Employment update – Does an employee have a duty to disclose any action which potentially is in conflict with their employer?

April 1st, 2022

Bakenrug Meat (Pty) Ltd t/a Joostenberg Meat v CCMA and Others (LAC) (CA8/2020, 18-1-2022) (Davis JA with Savage AJA and Waglay JP concurring).

The appellant’s business involves producing and selling a range of meat products. It employed the third respondent employee as a sales representative in October 2013.

In October 2016, the employer became aware of the fact that the employee was operating her own business, which marketed biltong products.

The employee was charged for dishonesty in that she failed to inform her employee that she owned and operated a business, which marketed dried meat products and thus failed to give full attention to marketing the products produced by the employer.

Subsequent to being found guilty and dismissed, the employee referred an unfair dismissal dispute to the Commission for Conciliation, Mediation and Arbitration.

The arbitrator made the following factual findings –

  • the employee operated a formal business, which marketed dried meat products;
  • in operating such a business the employee rented premises and employed one full time employee; and
  • prior to being charged, the employer did not produce or market dried meat products.

On these findings, the arbitrator found that the employee’s non-disclosure was dishonest. The arbitrator reasoning was that the employee had a duty to inform her employer of her activities and thereafter allow the employer to decide whether her activities were in conflict with its business. The fact that the employer’s operations did not include dried meat products did not negate the employee’s duty to inform her employer of her side-line business.

Following his conclusions, the arbitrator found the employee’s dismissal substantively fair.

Aggrieved by the outcome, the employee sought to have the award set aside on review. The court a quo found it significant that on the record, it was not disputed that the employee only operated her business during weekends. This, together with the fact that employee was not employed by the employer for 24 hours a day; would have meant that it was possible for the employee to operate her business without neglecting her duties towards her employer. Based on these facts the court found that there was no nexus between the employee’s business and that of the employer’s operations. The court set aside the award.

On appeal the Labour Appeal Court (LAC) noted that the court a quo’s view was that unless there was actual conflict between an employer’s business and an employee’s side-line business, there was no duty on the employee to inform the employee of his or her business. Put differently, the employee’s duty to disclose did not arise when there was only a potential conflict between the two businesses.

On this score the LAC held:

‘The evidence clearly indicates, however, that the third respondent failed to disclose an essential and important fact that she was running “a side-line business” in the market for the sale of meat products, albeit that they might not have been identical to the meat products which were sold by appellant. That she was able to discharge her duties to the appellant does not take her case any further. She was employed as a sales representative in a business that was involved in the sale of meat products. As a side-line business, she conducted a business which involved the sale of biltong, namely a meat product. She failed to disclose these obviously material activities to her employer and was therefore manifestly acting in violation of her duty of good faith to her employer.

The conclusion reached by the second respondent that “employees act in bad faith if conflict of interest may arise even though no real competition actually results” is unassailable.’

The LAC ordered that the court a quo’s findings be replaced with an order that the employee’s review application be dismissed with no order as to costs.

Moksha Naidoo BA (Wits) LLB (UKZN) is a legal practitioner holding chambers at the Johannesburg Bar (Sandton), as well as the KwaZulu-Natal Bar (Durban).

This article was first published in De Rebus in 2022 (April) DR 30.