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I was doing some research when moonlighting came up and I remembered this post. This case may not be an excellent example of the touch and go type moonlighting, but it does give a commisioners viewpoints and some more case references. Please note this is the actual commisioners report and I have no personal role in the writings below. if anyone would like the full case or any referred to drop me an email I will be more than happy to forward to you.
Commissioner: Sean Molony
Case No.: KN18726-03
Date of Award: 2-Feb-2004
In the arbitration between:
Mr R Naidoo Employee party (Applicant)
and
Chamberlain Phipps cc Employer party (Respondent)
What was the rule which the Applicant was alleged to have contravened?
[1] [25] The Applicant’s case is that there was nom rule which he contravened. It is common cause that the Respondent has no disciplinary code.
[2] [26] The allegation in the notice to the Applicant was “you have failed to work in accordance with your obligations as an employee in that on 21st, 22nd and 25th August, you spent an unacceptable amount of time at Malvern Dry Cleaners during your normal working day”. At the commencement of the arbitration I understood the allegation to concern absence without leave. It soon became apparent that the substance of the allegation in fact concerned one of conflict of interest, and for that reason I put to both Kemp and the Applicant notes I had made on the law pertaining to a conflict of interest, to the effect that if the employee engages in additional employment outside working hours (so-called moonlighting) there will normally be no conflict of interest, unless the additional employment is carried on in competition with the employer or in some way encroaches upon the employer’s interests, with the emphasis on the last phrase. At no stage was there ever any dispute or question from either representative, that I had incorrectly understood the allegation, and for that reason I find that the real reason for the dismissal of the Applicant is that he was alleged to have acted in conflict with the interests of his employer.
Did the Applicant act in conflict with the interests of his employer?
[3] [27] In this matter the alleged conflict of interest arose because of the time spent by the Applicant at the Malvern Drycleaners, his wife’s business. The question is whether he did in fact spend the time as alleged.
[4] [28] The video and Gilmore’s evidence establish that the Applicant did what the Respondent alleged.
[5] [29] The Applicant’s defence was that he was on his lunch time, which was disputed by the Respondent, but this left him in the difficult situation of having to explain a one hour twenty minute lunch on 21 August, one hour thirty on 28 August, and his trips to pick up a learner, and to the TAB on the 22 August. His response was that with all the overtime and effort he had put in to the business over the years of his employment, he was entitled to the extra long lunches.
[6] [30] The question is whether the Applicant’s conduct amounts to a conflict of interest.
[7] [31] The rule that an employee may not compete with his employer arises from the common law requirement that an employee act in good faith, and therefore owes a fiduciary duty to the employer which involves an obligation not to work against the employer’s interests [13]. This has been further interpreted as requiring the employee to devote his time, energy, and skills to further the interests of the business of the employer [14]. What this means is that an employee is prohibited from
· · involvement in another business which competes with his employer’s business [15]. The element of competition makes this form of breach of the duty of good faith particularly serious, and dismissal would therefore be appropriate [16]. In SALSTAFF obo van Niekerk and South African Airways [17] where the employee divulged information to a company owned by his wife thereby giving her an unfair advantage when tendering with employer, the arbitrator found that a conflict of interest arose and the employee’s dismissal was held to be fair. In FAWU obo Maleke and South African Breweries [18]the employee set up a recruitment agency for his own account, and then recruited the employer’s workers. The arbitrator was of the view that the employee’s actions were “those of an active member of a company which he had co-founded and that through his actions he was directly in conflict with the best interest of his employer. He sought to deprive, for his own benefit, his employer of employees whom it had trained, developed and compensated for their services…. [he had ] acted in conflict with the company and that this caused a breach in the relationship of trust”.
· · having a business interest in another organisation which has dealings with the employer. Where an employee had an interest in a firm which supplied his employer with computer equipment, the Industrial Court found that there was a conflict of interests and as a result the employee had a duty to disclose his involvement with the supplier. The failure to do so breached the relationship of trust between parties, and the employee’s dismissal was found to be fair [19].
· · working for another person where his own interests are at odds with the interests of his employer. This form of the conduct can arise where despite the fact that there is no competition, there is nevertheless a conflict in the interests of the two parties. An example which illustrates the point is where there is a conflict between the employee’s participation in union activities, and the employee’s function as a manager to conduct disciplinary hearings [20]. A central fact which needs to be determined in order to show that the employee has breached this form of the rule, is when the employee works for the other person. Where the employee works for another person outside working hours no conflict of interest can arise unless the employer can show that the employee was competing with his business. Where the additional employment takes place during the normal working hours of the employee, a conflict of interest arises [21].
[8] [32] Applying the above, and in particular the previous statement of the law, I am of the view the Applicant’s conduct amounts to a conflict of interest. The evidence is that the Applicant was assisting in the conduct of his wife’s business which meant that he was not selling his employer’s goods. The Applicant’s assertion that he was doing this during his lunch time did not add to his credibility as a witness, nor did his statement that he deserved the time off due to his years of working overtime. The fact is that the Respondent is a small business operating in uncertain times in a sector which has shrunk dramatically under intense competition from overseas manufacturers, and every employee is required to pull his weight.
Is dismissal the appropriate sanction?
[9] [33] How serious is the Applicant’s misconduct? This is the question which I battled with during the arbitration and which I find difficult to answer even now. On the level of compassion and empathy, I find the sanction difficult to swallow - the Applicant has worked for the company for a long time, and he has been seriously ill. Kemp, however, was of the view that the Applicant’s conduct had breached the duty of trust and that he was no longer prepared to work with him. I suppose the difference between Kemp’s view and mine is that I do not have to work with the Applicant – his is based on business reasons, I perhaps focus on the personal impact of the sanction.
[10] [34] It is trite law that an arbitrator is entitled interfere with the sanction imposed by the employer only if the sanction is indefensible in terms of norms of industrial relations practice, and values that legal system was meant to uphold. The fact that I would not have imposed the same sanction is not the issue. Where the employee has an interest in another entity, the seriousness of the misconduct will depend on the degree of prejudice to the employer [22]. The seriousness in this case is that the Applicant’s conduct impacted directly on the financial viability of the business; the less sales calls which are made the less sales and income is generated. This is the angle which Kemp took, and I can find no fault with it.
[11] [35] I can therefore find no reason in law to interfere with the sanction imposed by the employer, and the sanction must accordingly stand.
Award.
[12] [36] For the above reasons I find that the dismissal of the Applicant is fair and the application is accordingly dismissed.
Dated at Durban on the 2 February 2004
Commissioner: Sean Molony
Case No.: KN18726-03
Date of Award: 2-Feb-2004
In the arbitration between:
Mr R Naidoo Employee party (Applicant)
and
Chamberlain Phipps cc Employer party (Respondent)
What was the rule which the Applicant was alleged to have contravened?
[1] [25] The Applicant’s case is that there was nom rule which he contravened. It is common cause that the Respondent has no disciplinary code.
[2] [26] The allegation in the notice to the Applicant was “you have failed to work in accordance with your obligations as an employee in that on 21st, 22nd and 25th August, you spent an unacceptable amount of time at Malvern Dry Cleaners during your normal working day”. At the commencement of the arbitration I understood the allegation to concern absence without leave. It soon became apparent that the substance of the allegation in fact concerned one of conflict of interest, and for that reason I put to both Kemp and the Applicant notes I had made on the law pertaining to a conflict of interest, to the effect that if the employee engages in additional employment outside working hours (so-called moonlighting) there will normally be no conflict of interest, unless the additional employment is carried on in competition with the employer or in some way encroaches upon the employer’s interests, with the emphasis on the last phrase. At no stage was there ever any dispute or question from either representative, that I had incorrectly understood the allegation, and for that reason I find that the real reason for the dismissal of the Applicant is that he was alleged to have acted in conflict with the interests of his employer.
Did the Applicant act in conflict with the interests of his employer?
[3] [27] In this matter the alleged conflict of interest arose because of the time spent by the Applicant at the Malvern Drycleaners, his wife’s business. The question is whether he did in fact spend the time as alleged.
[4] [28] The video and Gilmore’s evidence establish that the Applicant did what the Respondent alleged.
[5] [29] The Applicant’s defence was that he was on his lunch time, which was disputed by the Respondent, but this left him in the difficult situation of having to explain a one hour twenty minute lunch on 21 August, one hour thirty on 28 August, and his trips to pick up a learner, and to the TAB on the 22 August. His response was that with all the overtime and effort he had put in to the business over the years of his employment, he was entitled to the extra long lunches.
[6] [30] The question is whether the Applicant’s conduct amounts to a conflict of interest.
[7] [31] The rule that an employee may not compete with his employer arises from the common law requirement that an employee act in good faith, and therefore owes a fiduciary duty to the employer which involves an obligation not to work against the employer’s interests [13]. This has been further interpreted as requiring the employee to devote his time, energy, and skills to further the interests of the business of the employer [14]. What this means is that an employee is prohibited from
· · involvement in another business which competes with his employer’s business [15]. The element of competition makes this form of breach of the duty of good faith particularly serious, and dismissal would therefore be appropriate [16]. In SALSTAFF obo van Niekerk and South African Airways [17] where the employee divulged information to a company owned by his wife thereby giving her an unfair advantage when tendering with employer, the arbitrator found that a conflict of interest arose and the employee’s dismissal was held to be fair. In FAWU obo Maleke and South African Breweries [18]the employee set up a recruitment agency for his own account, and then recruited the employer’s workers. The arbitrator was of the view that the employee’s actions were “those of an active member of a company which he had co-founded and that through his actions he was directly in conflict with the best interest of his employer. He sought to deprive, for his own benefit, his employer of employees whom it had trained, developed and compensated for their services…. [he had ] acted in conflict with the company and that this caused a breach in the relationship of trust”.
· · having a business interest in another organisation which has dealings with the employer. Where an employee had an interest in a firm which supplied his employer with computer equipment, the Industrial Court found that there was a conflict of interests and as a result the employee had a duty to disclose his involvement with the supplier. The failure to do so breached the relationship of trust between parties, and the employee’s dismissal was found to be fair [19].
· · working for another person where his own interests are at odds with the interests of his employer. This form of the conduct can arise where despite the fact that there is no competition, there is nevertheless a conflict in the interests of the two parties. An example which illustrates the point is where there is a conflict between the employee’s participation in union activities, and the employee’s function as a manager to conduct disciplinary hearings [20]. A central fact which needs to be determined in order to show that the employee has breached this form of the rule, is when the employee works for the other person. Where the employee works for another person outside working hours no conflict of interest can arise unless the employer can show that the employee was competing with his business. Where the additional employment takes place during the normal working hours of the employee, a conflict of interest arises [21].
[8] [32] Applying the above, and in particular the previous statement of the law, I am of the view the Applicant’s conduct amounts to a conflict of interest. The evidence is that the Applicant was assisting in the conduct of his wife’s business which meant that he was not selling his employer’s goods. The Applicant’s assertion that he was doing this during his lunch time did not add to his credibility as a witness, nor did his statement that he deserved the time off due to his years of working overtime. The fact is that the Respondent is a small business operating in uncertain times in a sector which has shrunk dramatically under intense competition from overseas manufacturers, and every employee is required to pull his weight.
Is dismissal the appropriate sanction?
[9] [33] How serious is the Applicant’s misconduct? This is the question which I battled with during the arbitration and which I find difficult to answer even now. On the level of compassion and empathy, I find the sanction difficult to swallow - the Applicant has worked for the company for a long time, and he has been seriously ill. Kemp, however, was of the view that the Applicant’s conduct had breached the duty of trust and that he was no longer prepared to work with him. I suppose the difference between Kemp’s view and mine is that I do not have to work with the Applicant – his is based on business reasons, I perhaps focus on the personal impact of the sanction.
[10] [34] It is trite law that an arbitrator is entitled interfere with the sanction imposed by the employer only if the sanction is indefensible in terms of norms of industrial relations practice, and values that legal system was meant to uphold. The fact that I would not have imposed the same sanction is not the issue. Where the employee has an interest in another entity, the seriousness of the misconduct will depend on the degree of prejudice to the employer [22]. The seriousness in this case is that the Applicant’s conduct impacted directly on the financial viability of the business; the less sales calls which are made the less sales and income is generated. This is the angle which Kemp took, and I can find no fault with it.
[11] [35] I can therefore find no reason in law to interfere with the sanction imposed by the employer, and the sanction must accordingly stand.
Award.
[12] [36] For the above reasons I find that the dismissal of the Applicant is fair and the application is accordingly dismissed.
Dated at Durban on the 2 February 2004
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