused of signing a maintenance agreement without authority. He first denied having signed it and then claimed that he had signed it in error, not realising what it was. He was dismissed at a disciplinary hearing. The CCMA arbitrator found that the employee had lied about his signing of the maintenance agreement. The arbitrator said that, in telling this lie, the employee had breached his fiduciary duty towards the employer not to be dishonest. The seniority of the employee made his conduct even more serious. The dismissal of the employee was therefore upheld.

 

While this principle applies generally to employees it applies more strongly to senior employees. In deciding on the extent of fiduciary duty that an employee has the courts consider a number of factors including:

  •  The degree of freedom that the employee has to exercise discretion in making and executing business decisions 
  • The opportunity for the employee to exercise this discretion in his/her own interests 
  • The extent to which the specific circumstances open the employer to abuse of the employee’s discretion 
  • The extent to which the employer relies on the employee for expertise and judgement in conducting the business 
  • The extent to which the employee is in a position of trust.

 

Clearly, the more junior the employee the less these fiduciary factors are likely to prevail. That is, with some exceptions, junior employees normally do not have the right or duty to make crucial business decisions or the opportunity to misuse decision-making power.

 

The line between who is a senior employee and who is not, and the line between who is in a position of trust and who is not are blurred. Whether, for example, a junior salesperson is in a position of trust or not depends on the specific circumstances of each case. Therefore, in order to protect itself from employees acting against the employer’s interests every employer should:

  •  Build in checks and balances that prevent the abuse of power
  • Inform all employees of their fiduciary duties in relation to their positions of trust
  • Make sure employees at all levels know the seriousness of breach of their fiduciary duties
  • Take swift, fair and consistent action against employees who breach their fiduciary duties
  • Obtain expert legal advice before acting against suspects.

 

 BY   Ivan Israelstam, Chief Executive of Labour Law Management Consulting. He may be contacted on (011) 888-7944 or 0828522973 or via e-mail address: [email protected]labourlawadvice.co.za. Website: www.labourlawadvice.co.za.

To attend our 27 July seminar in Johannesburg on  DEFEATING THE DANGERS OF DISMISSALS please contact Ronni via [email protected] or 0845217492.

 

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