Looking out for No. 1

Employers can take action against employee conflicts of interest - with a good policy

Looking out for No. 1

The employment relationship requires a certain level of trust between the employer and the employee. How high that level is depends on the nature of the work and the employer – an employee who works mostly on their own, or one working with the public with health or safety responsibilities, working with money and confidential information would, of course, need a higher level of trust than many other types of workers.

But what happens if that trust is breached, or at least shaken?

One of the ways that trust in an employee can be broken is when a conflict of interest arises. Some employers have restrictive covenants that prevent employees from doing things like competing with the employer or soliciting clients for a certain amount of time after termination employment, but what about when they’re still with the company.

That’s where it’s important to have policies making it clear that employees shouldn’t be doing anything that could lead to a conflict between the employer’s interests and their own.

There are many types of situations that can lead to a conflict of interest. A recent case before the Ontario Labour Relations Board is an example. An employee became involved in a startup company that offered similar services as his employer. The startup never really got going, but it was incorporated and had a website offering its services, with the employee listed as a director.

The employer had clear policies – upon which the employee was trained – requiring employees to disclose both conflicts of interest and potential conflicts of interest. These policies allowed the employer to dismiss the employee for cause without severance pay for his serious, wilful misconduct.

High bar for conflicts of interest in public sector

Public-sector employees in particular have to be careful about conflicts of interest, as their employers rely on public perception of impartiality. The Canadian Public Sector Labour Relations Board upheld a 10-day suspension to an employee of the Canadian Food Inspection Agency for moonlighting for a meat exporter. Although the employee worked for the exporter while on leave from the agency, the agency had warned him about a perceived conflict of interest and it had a code of conduct that clearly defined it.

The board noted that the reputation of the agency depended on an arm’s-length relationship with the industry that it regulates, at all times.

Another public-sector employee, this one in Ontario, was a child protection worker who was suspended and then terminated for violating his employer’s confidentiality and conflict-of-interest policies. The worker conducted an investigation into allegations of family violence involving the husband and daughter of one of his supervisors with whom he had a strained relationship. The daughter was also a friend of his own sister.

An arbitrator upheld the termination, finding that the worker didn’t follow conflict-of-interest policies that required him to refer the matter to another supervisor rather than handling things himself.

Employers can help smooth matters over and avoid potentially messy situations by reminding employees of such policies and hope the employee is reasonable about it. This happened several years ago when a Toronto bus driver was elected as a councillor in a nearby city and planned to do both jobs.

However, the transit agency had a policy requiring employees to take a leave of absence to run for public office and, if they won, their employment would end. The bus driver claimed to have not been aware of the policy but the agency informed him it was to avoid conflict of interest. The employee chose to keep his job and withdrew from the councillor position with no further action by the employer.

Overzealous enforcement of policies

However, although employers want to make sure they avoid potentially damaging conflicts of interest with employees, they have to be careful not to be overzealous in policing it. Canada Post found that it overdid it when it denied an employee access to a leadership development program. The employee’s manager acknowledged that she would be a good candidate for the program except for her “personal situation” or she worked in another facility – her husband was the operations superintendent for the worker’s shift.

Eventually, her application for a position that wouldn’t report to her husband was approved, but by then she had missed the program, which was later cancelled. The Canadian Human Rights Tribunal found that Canada Post discriminated against the worker based on her family status and it could have accommodated her if the conflict-of-interest issue became a problem.

An Ontario restaurant also went too far when it terminated the employment of a manager who bought interest in a new bar. The restaurant’s owners were worried that employee would use his connections to get bulk inventory deals for the bar or steal customers, so they terminated his employment.

However, the employer had no evidence that the employee directly competed or stole anything from the restaurant for his bar and there was no policy preventing such activity, so it turned out to be a wrongful dismissal.

Conflicts of interest can create serious problems that can breach trust between employers, employees, and even the public, so it’s something employers should be ready to address. A clear, concise policy that’s explained to employees can go a long way in both avoiding conflicts or dealing with them properly – and identifying when it actually is a problem and when it isn’t.

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