Conflicts of Interest Explained

‘Conflict of interest’ means different things to different people – just ask the miscreants who were fingered in the state-captured report, who will provide you with an assortment of different definitions to explain away their indiscretions.

Written By and of Cowan-Harper-Madikizela Attorneys

In the employment law context, the concept of conflict of interest can be directly linked back to the duty of good faith which is owed by an employee to their employer. The duty of good faith itself is far-reaching and a somewhat nebulous concept, meaning that defining its exact contours is not always possible. We set out below several principles which emanate from the case law.

In Sappi Novoboard (Pty) Ltd v Bolleurs (1998) 19 ILJ 784 (LAC), the Labour Appeal Court (“the LAC”) found that it is an implied term of every contract of employment that an employee will act in good faith towards their employer and will serve their employer honestly and faithfully.

This understanding was followed by the Supreme Court of Appeal in Ganes & Another v Telecom Namibia Ltd (2004) 25 ILJ 995 (SCA). In this matter, the Supreme Court of Appeal (“the SCA”) found that in the absence of an agreement to the contrary, the employee in that case owed a duty of good faith to their employer. The SCA expanded on this by confirming that this duty entailed, inter alia, the following:

  1. not to work against their employer’s interests;
  2. not to place themselves in a position where their interests conflicted with those of their employer;
  3. not to make a secret profit at the expense of their employer; and
  4. not to receive a bribe, secret profit or commission in the course of or by means of their employment with the employer.

The SCA in Ganes thus interpreted the duty of good faith to, in essence, prohibit an employee from acting in direct conflict with their employer’s interests. In Phillips v Fieldstone Africa (Pty) Ltd (2004) 25 ILJ 1005 (SCA) the SCA took this interpretation even further, to include not only actual conflicts of interests but also those where there is a real sensible possibility of a conflict of interest.

In Schwartz v Sasol Polymers and Others (2017) 38 ILJ 915 (LAC) the LAC held that the dishonest non-disclosure of a material fact justifies a dismissal and that calculated silence in the face of a duty to inform an employer of material facts amounts to a fraudulent non-disclosure. An example of this is where the employer has a policy which obliges employees to disclose all external interests and the employee fails to make complete disclosures.

In De Beers Consolidated Mines Ltd (Venetia Mine) v National Union of Mineworkers & Others (2020) 41 ILJ 884 (LAC) the LAC found that where employees are involved with the service providers of their employer, they have a duty to disclose this.

More recently, in Bakenrug Meat (Pty) Ltd t/a Joostenburg Meat v CCMA and Others (LAC) (Unreported, CA8/2020) the LAC also found that an employee who runs a side-line business (or ‘side-hustle’ as it is colloquially known) and fails to disclose this to their employer acts in violation of the duty of good faith owed to their employer.

In Bakenrug Meat, the LAC also found that no real competition between the employer and the employee need exist for dismissal of the employee to be considered the appropriate sanction. Outside activities, such as working a second job or running a side-hustle, even where there is no competitive element with the employer, may still impact negatively on the employee’s ability to discharge their duties effectively. In these circumstances, the employer is entitled to take the appropriate action to ensure that the employee is able to fulfil their contractual duties as required.

Greater emphasis should be placed on the duty of good faith in our employment. Some serious consideration will need to be given to how this duty will need to evolve, if at all, in the gig economy, as well as the new world of work which incorporates remote working and increased flexibility.

Employees must always consider the duty that they owe to their employer prior to engaging in external work, and should as a general rule disclose all outside interests to their employers. As can be seen from the development of the case law above, any suggestion that there is no direct competition between business will not absolve the employee of their gross misconduct.

Neil Coetzer

Neil Coetzer
Partner, Employment Law, Benefits, Industrial Relations and Discrimination

Courtney Wingfield

Courtney Wingfield
Senior Associate in Employment Law, Benefit, Industrial Relations and Discrimination

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