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Is a Conflict of Interest Cause for Dismissal?

Whitten and Lublin | Sep 17, 2018

Being involved in a conflict of interest within an employment relation is grounds for dismissal. This is because an employee has an implied duty of loyalty and good faith when providing service so that the employer’s interests are protected. If an employee is engaged in a conflict of interest, the employee must disclose this to his/her employer. If the employer demands that the employee stops engaging in the conflicting behaviour, the employee must either comply or resign. Otherwise, the employer is justified in dismissing the employee.

A case that speaks to the inherent incompatibility that conflicts of interest create within an employment relation is Rodrigues v. Powell (OSCJ 2007). Rodrigues was a drywaller and occupied the position ‘Senior Business Representative’ of the Central Ontario Regional Council of Carpenters, Drywall and Allied Workers (CORC). Rodrigues also started a council for the same area (Toronto Area) for non-unionized drywall workers, in essence competing with his employer, the CORC, in organizing drywall workers in the area. He did this for a period of two years. Upon commenting, Justice Echlin stated:

It is incredible to believe that Rodrigues, who was being paid by CORC, and who owed a duty of loyalty, good faith, honesty, and the avoidance of conflict of duty and self-interest, would devote over 2 years promoting succession of Local 675 (the CORC local in the Toronto area which Rodrigues had represented)

Of course, in this instance, the conflict was closely related to the function Rodrigues held with his employer, the CORC. However, it highlights the incompatibility conflict of interest creates in an employment relation in light of an employee’s implied duty of honesty, loyalty and good faith. Specifically, when agreeing to provide service to an employer in exchange for compensation, engaging in conflicts of interest is undermining to the employers’ objectives in relation to competitors. The employer, at this point, simply cannot trust the employee to carry out their objectives in the best interest of the business. Employees engaged in conflicts of interest, therefore, violate their duty of good faith, which makes continued employment unfeasible.

Employers must also take note that in order to justly dismiss an employee for being involved in a conflict, dismissal would have to occur once the conflict is revealed. To condone the conflict would then make it more difficult to establish that the actions were incompatible with the conditions of employment. An employer, therefore, must make it known that the conflict is not acceptable, and either demand it stops or dismisses the employee.

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