Beware dismissing employees for conflict of interest

By Ivan Israelstam, chief executive of Labour Law Management Consulting

Employers quite rightly get very angry when they discover that their employees have been conducting private businesses during working hours and/or 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 the rule.

What about the situation where the employee is carrying on a business that could potentially cause harm to the employer but, in fact, has the opposite effect? That is, what if the employee’s private business has the effect of increasing the employer’s business. For example, take the hypothetical case where an airline cabin attendant secretly sets up a private business providing sexual favours for the airline’s passengers. What if the employee’s business results in an increase in the number of passengers who book flights with the airline. Would this amount to a conflict of interests or not? If the employee is dismissed and goes to the CCMA would the CCMA be able to find that the dismissal for conflict of interest was justified? The management might argue, at the CCMA, that the employee was bringing the airline’s name into disrepute. However, while the CCMA is likely to agree with this, it may still find that the dismissal was unfair. This is because, at the disciplinary hearing, the employee was dismissed for conflict of interest and not for bringing the employer’s name into disrepute. While the employer might argue that these charges amount to the same thing, such charges are, in legal terms, different enough to persuade the CCMA that the employer was technically in the wrong.

In view of the foregoing, employers cannot simply fire employees for 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.

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