Anyone with cause to dabble in Labour Law will know that the principal statutes are prescriptive, not permissive, and take precedence over contractual freedom. This is why, even though the contract may allow termination of employment on notice by either party of one month, terminating an employee on this basis without being able to justify the termination in law results in an unfair dismissal.
What is required is for the employer to show i) that a rule exists, ii) that the employee was aware of the rule, and iii) that the employee broke that rule. But what if the rule is contained in common law (i.e. so old and well-known nobody has bothered to write it down)? And, more importantly, would this apply to a conflict of interest?
Conflict of interest is a self-explanatory phrase. It denotes a situation where an employee’s interests are at odds with the employer’s best interest. The most obvious example (and one which has been explored in previous articles) is that of so-called moonlighting.
Case law
In the matter of Metsimaholo Local Municipality v South African Local Government Bargaining Council and Others (JA78.14) [2016], ZALAC 1, two electricians working for the municipality had informed their manager that they wished to use their annual leave to perform electrician work for a third-party contractor, for their benefit. These requests were never approved.
The Labour Appeal Court confirmed that “if so-called ‘moonlighting’ was to be effectively prohibited, there ought to have been a specific rule, which must have been made known to the employees, that ‘moonlighting’ was not permissible. For a dismissal based on ‘moonlighting’ to be fair, there must be proof of such a rule, knowledge of the rule on the part of the employee, and breach of such a rule by the employee.”
This follows the above-stated three-pronged principle, and the employees in the Metsimaholo case were found to have been unfairly dismissed.
In an earlier case, that of Bootes v Eagle Ink Systems KwaZulu-Natal (Pty) Limited (D781/05) [2007] ZALC 52, the employee, using his employer’s connections, circumvented his employer and agreed (in his capacity and for his account) with one of his employer’s suppliers for the textile printing of blankets.
In that case, the Labour Court, at [28], “accepts as a general proposition that a breach of good faith could impair the relationship of trust between an employee and the employer. In this case, […] [t]he option [the employee] exercised is one that favoured him personally. By exercising this option, he acted in conflict with the interests of [the employer] and, consequently, in bad faith.” The Court found that the employee, by competing with his employer in this way, was guilty of misconduct and liable for dismissal.
Findings
The court’s decision in the Bootes case was based on a “general proposition” and not a specifically recorded rule. It would, therefore, seem that there is a difference between the narrow field of moonlighting and the broader spectrum of conflict of interest, the latter relying on a rule (extant and well-known) contained within the common law.
Support for this is found in Grogan’s Workplace Law (8th Edition): “Employees who secretly compete with their employer’s business for their account breach their fiduciary duty. But in the absence of a contrary provision in the contract, there is nothing to preclude employees from holding two compatible jobs, provided the second is not conducted during the working hours they are obliged to devote to the first job.” (p.55-56).
However, “Secret trading for an employee’s account has been held to undermine the employment relationship, even if the employer happens coincidentally to have profited from the employee’s dealings.” (p56)
Grogan concludes: “The employee’s duty to act in good faith is fiduciary. Therefore, a breach by an employee of any of the above duties is grounds for summary dismissal under the common law and may also justify dismissal under the LRA.” (p57)
The deciding factor would seem to be the “secret” or clandestine nature of the employee’s dealings. In other words, in common law, an employee who hides the fact that he is garnering a benefit from his relationship with the employer – which the employer would not otherwise approve of – is guilty of an offence and liable for summary dismissal due to conflict of interest.
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