Conflicts of Interests Archives

“Is it illegal or unethical to work for two competing hotels?”

Published on January 23rd, 2013 by Alan L Sklover

Question: Dear Mr. Sklover: Is it illegal or unethical to work at the same time in two competitive hotels which are situated in the same town and in the same area of the city? The positions are Director in the first hotel and Sales Manager in the other. Thank you for your answer.

Petr
Prague, Czech Republic

Answer: Dear Petr: As I am sure you know, I am not licensed to practice law in the Czech Republic, so I cannot give you a legal opinion about your local laws. However, I think that the following thoughts might help you make a decision about what to do – or not do – and how to do it:      

1. While I cannot be certain, I am very confident that working simultaneously for two competitors is not illegal in your country. I have assisted employees in many countries on almost all continents, and I have never heard of it being illegal in any country to do what you describe. That leads me to be quite confident it is not illegal where you are, although I cannot be certain of that. 

2. I don’t think working simultaneously for competing hotels is unethical, either, BUT it could be viewed by other people to be unethical. What does “unethical” mean? Well, I guess you might say it means “in violation of fairness or morality.” While I do not view your working in the two hotels at the same time to be “in violation of fairness or morality,” I do believe your two employers may very well view it that way. That is because it does represent a rather clear potential “conflict of interest.” Think of it this way:  Is there anything “unethical” with dating two people at the same time? Not necessarily, but those two people you are simultaneously dating – if they did not know about it – might surely think it was unethical, or worse!  

3. Your working for the two competing hotels at the same time definitely presents the appearance of a “conflict of interest,” which constitutes a grave risk to both of your jobs, as well as your career and reputation. What do we mean by a “conflict of interest?” It is a circumstance which makes you uncertain to which of your two employers you should be most “loyal.” 

Let me try to illustrate that for you: Which hotel would you tell people is a nicer place to stay? Whichever one you don’t recommend might be upset by your answer. Which hotel might you tell someone represents the better value for the price of a room? Whichever one you don’t mention might be upset by your answer. Here is the best example: If one day both hotels tell you that they need you to work because they both have an emergency, which one will you say “Yes” to? Whichever one you don’t say “Yes” to might be upset by your choice. Thus, as illustrated, your two “interests” are in potential “conflict.” 

4. Most employers expect undivided “loyalty” from their employees, and so see “conflicts of interest” not as illegal, and not as unethical, but more as a breach of trust, a kind of bad faith, and cause for firing. Let’s go back for a moment to that example I gave about dating two people at the same time. It is not illegal. It may or may not be unethical. But it sure might make one or both of your date-mates feel like they should no longer trust you, and for that reason decide to break off the relation. That is precisely how your two employers may – and likely would – feel if they find out you are working for a direct competitor. Since every city and every industry is a “small town” when it comes to people learning about what other people are doing, you can almost count on your two employers learning – sooner or later  – of your two simultaneous employments. That would likely pose a problem for you. 

Being fired for an undisclosed conflict of interest is a kind of “cause” for firing, and, for this reason, a grave risk to your jobs, your career and even your reputation in your industry. 

5. The only true way “out” of a conflict of interest is (a) full disclosure and (b) informed consent. The best way to address a conflict of interest is to (a) disclose all facts to both hotels – preferably before you begin the dual employment, and (b) ask both hotels to consent to the dual employment. If both consent, for your peace of mind, and for prudence sake, I strongly suggest you ask both for their consent by way of email or other form of writing, so that you have some “evidence” that it was given after full disclosure. If they both consent, and you receive both expressions of consent in writing, you are in great shape. 

You may wish to obtain a copy of our Model Letter designed for this purpose entitled “Addressing a Conflict of Interest at Work,” that shows you “What to Say and How to Say It”™ in a situation like yours. To obtain a copy, just [click here.]  

6. No matter what you do, Petr, do it carefully, and with a long-term perspective. Like many people, Petr, you may need both jobs to make ends meet, or to take care of a considerable family need. Either way, I strongly suggest you handle this situation carefully, and with your reputation and career in mind. Life is full of risks, large and small, obvious and subtle. As to your career and reputation, this could be a large risk, and damaging for a long time.   

While you may truly believe you are doing nothing wrong – and you may be right about that – others could perceive things differently, and it is their view that may well determine your job and career, not your own. We would all do well to remember this wise observation in all of our business dealings: “While other people judge us by our behavior, we judge ourselves by our intentions. The two are very different things.”   

You have surely taken the right first step: finding out more information. Now, the rest is up to you.   

By the way, Petr, I may soon be traveling to Prague: which of your two hotels do you recommend I stay in? No, no – I am just joking. Thank you for writing in.       

My best to you,
Al Sklover

P.S: Our Model Letters help people stand up for themselves at work. For a friend facing Job Loss, Severance, Resignation, Bully Boss, or Performance Improvement Plan, they are a “Helping Hand Gift for a Friend in Need.” Just [click here] to view our list. 

Repairing the World –
One Empowered and Productive Employee at a Time ™

© 2013 Alan L. Sklover, All Rights Reserved.

“Is opening, but not really running, a competing firm a conflict of interest?”

Published on October 16th, 2012 by Alan L Sklover

Question: Hello. Is registering a partnership which offers related but not the same services to my employer, and advertising it, without any material income or clients yet, a conflict of interest?

My employer offers inpatient and outpatient physiotherapy without home visits or community services, while I’m planning to offer home visits and community services. 

Thank you. 

Adriana
Sawbridgeworth, Hertfordshire
United Kingdom

Answer: Dear Adriana: Your question gives me a good opportunity to draw and illustrate important points about conflicts of interest at work. In sum, though, based on the limited set of facts you have provided, and as explained below, I view your new company and your present employer to be in a conflict of interest. Here’s why: 

1. There is nothing wrong with a “conflict of interest,” in general. Though it sounds trite, a “conflict of interest” exists when “interests conflict with one another.” There is nothing wrong with interests that conflict – as the interests of one gas station conflict with the interests of a second gas station right across the street, as motorists who are in need of gasoline will probably purchase their fuel at one or the other, but not at both. Or the interests of one tree – in need of soil, air and water – conflict with the interests of another tree nearby, in need of the same three things to keep it alive. In fact, conflict and competition are more the rule in the world than they are the exception. 

2. There is, though, a problem with “conflicts of interest” in certain relations, according to our society and laws. The problematic part of a “conflict of interest” is when it arises in a relationship that our society has determined should have complete loyalty and alignment, not conflict, of interests. So, an employee must avoid conflicting interests with his or her employer for that relation to work well, according to our society and laws. Likewise, an attorney must avoid conflicting interests with his or her client for that relation to work well, according to our society and laws. That is, conflicting interests are fine, but not in certain relations that our society and laws have determined must require complete trust and loyalty. 

3. A conflict of interest at work exists when (a) what is good for your employer’s business, and (b) what is good for you, are not one and the same thing, but instead clash or compete with one another. The relation of employment is one in which conflicting interests are prohibited unless (i) disclosed, and (ii) waived. Conflicting interests at work are most commonly seen where: (1) an employee transacts business with a family member, (2) an employee owns an interest in a competing company, (3) an employee accepts favors from a competing company, and (4) an employee has agreed to accept a position of employment with a competitor, but does not tell his or her present employer. In each case, and others like them, the employee may feel an urge to favor the interests of another over the interests of his or her employer.    

4. It seems to me that some patients in need of physiotherapy may decide that they will (a) stop using your employer’s services, and instead of doing so, (b) they will use your new company’s services, as an alternative. From what you described, I see a conflict of interest in this situation, even though different services are offered by (a) on one hand, your employer, and (b) on the other hand, your new company. That is because I think that those two services compete for the same patient-customers, who may have to decide between using one company or the other, and the success of your firm would likely hurt the business of your employer, and vice versa. 

5. Setting up a competing business, by itself, does not create a conflict of interest, but I think your starting to advertise your new business does create a real conflict of interest. I don’t think anything is in conflict if you (a) register a partnership, (b) have stationery and business cards printed, (c) lease a new office, (d) purchase furniture and equipment, and even (e) hire staff. All of these pre-business activities may be in preparing to compete, but they are not competing, and since not yet in competition, not possibly conflicting, until you go into any kind of competition, with one exception: if you start to tell patients something like “Starting in December I will be in business across town.” That is the beginning of a conflict, as it seeks to interrupt the business and relations existing between your employer and its customers. Once you advertise your new company’s services, you are clearly in a conflict of interest, whether or not significant business or revenues have begun. Competing for customers is, by its essence, interests in conflict.    

6. The only two means of truly resolving the conflict of interest you are in are these: (a) ceasing the conflicting activity, or (b) disclosing it, and receiving permission to continue it from your employer. Adriana, you have come to a proverbial “fork in the road.” If you want to remove yourself from the conflict of interest you are in, you have no alternative to your either (a) ceasing your new and conflicting business activity, or if you don’t want to do that, (b) disclosing what you are doing, and requesting permission to keep on doing it. If you don’t do one or the other, you risk both (a) being fired, and (b) having you and your new company sued in court, and potentially being required to pay your employer for both (i) returning the compensation you received while a “competing employee” and (ii) paying over any profits of your new company for a period of time. Though not likely, that is surely what is possible. 

7. Though sometimes hard to spot, and thus properly address, conflicts of interest are a kind of gross misconduct. One of the things that people find perplexing about conflicts of interest is that they can be hard to identify and, yet, the consequences of being in a conflict of interest can be devastating. That’s because engaging in a conflict of interest is seen as disloyalty, and disloyalty is a kind of gross misconduct. Don’t forget that in military affairs, disloyalty is called “treason,” and frequently results in summary execution. I’m glad you had at least a hunch that you might be in such a situation, and you sought an outside perspective. 

Adriana, for your use as an example of how you might disclose your conflict of interest, and get it permitted, we offer a Model Letter entitled “Addressing a Conflict of Interest at Work by Disclosing It.” If you’re interested, just [click here.]   

Adriana, thanks for writing in from Hertfordshire, a rural county not too far north of London. If this has been helpful, I hope you will consider recommending our SkloverWorkingWisdom blogsite to your family, friends and colleagues who work, or who want to work. 

 Best,
Al Sklover

P.S. One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate Resignation Package” consisting of two Model Resignation Letters, a Model Involuntary Resignation Letter, a Memo to HR Pre-Exit Interview, and our 100-Point Pre-Resignation Checklist. To obtain a complete set, just [click here.]

Repairing the World –
One Empowered and Productive Employee at a Time ™

© 2012 Alan L. Sklover, All Rights Reserved.

“If my mother works for my employer’s competitor, is that a conflict of interest?”

Published on August 28th, 2012 by Alan L Sklover

Question: Hi, Alan. I have recently been given a new contract at the place that I work. I work in the health care industry. So does my mother. In fact, she works at the competition just down the road from the store I work at. Do you consider that a conflict of interest? Do you think it is necessary to let my boss know before signing the contract? Thanks. 

Kylie
Toronto, Ontario

Answer: Dear Kylie: Conflicts of interest are tricky things to spot and even trickier to deal with. I am glad you have, at the very least, spotted the potential problem, and have written in. Here are my thoughts: 

1. A conflict of interest can be said to exist when your “interests” may make you feel “conflicted,” and thus make you uncertain of what to do or who to be loyal to. As readers of my blog know, I love to use this illustration: “A person with one watch always knows what time it is. A person with two watches is never sure.” 

I ask you to consider this hypothetical: Imagine your employer had a lot of business, but your mother’s employer had very little business. In fact, imagine that your mother’s employer had so little business, that her employer told her “Unless we get a new client this week, we must lay you off.” Imagine, too, that you felt very strongly that your employer would not at all suffer by your directing a client to your mother’s company. 

Kylie, would you be tempted, even just a little, to send one client to your mother’s business – and away from your employer – in order to save your mother her job? I think it is likely you would, and that suggests to me that there does, indeed, exist a conflict of interest at the moment in your work life. 

2. Having a close relative working for the competition is almost always considered a conflict of interest. For the “heart-tugging” reason I illustrated above, it is the common view that having a close relative working for the competition is a conflict of interest. There is no clear line to be drawn regarding how close a “close relative” has to be – a cousin? an uncle? an in-law? – but I would say it is pretty clear that immediate family, spouse and child are “close enough” to be considered a presumptive conflict of interest. This common view is so common that many employers have rules requiring the immediate disclosure of any immediate family member who works for the direct competition, as well as any immediate family members who work for vendors, suppliers and contractors to the company.

3. Even if an actual conflict of interest does not exist, the mere perception that a conflict of interest might exist is enough to cause a problem. To a degree, conflicts of interest exist in the eye of the beholder. There is a degree to which intelligent people acting in good faith could disagree as to the existence or not of a conflict of interest. It is interesting to me that you spotted this possibility, yourself. That says to me that your employer could do so, too. And that could cause you a problem.

4. In almost all situations – but not all – disclosure of a conflict of interest is the best way to deal with it. In most cases the best thing to do is to present the facts of the conflicting situation to your employer, so it can decide the best way to address it. This way, you have a record of your reporting your apparent conflict, and – hopefully – your employer’s deciding to either (a)  “waive” it (that is, telling you that it is not upsetting to him or her) and permitting it to continue, or (b) “accommodate” it in some way that is not upsetting to you, such as asking someone to monitor the situation to watch out for problems, or perhaps giving you or your mother six months to find a different – non-conflicting – job.

It is always hoped that employers will act with intelligence, good faith and reasonably in these situations, and so either waive or accommodate the conflict of interest, so that no one is harmed by the problem. However, that is not always the path chosen by employers.  

5. Since you have apparently been working in this potentially conflicting situation for awhile, I am concerned that, if you disclose it now, you could be accused of, or terminated for, misconduct. Your note to me includes information that suggests the conflict of interest may have existed for some time. That leads me to be concerned that disclosure of it now might cause a problem. As I noted above, employers don’t always react to conflicts of interest that have existed for some time without disclosure in the most positive ways. It is possible that your past failure to disclose this conflict of interest is a violation of (a) a company policy, (b) good judgment, or (c) honesty. As a result, your contract could be withdrawn, you could be disciplined, or even terminated.

6. So, I must counsel you to carefully balance a few different factors in making your decision about whether to make disclosure. (a) Is your employer likely to react reasonably or in an irrational or spiteful way? (b) How likely is it that your employer will find out something that it has not found out to date? (c) Is it possible for you or your mother to find alternative employment in the meantime? (d) Are you essential or critical to the success of your company, and thus likely to survive any resulting “storm?” (e) In your position, could you possibly help your mother’s company even if you wanted to?

With these and similar thoughts in mind, if I was your attorney I could give you a judgment as to your best course of action, but for now that is what you need to do: make a reasoned decision as to your best course of action. Like so many other decisions, there is no absolute right or wrong decision, but only time will tell what decision is best.

If you do decide to disclose your conflict of interest, and suggest ways your employer should best deal with it, we offer a Model Letter entitled “Addressing a Conflict of Interest at Work” that might be helpful to you. To obtain a copy, just [click here].

Kylie, thanks for writing in, and give my best regards to your wonderful city. Torontonians are some of my very favorite people! Good luck.

Best,
Al Sklover

P.S.: Help Others While You Help Yourself! Become a SkloverWorkingWisdom™ Sales Affiliate –encourage others to take advantage of our Model Letters, Memos, Checklists and Agreements. Earn a substantial commission. Just [click here.]

© 2012 Alan L. Sklover, All Rights Reserved.

“While employed by a pharma company, is it a conflict of interest to be on the Board of a ‘nutriceutical’ company?”

Published on August 4th, 2012 by Alan L Sklover

Question: I am working as an Executive and Board Member in the Egyptian affiliate of a multinational pharmaceutical company. On the side, I have invested in a local “cosmeceutical” [that is, medications for cosmetic purposes) and “nutriceutical” (that is, medications for nutritional purposes) company. Recently, I was nominated to be on the Board of Directors of this local company. Is it a conflict of interest to do this?  If so, should I notify my current employer?

Philip
Cairo, Egypt

Answer: Dear Philip: It may or may not be a conflict of interest. But whether it is or it is not, the safest thing to do is to notify your present employer, and seek its consent. Allow me to explain:

1. As an executive and Board Member of your employer, you must obey a “fiduciary” trust and loyalty to the company, which is the highest degree of trust and loyalty there is. When we affiliate with other people or organizations, we sometimes take on certain responsibilities, just by the affiliation. Many times we don’t realize it.

For example, if I act as someone’s lawyer, just by doing so I must keep what they tell me in confidence. So, too, for someone who becomes an executive or Board Member of an organization: by doing so, they promise to be totally loyal and trustworthy to that organization, and look out for its interests over and above other, competing organizations. It is the highest level of trust. That is part of your relationship with your employer because you are an executive and a Board Member.  

On the other hand, if you were a clerk for your employer, you would not have such a relationship, but being an executive and Board Member makes you have a fiduciary relation. And, too, as a new Board Member of the local nutriceutical company, you must obey a “fiduciary” trust and loyalty to it, also.

It is something like being the father of two children at the same time: they both look to you for loyalty and trust. Yet, sometimes we feel “torn” by not being able to give them both our time, energy and resources. That is a natural conflict of emotion and parenthood, not of interest.  

2. The real question is this: might it be possible that their interests, now or in the future, conflict? The question is this: can you be “totally loyal” to both (i) your present employer, and (ii) the nutriceutical company, under all possible circumstances?

As examples: Might they both want to take advantage of the same great business opportunity? Now or in the future, is it possible? Might they both want to hire the same skilled person? Now or in the future, is it possible? Might they both want to buy the same hard-to-find raw materials? Now or in the future, is it possible? Might they both want to invest in the same company? Now or in the future, is it possible? These are the questions – and there are many more – that would determine if it is a potential conflict of interest to be a Board Member of both companies at the same time.   

3. Don’t be too sure that you can give a confident answer to that question, because even apparent – in addition to those that are actual – conflicts of interest are problematic. If you have read my blog posts on this subject, you will know I use this wonderful saying to illustrate conflicts of interest: “A person with one watch always knows what time it is. A person with two watches is never sure.” Sometimes, what seems to one person to be a “clean” absence of conflicting interests seems to another person a “clear” conflict of interest.

In fact, I can see how your pharma company employer (a) might have nutriceutical or cosmeceutical companies as affiliates, (b) might sell chemicals or pharmaceutical agents to nutriceutical or cosmeceutical companies, (c) might sell licensed research to nutriceutical or cosmeceutical companies, or (d) might, without your knowing it, have plans already in progress to enter the growing fields of nutriceuticals and cosmeceuticals.

Like I said, “Don’t be too sure.”  

4. Just the fact of your devoting significant time and energy to being a Board Member of another company – all by itself – could be viewed as a conflict of interest with your employer. As a general rule, janitors and clerks work about 40 hours a week, and are free to do as they please on their “time off.” As a general rule, executives are expected to devote their full time and energies to their employer, other than time devoted to such things as family, health, recreation, religious and community affairs. Your giving another profit-making company your time and energy – that you could be devoting to the interests of your full-time employer, could be characterized as a conflict of interest.

5. The safest course is always the same four steps: (i) Disclose Your Desire, (ii) Answer All Inquiries, (iii) Seek Consent, and (iv) all by Email Correspondence. By taking this approach, you are doing many positive –and risk-avoiding – things, including: (i) avoiding any concern that you are not being honest or forthcoming, (ii) disclosing “how many watches” you are wearing, and even “what kind of watches” they are, (iii) permitting your employer an opportunity to ask more questions and make further inquiries, (iv) letting your employer consider things you may not be aware of, including their still-secret strategic plans, (v) letting someone else decide if there is a conflict of interest, and, perhaps most importantly, (vi) making a permanent, written record that you have done so, to who, and when.

If you are denied consent, it might be disappointing, but it would be so much less disappointing than it would be to be unexpectedly fired at some later time for alleged misconduct.

Philip, you are wise to be concerned and careful. I hope you have found this information to be of value to you in your considering what to do, and how to do it, what we call navigating and negotiating to success and security.    

Best,
Al Sklover 

We offer Model Memo
“Addressing a Conflict-Of-Interest at Work.”
To Get a Copy, Just [click here.] 

Repairing the World –
One Empowered and Productive Employee at a Time ™

© 2012 Alan L. Sklover, All Rights Reserved.

Does a conflict of interest continue after you have resigned?

Published on April 13th, 2012 by Alan Sklover

Question: Hi, Alan. I am Rena from Malaysia. I need your help on a question about a conflict of interest.

I previously held a high position in an organization. While working there, I noticed that one of the services provided by the organization was not provided well to customers. So, I established another organization under my husband’s and dad’s name. Some of the customers switched over to the new organization I established.

I have left my previous employer, and some of the customers who moved over to my new organization are still using my new organization’s services. My previous employer is upset, and is threatening me.

My question: Is the present situation a conflict of interest, and can my previous employer sue me for this? I am in a state of confusion. Please advise.

Reena
Ipoh, Perak, Malaysia

Answer: Dear Reena: Many people find the subject of “conflicts of interest” to be confusing. Though I am not licensed to practice law in Malaysia, I can do my best to explain basic concepts and offer you some relief from your confusion:

1. While employed, employees owe a duty of “loyalty” to their employers. A central part of the employment relation is the duty of an employee to be “loyal” to his or her employer. That “loyalty” is not absolute, but has some limit: after all, the employee is not a slave. But one part of that required “loyalty” is that an employee is not supposed to act in competition with his or her employer while employed. Working “for” an employer and, at the same time, working “against” the employer is the clearest “conflict of interest” I can imagine. After all “Which side are you on?” Imagine what you would think if you heard a soldier was fighting for his army, and at the same time he or she was fighting against his own army; sure would seem wrong, wouldn’t it?

2. However, the moment the employment relation ends, the now-former employee is free to compete with the now-former employer. The very moment that an employment relation ends – for whatever reason it may end – the employee becomes free to engage in direct competition with his or her employer, provided that the employee has not signed a non-compete agreement. For more information on non-compete agreements, simply [ click here ].

3. But, an employee who has violated a “duty of loyalty” can be sued for any (i) damages during employment, and (ii) damages that were experienced even after the employment. This is what gets most people confused.

Imagine if a person is driving a car and runs over another person on a bicycle, who suffers a broken leg. The bicyclist can sue the driver of the car for that broken leg. Imagine that, as a result, the bicyclist is out of work for 10 months and has lost income for that 10-month period. The driver is responsible for (a) his bad driving while on the road, and (b) the damages for the broken leg (on the day of the accident) and for the lost income (that occurred later.) In the same way, an employee is responsible for (a) his disloyalty that took place during employment, and (b) the employer’s lost income in the future, whenever it takes place.

4. It is for these reasons that addressing a conflict of interest at work – by getting permission while you are employed – is often the wisest course of action. Disclosure and consent is the way to get around the restrictions imposed by the employee’s loyalty duty. Employees who either (a) find themselves in a conflict of interest at work, or (b) would like to compete with their employer, usually in some “incidental” or “inconsequential” way, are often best served by addressing the situation with their employers, and gaining permission to engage in the conflicting activity. “Sunshine is the best disinfectant.”

If you are interested in obtaining a Model Letter entitled “Addressing a Conflict of Interest at Work,” simply [ click here ].

So, Reena, your competition with your employer could result in a lawsuit against you, and the damages in that lawsuit for years to come. I would suggest that you contact a local lawyer to assess the situation, and to be prepared in case you are, indeed, sued. Sorry I don’t have better news for you, but I believe it is the truth that you really want.

I hope this information is helpful. Thanks for writing in from Malaysia.

My Best,
Al Sklover

P.S.: Become part of a growing movement; help others while you help yourself! Become a SkloverWorkingWisdom™ Sales Affiliate – encourage others to take advantage of our Model Letters, Memos, Checklists and Agreements. Earn a substantial commission. Just [click here.]

© 2012 Alan L. Sklover, All Rights Reserved.


Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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