Conflict of Interest Policy

What is a Conflict of Interest Policy?

A Conflict of Interest Policy is a document used by an employer to help employees avoid conflicts of interest at work and to act with integrity and transparency. It is designed to prevent situations where workplace decisions are unfairly influenced by personal interests or relationships.

The policy can provide guidance about the types of situations that could lead to a conflict of interest, and how employees should deal with those situations. It can outline the reporting processes that employees should follow if they identify an actual, potential or perceived conflict of interest. It can also outline the employer's procedures for handling conflicts of interest that arise, including disciplinary processes for employees that breach the policy.

What is a Conflict of Interest?

A conflict of interest occurs when an employee's personal interests conflict with their obligation to act in the best interests of the employer. These "personal interests" could include the employee's own interests, as well as the interests of their spouse, family, friends or other associates. A conflict of interest may also arise if an employee has obligations to another organisation, which are in conflict with their obligations towards the employer. This might occur, for example, if the employee is employed by another organisation at the same time that they are employed by the employer. It might also occur if the employee owns shares in another organisation which is in competition with the employer.

A conflict of interest might be actual, potential, or perceived. A conflict of interest might also relate to financial or non-financial matters. An "actual" conflict means a normal conflict of interest that actually exists. A "potential" conflict means that the conflict of interest might not exist yet, but if the employee continues to do what they are doing then a conflict of interest is likely to arise. A "perceived" conflict means that the conflict of interest might not actually exist yet, but it might look like a conflict exists. In other words, "it is a bad look", and should still be avoided - as it is likely to undermine confidence in the employee and the employer.

Conflicts of interest can arise in many situations, such as:

• an employee awarding a contract to a business owned by a friend or family member without disclosing the relationship to their employer.
• an employee accepting gifts or financial incentives from a supplier in exchange for favourable treatment.
• an employee simultaneously working for the employer and a competitor of the employee, or owning shares in a competitor of the employer.
• an employee using the employer's confidential information for their personal gain.

Apart from a Conflict of Interest Policy, what other employment policies does an employer need?

In addition to a Conflict of Interest Policy, there are various other employment policies that employers should consider, such as:

• Employee Handbook: which provides an overview of the employer's general rules, standards and expectations of employees.
• Social Media Policy: which outlines the employer's approach to use of social media by employees.
• Drug and Alcohol Policy: which outlines the employer's approach to drug and alcohol issues.
• Workplace Health and Safety Policy: which outlines the employer's approach to health and safety issues at the workplace.
• Discrimination Policy: which explains how bullying, harassment, victimisation and discrimination are treated by the employer.
• Remote Work Policy: which explains how the employer deals with employees that are working remotely.
• Cyber Security Policy: which outlines the employer's protocols, standards and procedures in relation to cyber security.

Is it mandatory to have a Conflict of Interest Policy?

It is not mandatory for all organisations in Australia to have a Conflict of Interest Policy but it is highly recommended. In addition, many organisations have strict obligations to manage conflicts of interest generally, so having a written Conflict of Interest Policy in place is a good tool to assist with this.

Who is involved in a Conflict of Interest Policy?

Usually senior members of staff will prepare the Conflict of Interest Policy. This could involve senior managers or directors, or a human resources officer.

What can be the duration of a Conflict of Interest Policy?

There is no expiry date for a Conflict of Interest Policy so it can remain in place indefinitely.

However, it should be reviewed regularly to ensure that it is up to date with current laws and with the organisation's current practices.

What has to be done once a Conflict of Interest Policy is ready?

Once a Conflict of Interest Policy is ready, it should be printed and/or saved electronically and kept on file with the employer, and employees should be made aware of it. Any existing employees should be notified of it and given a copy of it. Many employers use a Letter to Employees about New or Updated Workplace Policies to do this. In addition, each time a new employee starts work with the employer, the new employee should be given a copy of the policy.

It is a good idea to keep the policy in a place where it is easy for employees to refer to it - for example, physical copies could be kept in communal areas such as staff rooms. It could also be made available online, for example on the employer's shared drive.

If the employer is getting employees to sign this policy, the employer should get each employee to return a signed signature page, and should keep those signed pages on file.

From time to time, if the employer implements new rules or procedures, it may be necessary to update the policy. When this occurs, the employer may notify employees of the updates, and release a new version of the policy. The employer may ask employees to sign a new signature page at that time, to acknowledge the updated policy.

What must a Conflict of Interest Policy contain?

A Conflict of Interest Policy should contain sufficient information to allow employees to understand the employer's approach to managing conflicts of interest, and to help employees avoid conflicts of interest. This could include:

• an explanation of what a conflict of interest is.
• an explanation of who the policy applies to.
• an outline of when a conflict should be disclosed.
• an explanation of the procedure for disclosing conflicts.
• an outline of the processes that will apply if an employee fails to disclose a conflict of interest.

Which laws are applicable to a Conflict of Interest Policy?

There are various laws which might apply to a Conflict of Interest Policy in Australia, depending on the nature of the organisation and the industry within which it operates. For example, under the Corporations Act 2001 (Cth), company directors have various obligations relating to conflicts of interest, such as:

• section 180 - the duty to exercise their powers and discharge their duties with a reasonable degree of care and diligence.
• section 181 - the duty to act in good faith in the best interests of the company or for a proper purpose.
• section 182 - the obligation to not use their position to obtain an advantage for either themselves or a third party, or to cause detriment to the company.
• section 183 - the obligation not to improperly use information gained through their position as a director to obtain an advantage for either themselves or a third party, or to cause detriment to the company.
• section 191 - the obligation to disclose material personal interests in matters relating to the affairs of the company.

A conflict of interest that influences employment decisions could also be affected by the Fair Work Act 2009 (Cth). For example, if favouritism (rather than merit) affects hiring decisions or promotions, then in some cases this might lead to claims of discrimination from unsuccessful applicants.

Conflicts of interest that affect the safety of the workplace could also result in breaches of applicable Workplace Health and Safety legislation in the relevant state or territory.

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