THE INTERPLAY BETWEEN LABOUR LAW AND THE ENTREPRENEURIAL AMBITIONS OF EMPLOYEES

Jacqui Reed was recently interviewed on South African radio station Kaya FM to discuss the interplay between labour law and the entrepreneurial ambitions of employees. The discussion elaborated on some of the issues employees need to consider prior to pursuing interests unrelated to those of the business for which they work.

Importantly, one must be aware of the differences between common law and contractual law as a contract of employment may not disclose every duty attendant on an employee upon joining an organisation; some duties may still apply to the employee because of the common law. Therefore, though a contract of employment may not explicitly state that you may not use working hours for activities unrelated to the business of the organisation, there is a duty which is placed on an employee in terms of the common law to act in the employer's best interests. The common law places a fiduciary duty on every employee to act in good faith once joining an organisation and this is a duty which applies regardless of whether the contract of employment explicitly provides for it.

Interesting to note is that despite these duties not being explicitly mentioned in the contract of employment, failure to act in good faith is viewed as breach of contract and can lead to disciplinary action which may result in dismissal, depending on the severity of the breach of contract.

Five key takeaways from the interview:

1. Each employee has a fiduciary duty to act in good faith towards the employer regardless of whether any specific duty has been expressly or impliedly included in the contract of employment
2. It is important to disclose any potential conflicts of interest that may arise between your personal endeavours and those of the business. Where you are unsure that any conflicts exist, an employee has the important obligation to find out if their interests could conflict with those of the business
3. The obligation to act in good faith is a strict rule and there are limited exceptions which can be raised to this duty. The only possible exception is consent once full disclosure has been made to the employer about your interests or pursuits.
4. The obligations differ depending on your level of seniority. However, generally, employees are required to familiarise themselves with the business conduct and ethics requirements of their organisations as ignorance of these policies will not absolve an employee from the consequences of their actions. Where these policies do not exist or cannot be easily accessed, the employee must raise this with the employer
5. Where an employee has failed to disclose all necessary details and becomes aware of interests or activities that may conflict with those of the employer, the best course would be to admit this non-disclosure immediately and find out what steps the employee should take. Acting in this manner could be a factor that mitigates against your dismissal depending on the nature and gravity of your non-disclosure.

The employment relationship is built upon trust and the common law duty to act in good faith exists to assist in upholding and protecting this trust. It is therefore crucial to always remain aware of your duty to act in good faith and to disclose fully and request permission should your personal interests conflict with  those of the business. Where you have not managed to disclose for whatever reason, apologise, and disclose immediately once you have become aware of the possible conflicts.

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For more information, please contact Jacqui Reed or your usual Herbert Smith Freehills contact