Understanding Parallel Employment and Conflict of Interest

Understanding Parallel Employment and Conflict of Interest

Under Maltese law, particularly the Transparent and Predictable Working Conditions Regulations (S.L. 452.126 of the laws of Malta), employees are generally permitted to engage in parallel employment, that is, to take up secondary employment with another employer, subject to specific limitations.

The Law

Specifically, according to article 12 of the Transparent and Predictable Working Conditions Regulations, the default position is that:

“An employer may not prohibit a worker from taking up employment with other employers, outside the work schedule established with that employer, nor subject a worker to adverse treatment for doing so.”

This means that firstly, employees cannot be restricted from taking on other jobs, provided it is outside their official working hours. Secondly, employers cannot impose adverse treatment, such as demotions, salary deductions, or dismissal, simply because an employee took on a second job.

Essentially, the only main limitation which the law presents in this regard is the fact that if secondary employment is outside the work schedule, i.e working hours, of the original employer, they are free to engage in other employment.

When Can Parallel Employment Be Prohibited?

Despite the general rule, the law allows employers to prohibit secondary employment where there are objective grounds, including, but not limited to the following list:

· Health and safety concerns;

· Protection of business confidentiality;

· Integrity of the public service;

· Avoidance of conflicts of interest.

These exceptions are meant to protect legitimate business or public interests, especially where secondary work could compromise loyalty and performance.

Terms of Contract and Company Policies Matter

Employment contracts, company handbooks and internal company policies often contain Conflict of Interest clauses. These clauses are commonly enforceable by the

employer, so long as they align with the terms of law and are based on objective grounds.

Common restrictions by the employer based on the objective ground of avoiding any conflict of interest from arising include:

1. Prohibiting the employee from acting as a director, agent, consultant, or representative of another for-profit entity without obtaining the prior written consent of the original employer;

2. Requiring the employee to disclose any external engagements or possible interests that may interfere with their duties at work; and

3. Obliging the employee to seek prior written approval before taking up a secondary job, especially in overlapping sectors.

Conflict of interest frequently arises when an employee works for a competitor of his current employer, in the same or similar industry and field of work. Additionally, if an employee decides to take up a role with a client, supplier, or strategic partner of their current employer, or when the employee accepts freelance or consulting work that may divert attention or resources away from their primary role, this may very well indicate that the employee’s employment conflicts with their employment of the original employer. A similar example would be when there are working hours that overlap or interfere with scheduled duties in the employee’s current employment.

Violating these terms at law may lead to disciplinary action being taken by the employer, including possible dismissal based on a good and sufficient cause as reflected in article 36(14) of the Employment and Industrial Relations Act (CAP. 452 of the laws of Malta).

The Industrial Tribunal

The Industrial Tribunal in Malta, which is vested with the authority to determine unfair dismissal cases, has developed key jurisprudence surrounding the thorny issues of parallel employment and conflicts of interest. In a series of significant rulings, the Tribunal has examined where the boundary lies between an employee’s private pursuits and their fundamental duty of loyalty and transparency toward their employer.

In the case of Joseph Paris vs Cargo Handling Co. Ltd decided by the Industrial Tribunal on the 26th of January 2010, the Tribunal addressed the delicate balance between entrepreneurial initiative and competing with one’s employer. The facts revealed that Mr. Paris, a long-serving employee of Cargo Handling Co. Ltd., had

joined a consortium bidding for cargo-handling operations at Valletta Port, under the impression that his own employer would not be participating in the call for tenders.

Paris maintained that he had intended to withdraw from the bid if his employer later chose to participate. However, once his involvement came to light, he was summarily dismissed, with the company citing a breach of trust and a conflict of interest, particularly in light of his operational role and access to confidential internal information.

The Tribunal remarked on the nature of the conflict by stating: “Kunflitt ta’ interess kien ikun possibbli kieku kien hemm żewġ operaturi jew aktar jaħdmu fil-port fl-istess ħin u jikkompetu bejniethom.”

While there was no direct evidence of actual harm to the company, and although the company eventually wound up voluntarily, the Tribunal was clear in its expectations: employees, especially those in sensitive roles, must act with full disclosure and transparency. The failure to notify one’s employer of potential secondary employment, even in the absence of actual damage, can undermine the employment relationship itself.

Still, the Tribunal noted important mitigating factors:

• Paris had informally agreed to withdraw if his company chose to participate;
• His employer ultimately did not enter the bidding process;
• No actual competing entities were active during the relevant period;
• Paris maintained professional standards and did not misuse any confidential information.

Critically, the Tribunal observed: “Per principju kull kumpanija kummerċjali għandha l-għan li tkabbar il-profitt… [iżda] Dan it-Tribunal jemmen li l-interess ta’ l-azzjonisti ghandu jigi bilancjat ma’ l-interessi tal-haddiema.”

On this basis, the Tribunal deemed the dismissal unfair and disproportionate, awarding €8,000 to the employee, in compensation.

In another pivotal decision, that of Mark Muscat vs NGATT Consultancy Services Ltd decided on the 21st of August 2023; and which was affirmed on appeal on the 3rd of April 2024, the Tribunal examined a case of parallel employment that did not amount to a conflict of interest. Mark Muscat had been employed part-time by NGATT Consultancy from December 2019 while simultaneously serving as a venue media

manager for UEFA. Crucially, the employer was fully aware of this dual engagement from the start, and had even encouraged it.

Issues arose during Muscat’s four-week assignment in Qatar for the Arab Cup, during which NGATT experienced difficulty contacting him due to lack of internet connectivity. Despite this, the Tribunal found no evidence of dereliction of duty or adverse operational impact.

The Tribunal took the opportunity to emphasise a key principle in employment law: that dismissal must be a last option taken by all employers. It stated:

“It-Tribunal isostni li tkeccija mix-xoghol ghandha tkun ‘the very last resort’, u jekk issir tkeccija, din ghandha issir wara li l-persuna koncernata tinghata kull opportunita’ li tinghata smigh kif jixraq, imparzjali, u li jkollha opportunita’ cara li tiddefendi ruhha, anke jekk hemm bzonn b’ ghajnuna legali.”

Given that the UEFA engagement was not in a competing sector, and that Muscat had maintained high performance standards throughout, the Tribunal ruled the dismissal to be unjustified and disproportionate, awarding €18,600 in damages.

The case of Col. Claudio Spiteri vs Malta Gaming Authority decided by the Industrial Tribunal on the 24th of February 2023, Colonel Claudio Spiteri presented a textbook example of an undisclosed conflict of interest, which the Tribunal considered grave enough to justify dismissal.

Spiteri, Head of Investigations at the Malta Gaming Authority (MGA), had previously disclosed his links to private security firms. However, concerns were later raised when it emerged that one of his companies had begun servicing clients involved in the regulated gaming sector, over which the MGA exercised supervisory authority.

An internal audit, triggered by whistleblower reports, concluded that Spiteri’s role, which included enforcement actions against gaming companies, was incompatible with his external business activities. The Tribunal unequivocally held that “Minhabba d-dmirijiet tar-rikorrent mal-Awtorita’ inkludew, inter alia, azzjonijiet ta’ infurzar kontra kumpaniji fil-‘gaming’, dan holoq b’mod car kunflitt ta’ interess.”

Moreover, it stressed the importance of continuous transparency in an employmkent relationship, wherein: “Di piu, ir-rikorrent naqas milli jwettaq l-obbligu kontinwu tieghu sabiex jinforma lill-Awtorita’ jekk hemmx kunflitt ta’ interess reali jew percepit li jista’ jirrizulta minn attivitajiet jew interessi esterni”.

Despite Spiteri’s claims of constructive dismissal, the Tribunal found that the MGA acted within its rights to protect its institutional integrity and rightly terminated the employment relationship.

Employment Best Practices

In this respect, when an employee considers secondary employment, it is essential that they first review the terms of their employment contract and any applicable company policies, particularly those conditions relating to conflicts of interest. Before taking up any additional role, in order to maintain transparency, one should formally disclose their intentions in writing to their current employer, and even more so if this is outlined clearly in any terms of their employment contract or internal company policy.

Where required, one ought to seek prior written approval from their current employer, especially if the prospective role is within the same sector or may otherwise intersect with the employee’s current employment. It is equally important to clearly define the working hours and responsibilities of the secondary position to demonstrate that there will be no interference with their existing obligations, professional performance, or loyalty to the primary employer.

In the same spirit, as an employer, and for further protection of one’s business, it is important that the company’s internal policies explicitly address potential conflicts of interest and the conditions under which parallel employment may be restricted, and this in accordance with relevance legislation on the matter. Each request and/or disclosure from an employee regarding secondary employment should be assessed objectively, based on clearly defined criteria, rather than assumptions or perceptions. To ensure transparency and accountability, it is moreover advisable to maintain a formal written record of all disclosures, any permissions granted to the employees carrying out secondary employment, and any subsequent actions taken by the company in this regard. Such retention of information and documentation is critical should disciplinary measures ever need to be considered and will furthermore support consistency in the application of the organisation’s internal rules.

Conclusion

Therefore, whilst employers must be fair, proportionate, and legally grounded when responding to potential conflicts of interest of their employees, the latter should maintain reasonableness when evaluating the risks and responsibilities attached to their primary employment and company policies in deciding on securing parallel employment with a secondary employer. Ultimately, transparency, written

communication, and legal clarity are essential in any employment relationship in order to avoid disputes and maintain a good working level of trust among the parties.