What You Need to Know About Employee Conflicts of Interest in the Workplace

This article will explain what you, as an employer, need to know about employee conflicts of interest in the workplace. It will explain what conflict of interest is, its effect on your business and how to prevent it.

What is a Conflict of Interest in the Workplace?

In the context of employment, a conflict of interest is where a member of staff has an interest of some kind that does not align with the interests of your business. A conflict of interest may either be:

• actual — where there is an active conflict of interest; or
• probably — where there is a chance of a conflict of interest emerging at a later date.

Examples of conflicts of interest in the workplace include your employee:

• receiving bribes from clients in exchange for preferential treatment;
• using company property for their own personal use, especially where it is for a commercial purpose other than furthering the course of your business;
• soliciting your clients for another enterprise;
• trading confidential trade secrets to a competitor; and
• making decisions based on personal motivations rather than the needs of the business.

What is the Effect of Conflicts of Interest in the Workplace?

An actual conflict of interest frequently jeopardises your business’ position. For instance, your business may be deprived of revenue it was otherwise owed. 

Alternatively, or in addition, implicated employees may be using business resources inefficiently, thereby increasing your expenses. 

Such employees may also make decisions that increase your business’ risk of legal and financial liability.

Ways to Prevent Conflict of Interest in the Workplace

Employment Contracts 

You may wish to incorporate a term in any employment contract that forbids an employee from engaging in certain activities that increases the risk of a conflict of interest, subject to your consent. For instance, you might ban any employee from holding shares in another company or acting as a company director.

If they breach this term, it will improve your legal position if you wish to terminate their position or take further legal action. 

You should consult a solicitor who can advise on how best to draft the provision, as well as how best to amend any existing contracts.

Conflict of Interest Policies

You should have a conflict of interest policy to prevent conflict of interest from occurring in your workplace and deal with it effectively. This workplace policy allows you to clarify what you consider a conflict of interest and how you will deal with it if and when a conflict arises. 

Your policy should encourage employees to disclose any conflicts in advance and inform them of the process for doing so. For example, the policy may detail who they should speak to about it. 

As with all your company policies, your conflict of interest policy must be communicated clearly to your staff and be easily accessible.

There are also other ways you can try to prevent conflict of interest from occurring in your workplace, such as by:

• training managers to spot conflict and report it;
• training all staff on your business code of conduct and ethics; and 
• actively encourage staff to report potential instances of conflict of interest.
  

Ways to Deal With Actual Employee Conflict of Interest

When preparing a response to an active, ongoing instance of employee conflict of interest, you should consider:

• the nature of the conflict; 
• if there was any intent or if the conflict is accidental; 
• the extent of any voluntary disclosure; and 
• the potential impact of the conflict of interest on your business.

Once you have assessed the circumstances of the breach, you may deal with the conflict of interest in one of the following ways:

• informally with your employee where you resolve the issues by your employees ceasing the conflict of interest;
• formally with your employee where you ask them to stop the conflict of interest, or you will no longer allow them to work for you;
• dismissing your employee; or
• taking legal action against your employee.

Where the conflict is particularly egregious, it may be gross misconduct and therefore grounds for dismissal. 

Key Takeaways

Employment conflicts of interest in the workplace can arise in numerous ways. You should ensure you know how to spot a conflict of interest and what efforts you can take to prevent it. Employers commonly include terms in employment contracts restricting activity that increases the risk of any employee conflict of interest. Likewise, you should have a comprehensive workplace policy that sets out any additional obligations, such as reporting conflicts. 

If you need help understanding conflict of interest in the workplace in England, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

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