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HomeMy WebLinkAbout1979-0247.Van der Linden.81-02-04;<,. :. :; <.. IN THE MATTER OF AN ARBITRATION Under The CROWN EMPLOYEES COLLECTIVE BARGAINING ACT Before THE GRIEVANCE SETTLEMENT BOARD Between: Mr. C.J.M. Van der Linden -And - The Crown in Right of Ontario Ministry of Industry and Tourism Before: Prof. K. Swinton Vice Chairman Mr. A. Fortier Member Mr. W. Walsh Member For the Grievor: Mrs. L. Stevens, Grievance Officer Ontario Public Service Employees Union For then Employer: Mr. D. Brown, Crown Law Office Ministry of the Attorney General Hearing: November 28, 1980 Suite 2100 180 Dundas Street West Toronto, Ontario .~ .., . :: .’ :_ .: - 2 - This,.is a case in which the griever, Mr. Cor Van der Linden, claims that he has been unjustly discharged by the Ministry of, Industry and Tourism. The grievor had been employed as an Industrial Development Officer 3 in the Small Business Development Branch of the Ministry at the time of his discharge, effective August 9, 1979. The grievor was ~discharged on the grounds that he had engaged ,in conduct which placed him in a position of conflict of interest between his duties as a public servant and his private interests. The 'grievor joined the Advisory Services Section of the Small Business Development Branch in October, 1974. The Ministry of Industry and~Tourism provides a consulting-‘ service to small businesses throughout Ontario, giving financial and marketing advice as requested. The service is provided free of charge to the companier, and the government bears all the expenses. Often this service is, provided by Industrial Development Officers in regional offices. More specialized help is provided on request through the Queen's Park Office, where Mr. Van der Linden worked. The grievor's field of specialization was indus- trial engineering services, although he provided more ~general business advice as well. The events giving rise to this grievance involve,a company and its president whose names will not be disclosed in this award on the request of the parties. The company will be referred to throughout as "A Company" and its ‘- 3 - president a;s "B." . , A Company is a small company, making reinforced fibreglass tanks. In the spring of 1977, B requested industrial engineering assistance from a regional office of the Ministry, and the grievor was assigned to provide the assistance. The grievor visited A Company for a ,~~%~: total of: six days .in May and June, 1977 and four days in April, 1978. Apparently, the discussion in 1977 centred. on a new product line which B wished to develop, and the grievor assisted in the design of a production process. B and the grievor got along well on a personal level, and subsequently, in April, 1978, B telephoned the grievor at his home in Mississauga and inquired whether the grievor would be interested in the possibility of a partnership with B and another person. B wanted to embark on the manufacture of reinforced fibreglass bottles for. water softeners. The-grievor agreed to enter into a rela- tionship with B, although he testified that he knew that neither B nor the third party had funds to finance the plan. The grievor himself hadno.funds. However, he agreed to try to create a business plan to present to potential sources of funds, and he worked evenings and weekends over ~the next three months to do so. In May, 1978. B requested that the grievor go to the United States on his behalf to see about the possibility of a licensing agreement between B's company and an American company which manufactured the reinforced filreglass bottles. :-:. ./ ;: f ‘T:, ‘: : B asked whether he should send the grievor expense money, and Van der Linden said no. The grievor made the requested trip on May 25 and 26, 1978. He took the 26th as part of'his vacation, but the 25th was made on Ministry time. This is proven by an expense account receipt from a Ramada.Inn in Ohio (Exhibit 31 which shows that the grievor checked in at 9:?6 p.m., having driven 310 miles from the Toronto area. me arrangement with B eventually fell apart over the early sunrmer of 1978. The grievor heard nothing from 'B, and finally someone else informed him that B and the third party had parted ways. Tothis point, the grievor ' had received nothing from B. but had incurred over $578 in expenses. in July, 1979, the events occurred which ultimately led to the discharge. The grievor was working in the area iri which A Company was located, and the grievor decided .to pay B a visit. He said that he wanted to make sure that B knew that,Van der Linden had incurred expenses in their common enterprise. Before the visit, the grievor drew up an expense account on A Company's expense form, which he . happened to have in his briefcase along with some old receipts (~Exhibits 2, 3, 41. The amount claimed was $578.80. He testified that he was not too particular about dates and accuracy, as he did not.expect that he would be paid, for A Company's assets were under the management of' a bank. The grievor also stated ~that he did not expect -5- that the expense account would be compared with any other. In fact, the account was subsequently compared with ones which he had submitted to the Ministry in May and June of .1978 and for which he had been paid. Ten items were duplicated on the two'forms (Exhibit 2). The grievor's evidence was somewhat $:quivocal as ,., to his motive. He said that he compiled thei'form to em- phasize to B that he had not been paid and that B could do with it as .he wished - use it for a tax deduction, reimburse the grievor, feel bad, nor ignore it. The grievor met with B and had dinner with B's family. Sometime in the evening, expenses were discussed, and B reqdested the account.' saying he would see ~if he could take care of it. The grieior said that he submitted the account, still not expecting payment,, and parted with B as a friend. The ,account was never paid. Instead, B took the expense account to the Ministry's Regional Office and showed it to personnel there. The account was then for- warded to Toronto, where it was compared with accounts submitted to the Ministry and the duplications mentioned above were identified. The grievor, when asked to explain, stated that he had made an error with regard to the dupli- cate expenses. Otherwise, the grievor felt that he had done nothing wrong, as he had not made any money out of his venture with B. The Ministry disagreed and, after further investigation, discharged him effective August 9, - 6 - 1979 on the;.basis of a conflict of interest between his activities and his obligations as. a public servant (Exhibit 101, contrary to s. 33 of 0. Reg. 749 under the Public Service Act, R.S.O. 1970, c. 386, as amended, dealing with conflict of interest. That section reads: CONFLICT OF INTEREST 3. (1) A public servant shall not engage in any outside work or business undertaksng, (al that interferes with the performance of his duties as a public servant; fbl in which he has an advantage derived from his employment a8 a .pubZic servant; Ic) in which his work would otheroiwe con- stitute full time employment for another person; or (d) in a professional capacity that will, or is likely to, infzuetice, or affect the carrying out -of his duties as a public qervant. (2) Whenever a pubZic servant considers that he could be invoZved in a conflict of interest in that he might derive personat benefit from a matter which in the course of his. duties a8 ‘a. pubZic servant he is in a posi- tion to inftuence, he shalt disclose the situation to his deputy minister, agency head or minister, as the case may be, and shalt abide by the advice given. (31 Whenever a pubZic servant considers that he couZd be in a position of confzict with the interests of the Crown arising from any of his’ outside activities, he skaZZ disctowe the situation to his deputy minister, agency head or minister, as the case may be, and wkaZ1 abide by the advice given.. (4) Contravention of any of the provisions of subsection 1 or disregard of the provisions of subsection 2 or 3 may be considered as cause for diemiwwaZ. 0. Reg. 605/?3, 6.2. - 7 - The issue i; this case is whether the grievor was in fact in a position of conflict of interest due to his relationship with B and, if so, whether this conduct provides just cause for discharge. The government established guidelines for public servants to assist in identifying conflicts of interest in October, 1973 (Exhibit 7 and the regulation quoted above). A memorandum discussing those guidelines dated December 11, 1975 has circulated to all employees of the Ministry of Industry and Tourism (Exhibit 81, and the grievor acknowledged that he had seen the memorandum. It reads in part as follows: CONFLICT OF INTEREST AZZ emptoyeew are reminded that a confZict of interest situation can exist even where there is not a direct monetary advantage to the employee. (A memorandum to this effect was went to aZZ staff tit the end of 1973, and a copy of the Chairman of l’ke CiviZ Service Commission’s directive on the subject, dated October 22, 1972, has been given ~to eack~civil servant who has been appqinted to staff wince that date. 1 ExampZew of ConfZict: 1) Where the pubZic servant may infzuence the de’ciwionw of the Government in deaZing with a company which conducts business with the Govern- ment, when the company is 1argeZy owned. or con- troZted by a pubZic servant or an immediate re Zative, or in which he may have an interest. 21 Where the pubZic servant may influence the decisions of a m2niwtry in respect of a parti-.- cutar company or municipqz body which is appZying to a ministry for a loan, grant or other advan- tage, when the pubtic servant has a significant rewponwibitity in the affairs of the appZicant ‘(e.g., he is a trustee of a wckool board.) -8- 3) 41 I’ 51 Ow’nerwh$p by a public servant of Zand or other property where a decision by the Government to reaZize or improve the property vaZue may be influenced by the pubZic servant. Where a pubZic servant accepts favourw from an individual, organization or corporation which deaZw or may deaZ with the Ontario ~Government and where the public servant is or may be in a position to infZuenc& the dealings. When meinberw of a pubZic servant’s immediate family receive pe.;wonal benefit aa a rewuZt of the position of the pubZic servant. The appropriate reguzation under The PubZic Service Act indicatew,that when an empZoyee is, or beZievew he may be, in a position of conflict, he must diwctowe this to his deputy minister. It wkouZd atso be noted that a conflict of interest can be said to exist if the situation can be perceived to be in confzict with the employee’s responsibilities as a public servant. This latter-point is ewpeciaZZy important in a Minirrtry such aw ours which wo often acts in a conwuZtative capacity and in doing so is of necessity privy to highly confidential informa- tion regarding private enterprises. It is by no lpeans easy to set out a code of circum- stances which const5tute.a conflict of interest, for the existence thereof may turn on questions of fact such as the job of a Particular public servant and the extent of the interaction with a party qutside the government. In many of the examples listed in Exhibit 8, one sees circum- stances in which the public servant receives some form of pecuniary advantage from the combination of an outside relationship aid misuse, or the possibility of misuse, of the public servant's job in order to serve that outside interest. Such a conflict was held to be grounds for -9-. discharge in the McKendry and Treasury Board case, 166-2-674 (Jolliffe), where a senior public servant at the federal level, who was responsible for authorizing government grants, engaged in trading in the stock of an applicant companywhile the fact of governmentassistance was still secret. He also engaged in extensive negotiations with the applicant for a job. Both actions were held to be conflicts of interest. Here, the grievor would have us define conflict of interest in narrow terms. He has claimed that he was not in a position of conflict of interest because he did not stand to gain financially from his association with the Ministry's client. Were this Board to accept this propo- sition, we.would be placing much too narrow a definition on the phrase "conflict of interest". The first sentence of the Ministry's guidelines in Exhibit 8 explicitly states . that conflict of interest can occur even where there is no direct monetary advantage to the,employee, and places an onus on an employee to consult with his Deputy Minis.ter if he is in a possible conflict of interest situation. In deciding whether a.public servant is in a position of conflict of interest, a Board such as this should look to whether the public servant has,placed himself in a situation where his personal interests or activities interfere with his ability to carry out his obligations as a public servant or interfere with the government's ability,to carry on its programmes for the service of the public. -.lO - Mr. Brown for the employer argued that the grievor's involvement with B has damaged the government's interests in two ways: first, he expressed concern that other businesses which are potential clients of the Ministry will fear to disclose confidential information least it be used by government employees for personal advantage; < and secondly, th@t A Company's position with the Ministry .,. has been affected in some undefined fashion. It is difficult to put a great deal of weight on this second point, for the detriment to the Ministry was not specified; The grievor never gave A Company any special favours nor committed the Ministry to any obliga- tions to A Company. Surely, any future application for funds which A Company might make to the government can and will be considered on neutral grounds, and the govern- ment is not harmed in its relationship with A Company by the grievor's conduct. Of greater concern is the employer's first argument with regard to the perceptions of the Ministry by other companies. One can well understand the Ministry's desire to safeguard the reputation of its business consultation programme. It might be questionned whether the grievor's 1involvement with a client at the client's invitation would necessarily imply that he would abuse confidential informa- tion by another client, or that others would draw such an inference. According to Mr. John Laschinger, who was - 11 - Director of;*the Small Business Development Branch, the a Ministry feels the necessity of presenting an appearance of neutrality by its employees, so that even the most cautious of clients will feel secure in releasing its information. The Ministry cannot risk the possibility that a client will fear misuse of confidential information by an enterprising entrepreneur employed by the government to its detriment or that the client will distrust the advice given because the employee who proffers it is, or might be, engaged in activity competitive with that of the client. .Therefore, outside business activity in this Branch appears to interfere with the public servants' performance of their duty and that of the Branch. There is a fine line to be drawn, in deciding whether a conflict of interest exists because of employee business conduct, so as to recognize certain inevitable circumstances. A business client in contact with a'govern- ment official may well become impressed with the official's capabilities and wish to engage his or her services. Surely, such an offer does not automatically constitute a conflict of interest. Whether it does will depend on the circum- stances, as Adjudicator Jolliffe stated in the McKendry .case above, and particularly whether the employer's interests are prejudiced by the association. In this particular case, we are not dealing with a job offer, but with a business relationship extending over - 12 - . several months. Furthermore, it appears that there was - actual prejudice to the employer, in that the grievor's private relationship with B directly interfered with his obligations to the Ministry. In addition, there is an appearance of conflictof interest, discussed above, which constitutes grounds for discipline. The prejudice to the employer arises from the grievor's failure to separate his private business inter- ests from his- employment obligations. He used government time on occasions in May, 1978 to do business for B. This included'the trip to Ohio and a subsequent trip to see B in May, 1978. In addition, the grievor submitted expense accounts to the government for expenses incurred in his private dealings. This is a very serious conflict, even if the submission to the government was an oversight, as he testified. The grievor placed himself in a position where it was important that he distinguish private and public ' interests and he failed to do so. The grievor claimed that even if he was in a conflict of interest situation, he did not realize it and believed that he was doing nothing wrong. Having considered Mr. Van der Linden's evidence, it appears that he has not been 'altogether forthright. For example, he stated that he entered into'dealings with B in April, 1978 as an "exercise", ratlier than as a potential profit-making arrangement. That is, he testified that he enjoyed the intellectual challenge of putting together a plan, never anticipating success or the reality of partnership. This is difficult to accept - 13 - in, light of-the fact that he voluntarily.incurred several hundred dollars worth of expenses during the "exercise". Furthermore, in a voluntary statement to his supervisor dated August 12, 1979 (Exhibit 51, he stated, “Hot) often i is one invited. to actively participate in a multi-million dollar venture having to invest onZy his time and effort to acquire an equity position?” The grievor was also equivocal about the reason why he presented the expense account to B a year later. It is difficult to accept his original explanation that he only wanted to make a point to B or to give him a tax'deduction, particularly in light _I of the precise detail shown in the expense account and the furnishing of receipts. He also admitted on cross- examination that he would have taken the money sought, had it been offered. In considering all the evidence, it appears that the grievor.knowingly became involved with B in April, 1978 in a private business arrangement which he hoped would lead to personal profit. He realized that this activity must remain separate from his employment, and he tried to do so, although he failed in this endeavour. He knew that the conduct should be separate from his job, -and by implication, he should have known that failure to do so placed him in a conflict of interest. Therefore, we cannot accept his submission that he did not know he was in a conflict of interest position. - 14 - This leads to the question of apprapriate penalty. Counsel for the Union submitted two cases in which con- flicts of interest did not result in discharge and argued that they should be followed. In Gouveia and Treasury Board, 166-2-3185 (Jolliffe), a benefits officer for the Unemployment Insurance Commission received a two-month suspension for failing to report a possible fraud on the Unemployment Insurance Plan by a friend. In Re Regional Municipality of Hamilton - Wentworth and Canadicin Union of PubZic Employees, Local 167 (1978), 18 L.A.C. (2d) 46 (Kennedy), an assistant planner who had a priva~te business as a landscape architect was reinstated without back pay, with a penalty amounting to a suspension of ..T ..: over one year:. In that case, reference was made to the grievor's honest belief that he was not in a position of conflict of interest, that he had previously been permitted to engage in outside projects not involving clients before his department, and that there was no evidence of actual damage to the employer from the griever's activities. While that case could be distinguished, in that the employer here has been damaged by the grievor's activities because his outside activities interfered with his job, it -is important to canvass the issue as to whether "actual" damage is necessary to warrant discharge for conflict of _ interest. The employer's witnesses and counsel have em- phasized the importance to the Ministry's operations of protecting its reputation as a disinterested party offering - 15 - i- A professional information to private business clients. Employees who engage in entrepreneurial activities for their own interest may well create feelings of apprehen- sion in clients of the Ministry, particularly if they may be potential competitors. Therefore, the Ministry is justified in trying to prevent such activity and in stressing the importance of avoidance of any appearance of conflict of interest by imposing the penalty of discharge, even in the absence of proof of actual harm. In light of all the evidence, including both the actual conflict of interest here and the appearance of conflict of interest created by such active involve- ment with a private.business, and the importance to the Ministry of preventing.such conduct, we are not prepared to disturb the finding that discharge was an appropriate penalty. Mr. Van der Linden refuses to acknowledge that he should not have engaged in the 'activity with 'B.~ How- ever, he appeared‘to treat the activity as "private" all along, and his filing of the expense account one year later and his explanation therefor lead to doubts about his testimony that-he did not perceive any conflict. He had been informed of the government's guidelines and the gravity of non-compliance.. As a result, the discharge is upheld and grievance is dismissed. . . : ;:i, ,..’ : - 16 - ;- e Dated at Toronto this 4th day of February 1981. Prof. K. Swlnton Vice Chaxman "I concur - A. Fortier" Mr. A. Fortier Member "Dissent to follow" Mr. W. Walsh Member /lb