Olivia is the Head of Legal at Lawpath, where she helps Australian businesses navigate complex legal challenges with practical, commercially minded advice. She specialises in employment matters, contract drafting, pre-litigation strategy, dispute resolution, commercial law and startup compliance, and has supported clients across technology, healthcare, professional services and retail. Olivia is passionate about making legal services accessible, personable and effective for every client.
A conflict of interest in the workplace is any situation where someone’s personal interests could sway, or look like they sway, the decisions they make for your business. Think a side business, a relative on the payroll, a generous supplier or shares in a competitor. Having one isn’t misconduct. Hiding one, or acting on it, is where the trouble starts.
Here’s the awkward truth. Most small business owners only deal with this once something has gone sideways. A supplier keeps winning work it shouldn’t. A manager signs off on their partner’s pay rise. Someone’s weekend gig starts quoting your clients. Sorting it out early takes an afternoon. Sorting it out late can take months.
- Conflicts aren’t wrongdoing on their own. Hidden and unmanaged conflicts are the real risk, so make disclosure the easy, normal thing to do.
- No single law covers conflicts in private businesses. Employee obligations come from their contract, your policies and the common law duty of good faith. Directors carry extra duties under the Corporations Act 2001 (Cth).
- Match the fix to the risk. Most conflicts need a line on a register and someone else making one decision, not a disciplinary meeting.
- Manage reporting lines, not relationships. Marital and relationship status are protected attributes, so acting against someone because of who they’re with creates its own legal risk.
- Write the rules down before you need them. A clear contract clause and a short Conflict of Interest Policy make every later conversation fairer and faster.
Get your Casual Employment Agreement now for free.
What counts as a conflict of interest in the workplace?
You’ve got a conflict when a personal interest pulls against what’s best for the business. The interest might be financial (shares, commissions, a side hustle), personal (family, friends, partners) or about information (knowing things a competitor would pay for).
Whether the person actually made a biased call isn’t the test. Ask instead whether a reasonable outsider, knowing the facts, would worry they might. That’s why a scrupulously fair manager still has a conflict when they’re interviewing their cousin.
Actual, potential or perceived: which one are you dealing with?
| Type | What it looks like | Small business example |
|---|---|---|
| Actual | The interest is affecting a decision right now | Your office manager hires her brother’s cleaning company without getting other quotes |
| Potential | The interest could affect a future decision | A developer starts building an app in a market you’ve talked about entering |
| Perceived | It looks biased, even if it isn’t | A sales rep recommends a supplier run by his best mate |
Why sort them? Because each one calls for a different response. An actual conflict needs action today. Potential conflicts need a plan. A perceived conflict mostly needs transparency, plus someone else signing off.
Which conflicts of interest come up most in small businesses?
When it comes to conflicts of interest at work, small teams are more exposed, not less. One person might pick the suppliers, approve the invoices and manage the relationship. Nobody’s checking because there’s nobody else to check.
Side businesses and second jobs
This is the big one in our consultations. Plenty of employees run something on the side, and most of it is harmless. It becomes a conflict of interest at work when the side business competes with you, serves the same clients, supplies you, or relies on information the person only has because they work for you.
So don’t treat every second job as a red flag. A software engineer selling handmade candles on weekends isn’t a conflict. That same engineer freelancing for your biggest client is.
Family, friends and partners on the team
Hiring people you know isn’t illegal, and in a family business it’s half the point. Blanket “no family” rules sound tidy, but they’re unrealistic for most small businesses. What you avoid is anyone managing, rostering, paying or disciplining a person they’re close to.
Workplace relationships follow the same logic. Two colleagues dating is not a conflict. One supervising the other is. Fix the reporting line and leave the relationship alone.
Gifts, kickbacks and supplier relationships
A bottle of wine at Christmas is a nice gesture. A supplier-funded weekend on the Gold Coast for the person who chooses your suppliers is a conflict. The grey zone in between is exactly why a written gifts rule matters.
Private businesses have no legislated dollar limit. Pick a threshold you’re comfortable defending, require anything above it to be declared, and log it. A short Gift Policy plus a spreadsheet register covers most small teams.
Confidential information and business opportunities
Some conflicts are less about bias and more about what someone knows. An employee who hears you’re bidding on a contract, then bids through their own business, has a conflict. So does the staff member who walks your pricing over to a mate’s competing shop.
When the conflicted person is you
Nobody enjoys this one. In plenty of small businesses, it’s the founder who has the brother-in-law’s supplier or the spouse in the finance role. You still need a check on yourself.
Your policy should name who staff can go to when the concern is about you, or about whoever would normally hear it. A co-founder, your accountant or an external adviser all work.
What does Australian law say about conflicts of interest at work?
Short answer: no single statute governs every conflict of interest in the workplace for private businesses. The Fair Work Act 2009 (Cth) doesn’t create a general duty for employees to disclose second jobs or outside interests. Your protection comes from a mix of sources.
Employees: the duty of good faith and the contract
Every employee owes their employer an implied duty of fidelity and good faith. In practice, that means no competing with you while employed, no diverting your opportunities, no poaching clients and no misusing confidential information. It applies even when the contract says nothing.
Implied duties are blunt tools, though. If you want staff to disclose outside work, get approval for second jobs or declare gifts, put it in their employment contract, or in a policy the contract requires them to follow.
Directors: the Corporations Act
Company directors have statutory duties under the Corporations Act 2001 (Cth). They must act in good faith in the company’s best interests (s 181) and can’t misuse their position (s 182) or company information (s 183). A director with a material personal interest in a matter must disclose it to the other directors (s 191).
One detail plenty of guides miss: the strict rule stopping a conflicted director from voting (s 195) applies to public companies. In a proprietary company, a director who has disclosed the interest can still vote under the replaceable rule in s 194, unless your constitution says otherwise. Minute the disclosure anyway. Our guide to directors’ duties in Australia covers the full set, and this piece on avoiding director conflicts of interest goes deeper on board-level conflicts.
The discrimination trap
Here’s where well-meaning employers get burnt. Marital or relationship status is a protected attribute under the Sex Discrimination Act 1984 (Cth), and marital status is covered by the adverse action protections in the Fair Work Act. Demoting or dismissing someone because of who they’re in a relationship with can land you in a general protections claim.
The safe approach: change a reporting line for a legitimate, documented business reason, and treat both people the same way.
Whistleblower rules
Public companies and large proprietary companies must have a whistleblower policy under Part 9.4AAA of the Corporations Act. Smaller businesses don’t, but conflicts are one of the most common things people want to raise quietly. A clear reporting path helps everyone, including you.
How do you manage a conflict of interest in the workplace?
Six steps handle almost any conflict of interest in the workplace a small business will face. None of them needs a compliance team.
1. Put the rules in writing first
Start with your contracts and a short policy. Lawpath’s Conflict of Interest Policy gives you the structure in minutes, so you’re not drafting from a blank page. Whatever you use, make sure it covers:
- What counts as a conflict, with examples that fit your business rather than generic ones
- Who staff tell, how they tell them and how quickly
- Your rules on second jobs and side businesses (allowed, needs approval or off limits)
- Your gifts threshold and how to declare anything above it
- Who decides how a conflict is managed, including when the conflict involves the owner
- What happens if someone doesn’t disclose
2. Ask at the moments that matter
Don’t wait for people to volunteer. Build one question into hiring, onboarding, annual reviews and big purchasing decisions: “Do you have any outside work, investments or relationships that overlap with this role?” That’s enough.
Hiring tip: if a candidate plans to keep working for one of your clients or competitors, deal with it before they sign. Make the offer conditional on resolving it.
3. Make disclosure easy and boring
The more ordinary disclosure feels, the more of it you’ll get. A one-page form or a templated email is plenty. Ask for:
- What the interest is and who’s involved
- Which decisions, clients or suppliers it touches
- When it started
- How the employee suggests managing it
That last field matters most. Your staff member knows the day-to-day better than you do, and a fix they proposed is a fix they’ll stick to.
4. Keep a register
Log every disclosure, what you decided and a review date. A spreadsheet works fine. Store it somewhere private, though, because declarations carry personal details nobody wants circulating.
5. Pick a proportionate fix
| Situation | Proportionate response | When to step it up |
|---|---|---|
| A staff member’s partner works at a supplier | Record it; someone else approves that supplier’s quotes and invoices | They’re the only person who can assess the supplier |
| A manager is related to someone in their team | Move pay, rostering and performance sign-off to someone else | The team is too small to change who signs off |
| An employee’s side business serves your market | Written conditions: no shared clients, no company time, tools or data | It starts competing directly or pitching your clients |
| A gift above your threshold | Declare it, log it, and return or share it | It comes from a supplier in the middle of a tender |
| A director has an interest in a company deal | Disclose at board level and minute it | It’s a public company, so the director can’t vote |
Most conflicts land in the top two rows. Taking someone out of one decision fixes more problems than a formal warning ever will.
6. Review it when things change
Promotions, new suppliers, a staff member launching a business: each of these can wake up a dormant conflict. Send a quick annual reminder to update declarations and your register stays honest.
What if a conflict of interest has already caused a problem?
First, breathe. Then pause any decision the conflict touches (a tender, a promotion, a disciplinary process) until you know what happened.
Next, get the facts. What was the interest, when did it start, which decisions did it affect, and did anyone disclose it? Write everything down as you go.
Match your response to what you find. An honest oversight calls for a fresh disclosure and a management plan. Deliberately hiding a kickback is serious misconduct. If you’re heading towards a warning or dismissal, follow a fair process and give the employee a real chance to respond. Rushed discipline is how a conflict problem turns into an unfair dismissal or general protections claim, so speak to an employment lawyer before you act.
Finally, keep it need-to-know. Reinforce the policy with the team without naming anyone, and make sure whoever raised the concern isn’t punished for it.
What we see in Lawpath consultations
Our lawyers regularly advise both employers and employees on conflicts of interest. These patterns come up again and again.
- Conflict is broader than competition. Employees assume they’re fine because their side business doesn’t compete. We see real conflicts where the side business serves the same clients as the employer, or even supplies the employer, while the employee can access both sets of records.
- No clause doesn’t mean no obligation. We regularly review contracts with no restraint or disclosure clause at all. The employee still can’t compete, divert opportunities, solicit clients or use confidential information, because the duty of good faith applies anyway.
- Not every side project needs a declaration, either. Where a side business sits in a genuinely different market, our lawyers have confirmed no declaration or consent was needed under the employee’s contract. Read the contract before assuming the worst.
- The real rules hide in linked policies. Bigger employers’ contracts point to a long list of policies, and the conflict obligations live there rather than in the contract itself.
- Managers get handed the job without a playbook. A supportive but inexperienced manager asks for a “declaration and management plan” and nobody knows what goes in it. What works: list the realistic scenarios together, agree the boundaries, then document the steps.
- Stacked arrangements multiply the risk. When one worker holds several roles with the same business, say a contractor arrangement plus casual shifts, conflicts get messy fast. The contractor role might really be employment, too. Deal with each issue against the specific role, then fix the structure.
- Gift registers aren’t legally required, but they’re worth it. Founders setting up gifts rules for sales teams ask whether a register is mandatory. For private businesses it isn’t. It’s still the cheapest governance win you’ll find.
Frequently asked questions about conflicts of interest at work
What is a conflict of interest in the workplace, in simple terms?
It’s when someone’s personal interests could influence, or look like they influence, the decisions they make at work. Common examples are a second job with a competitor, hiring a relative, or accepting gifts from a supplier. It only becomes misconduct when it’s hidden or acted on.
Is having a conflict of interest illegal in Australia?
No. Having a conflict isn’t illegal. Acting on an undisclosed conflict can breach an employee’s duty of good faith, their employment contract or, for directors, the Corporations Act. The legal risk comes from failing to disclose and manage it.
Do employees have to disclose conflicts of interest?
The Fair Work Act doesn’t impose a general duty to disclose. The obligation comes from the employment contract, workplace policies and the implied duty of good faith. If you want disclosure, put the requirement in writing.
Can I stop an employee from having a second job?
You can require approval for outside work and prohibit work that competes or conflicts with your business. A blanket ban on all second jobs is harder to justify, especially for part-time and casual staff, so tie any restriction to a genuine business interest.
Should I let family members or couples work together?
Yes, with guardrails. Make sure nobody manages, pays, rosters or disciplines a relative or partner, and have an independent person make those calls. Treat the arrangement like any other declared conflict.
Can I dismiss someone for not disclosing a conflict of interest?
Possibly, if the failure is serious and you follow a fair process. Dishonesty, kickbacks or misuse of confidential information can justify dismissal. An honest oversight rarely does. Get advice first, because a rushed dismissal invites an unfair dismissal or general protections claim.
How do I handle a conflict involving the owner or a director?
Disclose it the same way you’d expect staff to. Directors must disclose material personal interests to the board under section 191 of the Corporations Act. In very small businesses, a co-founder or external adviser can act as the independent check.
Is a conflict of interest the same as workplace conflict?
No. Workplace conflict means disagreements between people, like personality clashes or disputes over workloads. A conflict of interest is about divided loyalties. The two overlap when perceived favouritism sparks tension in a team.
What is a conflict of interest register?
It’s a simple log of every declared conflict, how you’re managing it and when you’ll review it. A spreadsheet works for most small businesses. It shows you handled conflicts fairly and consistently if a decision is ever challenged.
What’s an example of a perceived conflict of interest?
A manager choosing their best friend’s company as a supplier, even after a fair quote process, is a perceived conflict. Nothing improper has to happen. The appearance of bias is enough to damage trust, so disclose it and have someone else approve.
If you’ve read this far and spotted a few undeclared conflicts in your own business, you’re in good company. Almost every small business has them. Zero conflicts was never realistic. Knowing where they sit, and having a fair, simple way to handle them, is the win.
Your next step: get your Conflict of Interest Policy in place today. Lawpath has helped 650,000+ Australian businesses get admin like this sorted in one go, so you can get back to running yours.
