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Conflict of Interest in the Workplace: What Employers Need to Know
Many employment contracts contain a “Conflict of Interest” clause. This may be widely overlooked or treated as standard legal wording. However, conflict of interest in the workplace, as well as issues with expired work permits, can also be a serious concern in the workplace. Conflict of interest is an important labour law principle. It can have serious consequences if it is not properly understood and managed.
Understanding what constitutes a conflict of interest in the workplace and why it matters is essential for both employers and employees.
What is a conflict of interest in the workplace?
In the context of employment law, a conflict of interest in the workplace arises when an employee acts in a way that harms, or has the potential to harm, the employer’s business. Naturally, an employee of a company has a legal obligation to act in good faith and in the best interests of their employer. If he or she fails to do so, it may lead to the breakdown of trust in the employment relationship. Good faith is a well-recognised principle in South African employment law.
A common example of a conflict of interest is where an employee performs similar work for a competitor, or privately in their own name, while still employed and without the knowledge of their employer. In these cases, the real issue is often not only the outside activity itself. Instead, it is the employee’s failure to disclose it and the damage it may cause to the trust relationship.
How should employers deal with conflict of interest?
1. Verify the position immediately
As a first step, employers should ensure that all contracts of employment contain a clear conflict of interest clause. Employers should also support this with a proper disciplinary code. In this way, employees understand the standards expected of them and the consequences of acting against the employer’s interests.
It is important to note that conflict of interest is not usually a stand-alone act. It is often the result or consequence of the employee’s conduct. For that reason, employers should address both the conduct itself and the effect of that conduct during disciplinary proceedings. Any disciplinary response should still follow a fair disciplinary process in line with South African labour law.
Before taking action, the employer should investigate the facts properly. This includes establishing what happened, whether the employee disclosed the interest, whether there was actual or potential prejudice to the business, and whether the trust relationship has been damaged. A proper investigation is an important part of procedural fairness.
Where an employee acts against the interests of the employer, this may amount to a breach of their duty of good faith. Such conduct can undermine the trust relationship between the parties. If the conflict of interest is serious, it may render the employment relationship intolerable. In that case, this could justify disciplinary action, provided the employer follows the correct legal process.
Why clear rules matter
Clear rules, policies and contracts help employers show that employees were aware of what was expected of them. This can be important if the matter later becomes disputed. In addition, employers who align their internal rules with South African labour law and the Code of Good Practice: Dismissal are in a stronger position to manage disciplinary issues fairly and consistently.
When termination may become justified
If lawful work authorisation cannot be obtained within a reasonable period, termination may become justified because continued employment is no longer legally possible.
However, termination should follow only after a fair process has been completed. The employer should be able to show that it verified the facts, gave the employee an opportunity to respond, considered reasonable alternatives, and reached a reasoned outcome. The same 4 September 2025 Code of Good Practice: Dismissal is the best external process source to support this section.
Conclusion0
Although a conflict of interest can have a damaging effect on the employment relationship, it is important to remember that it arises from the employee’s conduct. The conflict cannot exist without the behaviour that caused it. Employers should clearly communicate expectations around loyalty, disclosure and acting in the business’s best interests. Clear rules and ongoing communication can help prevent disputes and ensure that, where they do arise, they are dealt with fairly, consistently and in accordance with labour law.
Should you require assistance with labour-related matters, conflict of interest issues, disciplinary procedures or workplace policies, contact your nearest SEESA office for professional guidance.
Prepare your business. Request a labour law risk assessment today. SEESA’s labour law consultants are ready to assist.