In this case, the former employee, Ms Hough, was employed as a sales representative at Joostenberg Meat, which produces and sells a variety of meat products. Unbeknownst to her employer, Hough also ran a side hustle, her own company which ostensibly marketed and sold biltong. When her employer discovered the side hustle it brought disciplinary allegations against her. The gist of the allegations was that she had failed to inform her employer that she ran a business of her own in the meat trade and, as a result of her focus on this business, neglected to give her full attention to her duties with her employer. Hough was found guilty of the allegations and dismissed.
Hough referred an unfair dismissal dispute to the Commission for Conciliation Mediation and Arbitration. The evidence before the Commissioner was that Hough operated a formal business, with at least one full-time employee, from a rented premises. Hough could not give her full attention to her duties. Her employer had in fact communicated her poor performance to her on various occasions. Unsurprisingly, the Commissioner found there was an obligation on Hough to inform her employer of her side business so that it could decide whether this was a conflict or not. Her decision not to do so was dishonest and unacceptable.
Conflict of interest and duty of good faith
Unhappy with the award, Hough launched a review application in the Labour Court. The Labour Court reasoned that Hough mainly ran her business on weekends. The court found that this was acceptable as Hough was not employed by her employer for 24 hours every day and because the business was run on a weekend, it could not affect her work performance. The court further considered that, while there was some dispute about whether Hough’s business sold more than biltong products, Joostenberg Meat only started selling biltong after the allegations were brought against Hough. The Labour Court reviewed and set aside the arbitration award. Its approach seems to have been that there was no actual conflict of interest and that there was no duty on the employee to inform the employer of a potential conflict of interest.
Joostenberg Meat took the judgment on appeal. Relying on the judgment of Sappi Novo Board (Pty) Ltd v Bolleurs [1998] (19) ILJ 784 (LAC), Joostenburg Meat argued that Hough had a duty of good faith towards her employer. Accordingly, anything done by her which was incompatible with her duties as an employee would justify her dismissal. The evidence before the court was that Hough had testified that she would have stopped selling biltong if she had been instructed to do so by her employer. Counsel for Joostenberg Meat argued that this showed that she was aware that she was competing with her employer and that she owed her employer a duty to disclose her outside business interests. To make matters worse for Hough, she had previously concealed her interest in her business when completing her income form. She declared only her Joostenberg Meat salary and maintenance payments by her ex-husband as income. In line with Schwartz v Sasol Polymers and Others [2017] 38 ILJ 915 (LAC) counsel for Joostenberg Meat argued that the dishonest non-disclosure of a material fact justified a dismissal and a calculated silence in the face of a duty to inform her employer of a material fact amounted to fraudulent non-disclosure.
The Labour Appeal Court found that the evidence showed that Hough had failed to disclose an essential and important fact that she was running a side business even though she may not have been trading in the identical meat products sold by her employer. Whether this affected her work performance was irrelevant. It found that the conclusion reached by the Commissioner that “employees act in bad faith if conflict of interest may arise even though no real competition actually exists” was unassailable. The Commissioner’s finding that Hough had acted in a dishonest and unacceptable manner was a reasonable conclusion, and the appeal was granted.
This judgment by the Labour Appeal Court brings some welcome clarity to the debate about whether there can be a conflict of interest where there is no direct competition between an employee’s side hustle and the business of the employer. An employee has a duty of good faith to their employer. This would include a disclosure to their employer of any outside interests. Where an employee fails to disclose material activities to an employer, they act in violation of the duty of good faith towards their employer and may be dismissed.
