Conflict of Interest: What Employees Need to Know

Stealing office supplies: bad. Stealing confidential information: worse.

All employees should know how to identify a conflict of interest when they see one – do you?

In my previous post I emphasized that it is not just high-profile politicians who have to pay attention to conflict of interest policies and ethics. All employees have a legal duty to serve their employers with good faith, loyalty and fidelity; this duty includes an obligation that employees not engage in activities that conflict with the interests of their employers.
 
So what is a conflict of interest? A conflict of interest exists when your personal interests or those of a “related party” could influence your decisions or impair your ability to act in the best interests of your employer. (“Related party” means your family, partner, close friends, a business in which you hold a significant interest, or anyone to whom you owe an obligation.) As recent news shows, a perception of conflict can be as disruptive as an actual conflict of interest.

Actual or perceived conflicts of interest undermine the confidence of anyone who wants to do business with you. Why, for example, would a contractor spend time and money to develop a bid if he thought you would award the contract, not on merit, but on some undisclosed personal interest of yours? Ultimately, bidding processes suffer if bidders drop out because process is not fair. You’ll end up paying higher prices from your favoured bidder.

Employees should immediately disclose a conflict of interest or potential conflict to their managers. Full disclosure enables employees to resolve unclear situations and gives an opportunity to dispose of conflicting interests before difficulty arises.
 

Conflict of Interest Guidelines

Many employees have outside business interests. This is okay and will not breach their duty of loyalty and fidelity as long as the employee follows a few guidelines:
 

• -Don’t use your employer’s tools, information, systems or equipment for personal business.
• -Don’t work on your personal business matters at the expense of the time required for your employment.
• -Don’t set up a business that competes with your employer.
• -Be careful that you don’t embark on a business that might embarrass your employer or be seen to be contrary to the mission of your employer.
• -Do let your employer know what you are doing – full disclosure is the best protection against claims that you used your employment position for personal gain.

Sometimes the personal business activity pre-exists the employment relationship, so be sure to disclose the business activity at the outset to ensure that your employer does not have a problem. If necessary, rules or systems can be set up to preclude any problems arising in the future.  

Not all conflicts of interest are easy to identify; often all we get is a bad feeling that something is not quite right about a situation. If in doubt, speak to your employer. Many of the situations in the news might have been avoided if the individual had made full disclosure of the situation that created the perception of conflict.

In my next post, I’ll talk about what employers should have in their conflict of interest policies and how best to ensure the policies and procedures for reporting conflicts are well-known and effective.
 

This blog is written by Nicole Byres of Clark Wilson LLP and made available by BCBusiness to provide general information on employment law, and is not a substitute for competent legal advice from a lawyer licensed to practice in your jurisdiction. Neither the reading of this blog, nor the sending of unsolicited comments or emails creates a lawyer-client relationship with the writer or Clark Wilson LLP.