Disclosing your ‘side-hustle’/ side business to your employer
Article written by Erin Gradidge, checked by Divina Naidoo, Associate and released by Chantelle Gladwin-Wood, Senior Partner at Schindlers Attorneys
13 July 2022
BODY OF ARTICLE:
The fiduciary duty of good faith placed on employees to act in the best interest of the employer extends to disclosure of side businesses operated by the employee especially where a conflict of interest may arise.
In the case of Bakenrug Meat (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration & Others, an employee found guilty of dishonesty because she failed to disclose to her employer that she was operating a side-line business. Which led to her subsequent dismissal.
The employee, also cited as the Third Respondent, Ms. Hough, was employed by Joostenberg Meat (the “Appellant”) in this the appeal case heard in the Labour Court, as a sales representative for the company which produced and sold meat products. Ms. Hough had a formal business which she operated from a rented premises and sold a meat product, biltong. When her employer discovered her side-line business, she was dismissed for dishonesty based on the fact that she had not informed her the Appellant of her side-run business and as a result of the side-run business, was unable to give her full attention to the job that the Appellant had employed her to do.
Ms. Hough referred the dismissal to the Commission for Conciliation, Mediation and Arbitration (“CCMA”). It was found that the Third Respondent, Ms. Hough, did have an obligation to inform her employer of her side business and that it was for the employer to decide whether a conflict existed. Her non-disclosure of her side business was deemed to be dishonest, and the CCMA found her dismissal to be substantively fair.
Ms. Hough launched a review application in the Labour Court where it was held that due to her business only being run on the weekends, it was acceptable to run this business and not disclose same to her employer as it did not interfere with her work that she was employed by Appellant to do. It was also found that there was no conflict of interest as, at the time of her employment, as the Appellant did not sell specialise in selling the specific meat product that being biltong in this regard, thus Ms. Hough had no duty to inform her then employer. The arbitration award was then set aside.
Labour Court of Appeal
On appeal in the Labour Court of Appeal (“LAC”), Joostenberg Meat argued that Ms. Hough did have a duty of good faith to disclose her side business to her employer despite her side business not being identical to her employer’s. The LAC held that in operating the side business, it was insignificant that it did not interfere with Ms. Hough’s work that she was employed by Joostenberg Meat to do. The LAC found that operating a side business in a market like that of her employer, Joostenberg Meat was an essential and material fact that Ms. Hough should have disclosed to her employer. The LAC set aside the judgment of the Labour Court and arrived at the decision that the dismissal was substantively fair.
The duty of good faith owed by the employee to act in the best interest of the employer extends to an employee needing to inform his/her employer of a side business that may be a conflict of interest even though no real competition comes about. Not disclosing same would be unacceptable and grounds for dismissal based on dishonesty and an active violation of this duty of good faith.
It was held by the Labour Appeal Court that a dismissal based on non-disclosure of a side business operating in the same/similar market as the company the employee works for is a breach of the fiduciary duty of good faith. It is a ground for dismissal based on dishonesty and non-disclosure of a material fact that may cause a conflict of interest.