Conflict of interest in the workplace refers to when a staff member takes part in an activity (circumstance, arrangement, or relation) which brings them benefits that are contrary to their employer’s. In other words, each party’s personal gains are at odds with each other.
If an employee has a conflict of interest, it usually affects their judgement or decision-making at work, their job duties, or their loyalty to the employer.
The workplace is one of the most common places where a conflict of interest can occur.
Examples of Workplace Conflicts of Interest
Romantic: when two parties are romantically involved and the relationship itself conflicts with the workplace, employer, or another employee’s interests.
For example, an employee dates his or her supervisor and receives special treatment, not because of his or her professional qualifications, but because they are dating. They both have a romantic interest, but it goes against the company policy to grant special privileges that are not fairly earned (thus conflicting with the employer’s interests).
Another example would be an employee dating a company client. As a result of the relationship, the employee’s judgement is affected and they may offer them deals that other clients would not normally receive—which is at odds with the employer’s interests.
Relational: similar to the romantic examples, relational conflicts of interest are when a business owner hires a family member for a job and gives them bonuses or favoritism (referred to as nepotism). This can also occur when an employee suggests or has a role in hiring a relative’s company to do work for the business.
There are several financial conflicts of interest where a worker stands to gain financially from their activities. Some examples include:
- When an employee owns a portion of a business that their employer does business with.
- When an employee sends their employer’s customer to another business where they are employed or own a portion of.
- Providing consulting services on the side to a customer of the employer.
- When an employee accepts a gift from a customer in exchange for something, such as discount, on the employer’s goods or services.
- Exercising decision-making power about a purchase or business choice that will affect a business that the employee has a stake in.
- Any use of a company’s resources for personal profit, such as information, technology, supplies, goods, etc.
Competition & Confidentiality
Serious conflicts of interest in the workplace involve working with a competitor (either as an employee or contractor) or revealing information, such as trade secrets, to a third party.
If an employee starts a business in their spare time that competes with their full time employer or uses skills that they learned at their job to start a competing business, this could also constitute as a direct clash of interests.
These are just a few examples of the various types of workplace conflicts of interest. There are several other questionable scenarios that would call for investigation.
Usually an employee will sign an Employment Contract that contains a non-compete or a confidentiality clause to deter conflicts so long as the employee has not left anything undisclosed.
A Non-Compete Agreement or Confidentiality Agreement may also be created if a company decides to work with a third party (another company) for a new business deal or project and they want to help prevent sensitive information from being released to that party.
Is There Ever an Innocent Conflict of Interest?
An employee could be unaware that their behavior conflicts with their employer’s, however, innocent or not, it is an employee’s responsibility to evaluate their work and personal lives to see if there is anything they do which would be at odds with their employer. And if so, to disclose it fully to their employer.
A Question of Ethics
When an employee is knowingly taking part in conflicting scenarios for personal benefit, it can be cause for disciplinary action or termination.
To prevent involvement in any type of ethical conflict, employees should inform themselves about the types of conflicts that exist. And if they are ever unsure about whether their involvement in something constitutes as a conflict, ask someone they trust or an attorney to provide them with an objective opinion.
If you find yourself involved in conflicting interests, it’s best to remove yourself from the situation immediately or if you wish to continue, seek approval for the activity by disclosing it to your manager.
Policies and Disclosure
Many businesses have a code of ethics in their employment guidelines to clearly present its employees with information on conflicts of interest and how they are handled, such as workplace relationships and what is and isn’t appropriate behavior between two colleagues.
Additionally, there might be a human resource manager appointed to oversee these issues.
The best way for employers to make these policies known is at the beginning of any staff member’s employment with the business.
By asking new employees to disclose potential conflicts during the hiring process and putting a system in place where existing employees can report conflicts of interest, it may help to prevent, and resolve, any competing interests that might affect the business now or in the future.