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 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.
What qualifies as a conflict of interest?
A conflict of interest occurs when an employee’s outside commitments or personal ventures start to pull against the duty of loyalty built into every written employment contract. Sometimes the conflict is obvious, such as doing work for a competitor. Other times it is more subtle, such as relationships or opportunities that influence how decisions are made at work. The key issue is whether the employee’s judgment has been influenced in a way that affects their obligations under the employment relationship.
Is conflict of interest illegal in Canada?
A conflict of interest is not a criminal matter, but it can amount to misconduct under employment law. If the conflict is serious and undermines the trust required for the employee to perform their role, an employer may treat it as just cause for dismissal.
What are the four types of conflict of interest?
The most common types of conflict of interest involve:
- Competing employment or outside business activity.
- Use of confidential information for personal or external benefit.
- Decisions influenced by personal gain or relationships.
- Situations placing the employee in dual roles where impartiality is compromised.
What are the consequences of a conflict of interest?
Consequences depend on the seriousness of the conflict. Minor issues may be corrected through disclosure and direction. More significant conflicts can lead to discipline or termination. A just-cause dismissal is only upheld when the conflict strikes at the core of the employment relationship and leaves no reasonable path for continued employment. If the employer reacts disproportionately or without adequate investigation, the dismissal may be treated as without cause, which restores the employee’s entitlement to severance.
What are the three elements of a conflict of interest?
A conflict of interest generally involves three elements working together. First, there is the duty of loyalty that exists within every employment relationship. Second, there is a competing personal or financial interest that has the potential to influence the employee’s judgment. Third, there is conduct that brings those interests into actual or potential conflict. When these factors are present, the employer must assess whether the employee can still meet the expectations of the role and whether the employment relationship remains workable.
What is considered the most common type of conflict of interest?
The most common issue is participation in a competing business. This includes activities that divert opportunities, undermine the employer’s commercial interests, or rely on information gained through the job. The Rodrigues decision demonstrates this clearly: the court found that promoting a rival organization while serving in a senior representative role created a direct and ongoing conflict that the employment relationship could not withstand.
When Conflict of Interest Concerns Start to Change the Tone at Work
When questions about a conflict of interest start circulating at work, the tone of the relationship can shift quickly. An employee may feel judged before they understand the concern, and an employer may react out of worry rather than clarity.
One conversation can shift how a manager views your decisions, your access to information, or your future with the company. Employees often feel on the defensive before they have had a fair chance to explain what happened. Employers worry about risk and exposure. The uncertainty alone can be destabilizing.
These moments call for measured guidance, not assumptions. At Whitten & Lublin, we take the time to understand what actually occurred, how the employer responded, and whether the situation truly supports a cause dismissal.If you’re dealing with conflict-of-interest concerns or the fallout from a termination tied to these issues, you can speak with an employment lawyer from our team at (416) 640-2667 or connect with us online when you’re ready. We’ll take a close look at the situation and help you understand where you stand.
