A conflict of interest in the workplace occurs when an employee’s ability to make decisions or judgments is compromised by personal interests.

Conflicts of interest manifest in various ways. For instance, doing consultancy work for an organization that is a competitor of the employer undermines the trust and loyalty expected of an employee and may lead to a breach of confidentiality and competitive advantage for the rival company.

Another manifestation is when an employee engages in or has competing business interests with his employer. This may be the case when an employee starts a business in the same line of business as that of his employer.

In the case of Ng’ang’a v Rubis Energy Kenya PLC Formerly Kenol Kobil Limited (Formerly KENOL KOBIL LIMITED) (Cause 1296 of 2017) [2023] KEELRC 2381 (KLR) (28 September 2023) (Judgment), the claimant was summarily dismissed for gross misconduct arising from a conflict of interest. He incorporated Super Vision Investment Company, which ran the National Oil Station in Ol Kalau. The Respondent employer was engaged in petroleum production, manufacturing, transportation and marketing, which was quite similar to the Claimant’s company’s activities. The Court found that the employer’s action of terminating the employee’s contract was justified.

Trading company or organization secrets to competing businesses is also a conflict of interest.

In the case of SBI International Holdings Ag (Kenya) v Amos Hadar [2015] eKLR, the Claimant sought interim orders prohibiting the Respondent from disclosing the Claimant’s trade secrets and other confidential information. The Claimant argued that the Respondent breached his duty under the employment contract by getting involved in companies that competed with the Claimant and using his position to further the interests of those companies.  The Respondent had taken up shares and become a director of a different company, which was contrary to the terms of his employment contract. Clause 2.2 of his employment contract provided that: “The employee shall devote all his time, energy and ability to the execution of his work, and he shall not, directly or indirectly, engage in any other or additional work or business whatsoever in the Country of Service or elsewhere, during the term of his employment.” The Court found that the Respondent knowingly breached an express term of his employment contract.

Conflicts of interest often lead to serious disciplinary actions, potentially culminating in the termination of employment contracts or summary dismissal. While conflict of interest is not specifically classified as an act that constitutes gross misconduct under Section 44(4), the grounds listed in Section 44 are not an exhaustive list. They complement the broader provision of Section 44(3), which stipulates that summary dismissal may ensue when the employee has, by his conduct, fundamentally breached his obligations under the contract of service.

In the case of Ng’ang’a v Rubis Energy Kenya PLC, Formerly Kenol Kobil Limited (supra), the Court held that gross misconduct may consist of activities undermining the trust and honesty between the employer and employee. In that case, the Claimant alleged that he was unfairly terminated as there were no justified reasons for his summary dismissal. The Respondent’s position was that the Claimant was involved in the selling and buying of fuel at Ol Kalou under National Oil Company, which is in the same trade as his employer. The Claimant did not dispute these assertions. The Court found that he had breached the contract and the Respondent’s conflict of interest policy by acting contrary to the contract and the policy, which justified the summary dismissal.

To curtail/manage conflicts of interest in the workplace, many employers have established internal control mechanisms, including;

• Declaration forms. Most employers require employees to fill in and sign declaratory forms declaring any potential conflict of interest. Non-disclosure of a conflict of interest could lead to the termination of employment.
• Some employers have mechanisms for employees to report conflicts of interest.
• Terms of engagement. Some employers include clauses in employment contracts prohibiting employees from engaging in activities that constitute a conflict of interest.

However, even in the absence of a contractual clause, an employee has an implied duty to act in good faith.

Researched and compiled by Tonny Arisi, Legal Intern. For further advice on any matters raised, please feel free to contact us.