Recent accusations have surfaced against a former chief executive officer of a state-owned entity in South Africa. Specifically, it has been alleged that the CEO failed to report suspected corrupt activities within the organisation and to the relevant authorities. This situation raises important questions about the duties and obligations of employees to act in good faith towards their employer.
The duty of good faith is an implied term of any employment agreement. It requires employees not to behave in a manner that is detrimental to their employer's best interests and to remain faithful and loyal to their employer and its business at all times. Traditionally, this duty has been viewed as reciprocal only insofar as the employer, in exchange for their employees' good faith in their dealings with the employer, provides job security and remuneration for work done in the furtherance of the employer's business to the employees. However, the Constitutional Court, in 2019, added an additional layer of reciprocity in circumstances where the employees' duty of good faith requires them to divulge information within their knowledge that relates to the misconduct of others.
The doctrine of derivative misconduct was developed by courts to deal with the difficulties associated with identifying the perpetrators in group misconduct. Although not mentioned by name as derivative misconduct, the roots of the doctrine lie in an obiter remark by the now retired Judge Nugent in Food & Allied Workers Union v Amalgamated Beverage Industries Ltd:
"In the field of the industrial relations, it may be that policy considerations require more of an employee than that he merely remained passive in circumstances like the present, and that his failure to assist in an investigation of this sort may in itself justify disciplinary action."
Derivative misconduct refers to a situation where an employee who is aware of misconduct (including the identity of those who perpetrated it), fails to disclose such knowledge to their employer and in doing so, breaches their duty of good faith owed to the employer.
In 2019, the Constitutional Court in NUMSA obo Nganezi & Others v Dunlop Mixing and Technical Services (Pty) Ltd & Others recognised that there may be certain instances where, in the context of derivative misconduct, the reciprocal duty of good faith would need to be extended. In this regard, the court stated that:
"The duty to disclose must be accompanied by a reciprocal, concomitant duty on the part of the employer to protect the employee's individual rights, including the fair labour practice right to effective collective bargaining. In the context of a strike, an employer's reciprocal duty of good faith would require, at the very least, that employees' safety should be guaranteed before expecting them to come forward and disclose information or exonerate themselves. Circumstances would truly have to be exceptional for this reciprocal duty of good faith to be jettisoned in favour of only a unilateral duty on the employee to disclose information."
What this means is that where an employee is aware of information relating to the commission of misconduct, including criminal activity, but fails to disclose this information to the employer due to a fear of reprisal, including risks to their personal safety and security, the employee may not be guilty of derivative misconduct in circumstances where the employer failed to create such a safe environment.
Of course, the employee's failure to disclose the information may be at odds with any obligations they might have under the Prevention of Corrupt Activities Act, 2004 ("PRECCA") to report information to the police. However, this latest decision does, but it does emphasise the importance of creating anonymous tip-off lines and other similar channels which employees can use to alert their employer to information in furtherance of their duty of good faith and help manage and prevent misconduct. It is important to mention that, absent any personal obligations under PRECCA, an employee's duty of good faith does not ordinarily extend to policing the employer and ensuring that the employer takes steps to deal with the misconduct identified.
Both employers and employees should make sure that any requests for information, refusals to comply with such requests, or the disclosure of the information are in writing, so as to ensure that proof exists as to whether or not an employee has discharged their duty of good faith. Employers facing any refusals for the provision of information on the grounds of an employee's safety and security should be cognisant of the court's finding in the Numsa case mentioned above and should ensure the integrity of their internal reporting processes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
