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employment

Conflict of interest in employment

Key Takeaway

A conflict of interest in New Zealand employment arises when an employee's personal interests or duties to another party conflict with their obligations to their employer. The Employment Relations Act 2000's good faith principle requires transparency and honest conduct, and specific laws like the Secret Commissions Act 1910 address related offences. Employers typically manage conflicts through employment agreements and policies.

Understanding Conflicts of Interest in New Zealand Employment

A conflict of interest occurs in an employment relationship when an employee's personal interests, or their duties owed to another person or entity, could potentially influence or be perceived to influence their actions or decisions in their employment, contrary to the interests of their employer. This may include situations where an employee could gain a direct or indirect personal benefit from their position, or where their loyalty is divided.

The Duty of Good Faith

The Employment Relations Act 2000 (ERA) establishes a fundamental obligation for all parties to an employment relationship to deal with each other in good faith [Source: Employment Relations Act 2000, s 4]. This duty applies to both employers and employees [Source: Employment Relations Act 2000, s 4(1)] and involves, among other things, being responsive and communicative [Source: Employment Relations Act 2000, s 4(1A)(c)] and not doing anything, directly or indirectly, to mislead or deceive the other party [Source: Employment Relations Act 2000, s 4(1A)(a)].

The principle of good faith implicitly requires employees to act honestly and with loyalty towards their employer, avoiding situations where their personal interests clash with their employer's. Failure to disclose or manage a conflict of interest can be considered a breach of this good faith obligation.

Contractual Obligations

Many individual employment agreements (IEAs) and collective employment agreements (CEAs) contain specific clauses that address conflicts of interest. These clauses often require employees to:

  • Disclose any potential or actual conflicts of interest to their employer.
  • Not engage in secondary employment or activities that compete with their employer or interfere with their duties.
  • Maintain confidentiality and protect the employer's proprietary information.

Breaching a term of an employment agreement relating to conflicts of interest can constitute a breach of contract [Source: Common Law, generally upheld in employment tribunals and courts, assessed under the framework of the Employment Relations Act 2000].

Statutory Provisions Addressing Corrupt Practices

Beyond the general duty of good faith and contractual terms, specific legislation directly addresses certain types of conflicts of interest that involve corrupt practices:

Secret Commissions Act 1910

The Secret Commissions Act 1910 aims to prevent employees and agents from accepting undisclosed benefits that could improperly influence their actions in their role. Under this Act:

  • An agent (which includes an employee) commits an offence if they corruptly accept or obtain, or agree to accept or obtain, from any person for themselves or for any other person, any gift or consideration as an inducement or reward for doing or forbearing to do any act in relation to their employer's affairs or business [Source: Secret Commissions Act 1910, s 3(a)].
  • It is also an offence to corruptly give or offer any such gift or consideration to an agent [Source: Secret Commissions Act 1910, s 4(1)].
  • A gift or consideration is deemed to be given corruptly if it is given or received without the consent of the principal (employer) [Source: Secret Commissions Act 1910, s 5].

Crimes Act 1961

Certain serious conflicts of interest can also fall under the Crimes Act 1961, particularly those involving bribery and corruption:

  • It is an offence for an official (which can include an employee of a public body or certain private entities) to accept a bribe [Source: Crimes Act 1961, s 105].
  • It is an offence to bribe an official [Source: Crimes Act 1961, s 106].
  • The Act also covers corruption and bribery of agents, where an agent corruptly accepts or agrees to accept any bribe for themself or any other person as an inducement or reward for acting or refraining from acting in relation to their principal's affairs [Source: Crimes Act 1961, s 217].

Employer's Response to Conflicts of Interest

When an employer becomes aware of a potential or actual conflict of interest, they have obligations under the duty of good faith to act fairly and reasonably. This generally involves:

  • Investigating the matter thoroughly and impartially.
  • Providing the employee with an opportunity to explain their position.
  • Considering any mitigation or proposed solutions from the employee.
  • Making a decision based on all available information, which may include requiring the conflict to be managed, removed, or, in serious cases, leading to disciplinary action up to and including dismissal [Source: Employment Relations Act 2000, s 103A, regarding justification for dismissal].

Any disciplinary action taken must be one that a fair and reasonable employer could have taken in all the circumstances at the time the dismissal or action occurred [Source: Employment Relations Act 2000, s 103A].

When to Seek Independent Legal Advice

Individuals facing issues related to conflicts of interest in their employment, whether as an employee or employer, should seek independent legal advice. This includes situations where there is uncertainty about an obligation, potential disciplinary action, or navigating complex ethical dilemmas. Further assistance can be obtained from official bodies like Employment New Zealand or through Community Law Centres for free advice at https://communitylaw.org.nz/.

Key Resources