The Duty Of Good Faith – Still The Cornerstone Of The Employment Relationship

The duty of good faith has, since time immemorial, been a part of our employment law (long before employment law was even recognised as a discipline). What it encompasses is difficult to define with any precision, but in general it entails that the employee must not place him or herself in a position which would bring him or her into conflict with their employer. The case law is full of such examples.

In Phillips v Fieldstone Africa (Pty) Ltd 2004 (3) SA 465 (SCA); (2004) 25 ILJ 1005 (SCA) an employee had appropriated an opportunity belonging to his employer by purchasing R732 000.00 worth of shares from his employer’s client, and which he later resold for R12 250 000.

The employer served summons on its former employee claiming payment of the sum of R11 250 000, being the difference between what he had paid for the shares and what he had eventually sold them for. The employer denied that the employee had acted as its agent when dealing with the client, and that the employee owed them duties of loyalty and good faith, and that he had breached those duties in acquiring the shares and failing to account to them.

The Supreme Court of Appeal made it clear that an employee is not allowed to make secret profits at the expense of his or her employer. It also held that the rule that an employee should not place his or her own interests above those of their employer is a strict one that allows little room for exceptions. The Court also confirmed that such a rule relates not only to actual conflicts of interest, but also to conflicts which are a real sensible possibility.

The duty of good faith remains the cornerstone of the employment relationship. This principle is encapsulated brilliantly in the case of Sappi Novoboard (Pty) Ltd v Bolleurs (1998) 19 ILJ 784 (LAC). In this case the Labour Appeal Court ruled that it is an implied term of the contract of employment that the employee will act with good faith towards his employer and that he will serve his employer honestly and faithfully.

Furthermore, the Court held that the very duty which an employee owes to their employer ‘involves the obligation not to work against his masters’ interests’. The Court emphasized that it is well established that that if an employee does anything incompatible with the due or faithful discharge of their duty to their employer, the latter has the right to dismiss them.

More recently, in Aquarius Platinum (SA) (Pty) Ltd v Commission for Conciliation, Mediation & Arbitration & others (2020) 41 ILJ 2059 (LAC), the employee had appropriated company property and utilised the labour of other employees for his own private use. The employee was charged with dishonesty, failure to comply with company procedures and theft of company property, which resulted in the employee being summarily dismissed.

The Labour Appeal Court held that the deliberate retention of property which the employee is not entitled to retain is not distinguishable, conceptually, from theft. The Court that the employee was a senior employee and was required to set a good example and he did not.

These three cases give some context to the duty of good faith. The concept is alive and well in our employment law and employers (and employees) should take note.

Written by Neil Coetzer and Sechaba Motloung
of Cowan-Harper-Madikizela Attorneys

Neil Coetzer of Cowan-Harper-Madikizela Attorneys,
Sechaba Motloung of Cowan-Harper-Madikizela Attorneys