Conflict of Interest in Business Ethics Examples
The case of De Beers Consolidated Mines Ltd (Venetia Mine) v National Union of Mineworkers and Others (JA83/18) [2019] ZALAC 72; [2020] 3 BLLR 251 (LAC) (11 December 2019) unpacks the issue of disclosing conflicts of interest to one’s employer.
Facts of the case
The appeal to the Labour Appeal Court (LAC) was against the judgment of the Labour Court which dismissed the review application of the award of the commissioner. This award had found the dismissal of the employee substantively unfair and ordered her reinstatement.
The employee was employed by the employer for over 15 years without a blemish to her record. At the time of her dismissal, she held the position of procurement clerk responsible for contract management and procurement of outside service providers. The employee was found to have contravened a code of business conduct and ethics by failing to disclose or avoid a conflict of interest. The employer held that such conduct amounted to a failure to perform her duties conscientiously, honestly and in the interest of the employer. She was accordingly dismissed.
A complaint was raised by Grace Security’s (Grace) proprietor. The employer had contracted with Genesis Electric Services (Genesis) – one of its service providers – to fix an alarm at one of its properties. Genesis was unable to provide the service and sub-contracted the work to Grace. The technicians indicated that they required a loan of R20 000 to purchase the alarm kit and to set up an office for Grace.
It was agreed that the money would be lent and it was agreed that this would be deposited into the employee’s bank account. The two technicians were her tenants and did not have a banking account so she allowed them to use hers. After the dispute arose between two contractors the employee made a disclosure to employer to the effect that two persons (being the technicians) were tenants on her property.
The employer has a strict rule requiring employees to disclose any possible conflict of interest they may have. The employee had taken the stance that since she had no business interest in the venture, and the money deposited into her account was not for her benefit but that she merely accommodated her tenants, there was no duty on her to disclose that information.
The employee gave evidence that she was not under any obligation to declare the deposit of R20 000 into her bank account because the source of payment was not linked to the employer’s business. In addition the transaction between the contractor and the sub-contractor had nothing to do with the business of the employer. The question here is whether the employee was under the duty to disclose the transaction and her dealings with the two employees of Grace.
The commissioner took the view that the employer could not prove that the employee had any business interest in either Genesis or Grace and, as such, found that the employee did not commit the misconduct with which she was charged. The Labour Court, like the commissioner, found that the employer failed to prove that the employee broke the rule relating to the duty to disclose. The Labour Appeal Court found that the employee was present when the R20 000 loan was negotiated between the employees of Grace (her tenants) and Genesis, and that part of the loan was for Grace to purchase the alarm kit that was necessary to render the service that Genesis had contracted to render to the employer, could be disregarded when this evidence was not challenged. Added to this is the unchallenged evidence that she was present at the meeting at which the employer’s service provider agreed to make the loan to Grace for, among other things, to purchase items needed to provide a service required by the employer. Whether she received any benefit or not was totally irrelevant as she had a duty to inform her employer about her involvement with the two companies.
The LAC has now confirmed that if you have a high level of disclosure, specifically in positions such as procurement, employees should learn that they should rather disclose more rather than less. If they are in any doubt they should disclose. The LAC would not stand for a situation where a person in procurement offered the excuse that they did not think there was a conflict of interest and therefore did not make any disclosure. It is not for the procurement person to decide if there is a conflict of interest. They are obligated to make such a disclosure to the company as a part of their duty of good faith.