Bakenrug Meat (Pty) Ltd t/a Joostenberg Meat // CCMA & 2 Others [2021] (LAC)

In this day and age it is not uncommon for individuals to have full time employment and side-hustles. These side-hustles are often with a view to making extra money to substitute their permanent employment income. While this may not normally be an issue, what is the position when the side-hustle is very similar to the employment of the individual? Could this result in a conflict of interest? This potential conflict of interest, and the employee’s duty to inform their employer of the potential conflict, was addressed in this LAC judgment. 

Background:

Mrs. Hough was employed, in October 2013, as a sales representative with Joostenberg. Joostenberg’s main business function was selling cold meat products. During her employment she ran a business which sold dried meat products (“biltong”). At the time Joostenberg was not selling biltong but commenced such biltong sales during September 2016.   

Mrs. Hough was dismissed on 10 October 2016 for, inter alia, dishonesty and not informing her employer of the potential conflict between her business and her employment. She referred a dispute to the CCMA. 

CCMA Arbitration:

The CCMA commissioner held that Mrs. Hough’s dismissal was substantively fair for the following reasons –

1. She operated a business, which also marketed and sold meat products, with a full time employee. Joostenberg should at least have been made aware of this fact so it could determine whether or not her business was in conflict with that of Joostenberg;

2. She chose not to tell Joostenberg of her business and it was dishonest to do so;

3. The effect was that she could not give her full attention to her duties with Joostenberg and she had previously been told she was not sufficiently performing her duties; and

4. While she believed Joostenberg knew of her business, it was not an acceptable excuse to justify her not informing Joostenberg of her business and the potential conflict.

Labour Court:

Mrs. Hough thereafter launched a review application where the LC reviewed and set aside the arbitration award based on, inter alia, the following – 

1. She only ran her business on weekends;

2. She was not employed by Joostenberg twenty-four hours per day;

3. There was no nexus between her performance for Joostenberg and the running of her business;

4. The commissioner had arrived at a conclusion which no reasonable decision-maker could have reached, namely that the evidence did not sustain the charge that she “took on employment whilst you were also working in another capacity.”.

Labour Appeal Court: 

Joostenberg took the matter on appeal and argued that Mrs. Hough in her capacity as an employee owed it a duty of good faith in that anything she did which was incompatible with her duties as an employee would justify her dismissal. Mrs. Hough testified that she would have ceased selling biltong if Joostenberg had instructed her to do so. Joostenberg alleged that her testimony portrays that (i) she was aware that she was competing with her employer; and (ii) that she owed her employer a duty of good faith.

The LAC took a dim view of the LC decision as it portrayed that “… there is no duty of an employee to inform an employer about a potential conflict of interest.”. It was held by the LAC that the evidence clearly showed that she failed to disclose an essential and important fact that she was running a “side-line business” in the sale of meat products which is a violation of her duty of good faith towards her employer regardless of when she ran the business, or that her work performance with Joostenberg may or may not have suffered.

LAC further held 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 results” is unassailable and the commissioner had reached a reasonable conclusion. There was no basis on which the LC should have interfered and the appeal succeeded. The LC review was dismissed leaving the decision of the commissioner standing, i.e. Mrs. Hough dismissal had been substantively fair.   

In conclusion, where there may be a potential conflict of interest regarding a side-hustle and permanent employment, the duty of good faith rests on the employee to inform the employer of the side-hustle. The employer would then be in a position to reasonably determine whether or not this side-hustle may in fact be a genuine conflict of interest.

Candace Bachmann – Associate Attorney

Justine Del Monte & Associates Incorporated