Case Law Alert
HOD Sports, Arts, Culture & Recreation – Free State v NEHAWU obo Maseko & others (LAC) 18.10.22.
Conflict of interest
The Chief Director: Arts & Culture & Heritage of the Government Department concerned was dismissed on 15 December 2015 in connection with misconduct related to irregular business dealings involving her guesthouse doing business with her department.
In her annual declaration of interest, the employee concerned formally declared her ownership of the guesthouse in question. She also obtained and submitted quotes from other service providers for the transaction concerned, besides the quote from her own guesthouse. Her argument was that, as a result, there existed no conflict of interest.
At arbitration it was found that the allegations against the employee could not be proved, and that the dismissal was also procedurally unfair. Reinstatement as from the date of dismissal, plus backpay, was ordered.
When the arbitration award was taken on review to the Labour Court (LC), the court found that there was no procedural unfairness and that the arbitrator correctly found that there was no conflict of interest regarding the transaction involving the employee’s guesthouse.
The finding of the LC regarding substantive fairness (that there were no grounds on which the reason for the dismissal related to a conflict of interest could be justified) was taken on appeal to the Labour Appeal Court (LAC).
It is a well-established principle that employees have a duty of good faith towards their employers. Where there is a conflict of interest between an employee’s own interests and that of the employer, the employee must give preference to the employer’s interest. See passage 27 of the HOD-case.
This principle is emphasised with reference to a case heard in 1920 in the Appellate Division, namely: Robinson v Randfontein Estates Gold Mining Co Ltd. Extract from Robinson-case
Even when, as in this case, there was no clear rule prohibiting the employee from doing business with the employer, she was still under an obligation to declare to her employer any actual or potential conflict of interest related to the transaction concerned (or any other similar transaction which may occur in future).
Mere declaration of an interest during an annual declaration of interests is not sufficient to relieve the employee of the obligation to still bring any actual or potential or perceived conflict of interest related to a specific transaction to the attention of the employer.
While courts of appeal and review will generally be reluctant to interfere with factual findings of an arbitrator, those findings may be interfered with if there is a reason to do so in the interest of justice. Passage 34 HOD-case
The LAC found that both the arbitrator and the LC made the same errors of judgement regarding crucial factual issues, such as not taking into account that, as Chief Director of the department concerned, the employee managed the event from which her guesthouse benefitted. This placed her in a unique position regarding the event concerned calling for transparency and circumspect which lacked in this case. This, the LAC found, made the inappropriateness of her involvement in the transaction and the conflict of interest it created serious enough to warrant her dismissal – she was in a position of trust and has breached it. It therefore justified that the LAC interfered with the findings of the arbitrator and the LC and endorsed the Chief Directors dismissal by her employer as fair.
It should always be remembered that the employment relationship is a subordinate relationship, which implies that the employee stands in the service of the employer and has to always act in the best interest of the employer. This leaves no room for the employee to unduly benefit from a conflict of interest which arises from a matter which has its roots in the employment relationship.