Should an employee running a side business disclose to their employer? Quarter 2 2022

By PHUMZILE ZIQUBU, Published in Employment Law

Issue Whether there is a duty on an employee to inform an employer about a potential conflict of interest.

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Facts

Bakenrug Meat (Pty) Ltd t/a Joostenberg Meat v CCMA and Others (LAC) (CA8/2020, 18-1-2022)

Coris Hough-Oosthuizen was employed as a sales representative by Bakenrug Meat Pty Ltd t/a Joostenberg Meat in October 2013. The employer's business produces and sells a range of meat products. The employer was unaware that the employee ran a side business selling meat products, namely biltong. The employee operated her business on rented premises and had one permanent staff member. As the owner, the employee only attended to her business on weekends, because she worked for Joostenberg Meat during the week.

In October 2016, the employer found out that Hough-Oosthuizen was running a side business, investigated the matter, and charged her. Disciplinary proceedings were instituted.

Disciplinary hearing

Hough-Oosthuizen faced two charges:

(1) (she) took on employment while she was also working in another capacity.
(2)(she) undertook that she would be physically calling on clients weekly and on a regular basis, but it was found that she had not done so.

On 10 October 2016, she was found guilty on the charges leveled against her and dismissed. Unhappy with the sanction, she referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA).

CCMA

The Commissioner found that the dismissal of the employee was substantively fair.

The Commissioner's reasoning was that the employee should have informed the employer that she was running a meat business on the side. With this information, the employer would have decided whether or not the employee's business was in conflict with its own business.

The fact that the employer did not market biltong did not mean that Hough-Oosthuizen could run a formal business, marketing meat products, without telling her employer.

The Commissioner viewed the employee's act as dishonest and unacceptable.

The employee, aggrieved with the award, launched a review application before the Labour Court (LC) to have the award set aside.

Labour Court

This court considered that the employee ran her business on weekends, which meant that her business activities did not interfere with those of the employer. The court said that there was no link between the employee's performance for the employer and her running of the side business. This meant the employee had no duty to inform her employer about a potential conflict of interest.

This court concluded that the Commissioner arrived at a decision that no reasonable decision maker could have reached. Evidence on record did not support the charge that she "took on employment whilst also working in another capacity".

The matter then went to the Labour Appeal Court.

Labour Appeal Court

On appeal, this court found the award of the CCMA to be reasonable and correct. This court agreed with the Commissioner that the employee's act was dis-honest and unacceptable, and held that the employee was a sales representative in a business involved in meat products. She failed to disclose the fact that she was running a sideline business for the sale of meat products. Her failure to disclose these material activities to her employer meant that she acted in violation of her duty of good faith to her employer. For conflict to arise, no real competition needs to be present. The LAC set aside the labour court's judgment.

Comment

The LAC's judgment once again showed that an employee has a duty of good faith towards the employer to disclose any information about a potential conflict of interest. If potential conflict arises because an employee is running a side business, that business does not have to be in competition with that of the employer for an employee to have a duty to disclose; the mere fact that an employee runs a side business must be declared.

Ziqubu writes in her personal capacity.