Failure to take measures to prevent and resolve conflicts of interest: labor law issues

Basalaeva Svetlana Pavlovna PhD in Law Associate professor, Senior Scientific Associate, Department of Labor and Environmental Law, Siberian Federal University 660075, Russia, Krasnoyarskii krai, g. Krasnoyarsk, ul. Maerchaka, 6, aud. 3-04 s.p.b@mail.ru Other publications by this author

In labor relations, for corrupt behavior in a conflict of interest situation, it is possible to dismiss an employee according to clause 7.1 of Part 1 of Article 81 of the Labor Code of the Russian Federation (hereinafter - the Labor Code of the Russian Federation). The objective side of the disciplinary offense provided for by this norm consists of three significant parts. These are "conflicts of interest", "failure to take measures to prevent and resolve this conflict" and "loss of trust". The subject of this article will be the second category of the objective party – failure to take measures to prevent and resolve conflicts of interest.

         Measures to prevent and resolve conflicts of interest have been studied by such scientists in the field of administrative and service law as S.E. Channov, V.Y. Panteleev, T.R. Meshcheryakova, E.V. Parkhomenko.  Their works will be cited in the course of this study. The labor law doctrine pays extremely little attention to this topic.

         Meanwhile, from the point of view of labor law, a number of questions arise when investigating this employee behavior.

         1. What measures can be taken?

2. Who should take such measures? Should it be the employee himself who is a party to the conflict of interest? Or should the employer offer them to the employee? Does the employee have the right to refuse the measures offered to him and insist on his own measures?

3. What should I do if no action can be taken?

4. What does prevention mean and what does settlement mean? And why is disjunction used in the construction of the norm?

We will consistently consider these issues through the prism of labor law institutions. For the purposes of the research, the general scientific method of dialectical cognition will be used, as well as private scientific methods: technical-legal, systemic-structural, formal-logical, comparative-legal.

Types of measures to prevent and resolve conflicts of interest. Federal Law No. 273-FZ dated December 25, 2008 "On Combating Corruption" (hereinafter – the Law "On Combating Corruption") states that the prevention or settlement of a conflict of interest may consist in changing the official or official position of a person who is a party to a conflict of interest, up to his removal from the performance of official (official) duties in accordance with the established procedure. in accordance with the procedure and (or) in the refusal of his benefit, which was the cause of the conflict of interests, and are also carried out by recusal or self-recusal of the specified person in cases and in accordance with the procedure provided for by the legislation of the Russian Federation (Part 4, Part 5 of Article 11).

As you can see, the legislator provides four ways to prevent or resolve conflicts of interest:

1) change of official (official) position;

2) suspension from performance of duties, as a special case of a change in official position;

3) refusal of the benefit that caused the conflict of interest;

4) recusal or recusal in the cases and in the manner prescribed by law.

As for recusal (recusal), the labor legislation does not provide for such cases. Nevertheless, this measure can be applied in labor relations as an organizational measure. It can be considered as an employee's refusal to interact with certain persons, non-participation in certain procedures. For example, the employee's non-participation in the audit of the organization from which he received income or in which his relative works; recusal (recusal) during voting in collegial bodies. This measure does not require a special regime from the point of view of labor law, the employer can apply it at his discretion.

A similar statement can be made with regard to the rejection of benefits that caused a conflict of interest. This measure does not require labor-legal registration and does not entail labor-legal consequences. Moreover, its implementation often lies behind the redistribution of labor relations. For example, this is the sale of certain financial assets by an employee or his dismissal from another job.

The other two of these measures are mediated in the norms of labor legislation. Thus, suspension from work is regulated by Article 76 of the Labor Code of the Russian Federation, which contains a list of grounds for suspension from work. These include: appearing at work in a state of alcoholic, narcotic or other toxic intoxication; failure to undergo training and testing of knowledge and skills in the field of occupational safety; failure to undergo mandatory medical examination, etc. The situation of a conflict of interest among the grounds in the Labor Code of the Russian Federation is not named. However, Article 76 of the Labor Code of the Russian Federation contains a reference norm to other cases provided for by the Labor Code of the Russian Federation, other federal laws and other regulatory legal acts of the Russian Federation. Part 4 of Article 11 of the Law "On Combating Corruption" can be attributed to such cases. Therefore, suspension from work as a measure to prevent or resolve conflicts of interest is possible in employment relations.

Note, however, that this measure puts the employee in an unfavorable position. As a general rule, according to Article 76 of the Labor Code of the Russian Federation, wages are not retained for the period of suspension, except in cases provided for by the Labor Code of the Russian Federation or other federal laws. Accordingly, the legislation does not provide for such exceptions for dismissal in connection with the settlement of conflicts of interest for employees. At the same time, for civil servants for the period of removal from a position in a similar situation, the monetary allowance is maintained (Part 4 of Article 32 of Federal Law No. 79-FZ dated 07/27/2004 "On the State Civil Service of the Russian Federation"). The legislation on public service does not apply to labor relations. Obviously, such legal regulation is unfair, because on the one hand, it establishes adverse consequences for an employee in the absence of illegal actions on his part, on the other hand, it creates a discriminatory situation against employees compared to civil servants and, finally, reduces the effectiveness of suspension from work as an anti-corruption security measure. We consider it necessary to provide for the possibility of maintaining wages in connection with suspension from work for the period of conflict of interest settlement in the Law "On Combating Corruption".

Let's now consider the main way to prevent and resolve conflicts of interest – changing the official (official) position. In some cases, it is impossible to resolve a conflict by "withdrawing" an employee from participating in any activity or interacting with any person (natural or legal) if such activity or interaction is permanent when the employee performs his work function. For example, a relative works in a department controlled or subordinate to an employee.

From the point of view of labor law, a change in official position is possible by transferring to another job. Moreover, the transfer is both a change in the position of an employee and a change in the labor function while maintaining the previous position. In any case, in accordance with Article 72.1 of the Labor Code of the Russian Federation, a transfer is possible only with the written consent of the employee. Exceptions are set for temporary transfers for a period of no more than one month. This is possible only in the event of an accident, natural disaster, downtime caused by extraordinary circumstances and other exceptional cases that endanger the life and normal living conditions of the entire population or its part (Parts 2, 3 of Article 72.2 of the Labor Code of the Russian Federation). In case of production necessity or other objective circumstances, such as the presence of a conflict of interest, transfer without the consent of the employee is not allowed.

A kind of "window of opportunity" for the employer is such an adjustment of the employee's job responsibilities that would not lead to a change in the labor function, would not be a transfer and, as a result, would not require the employee's consent.

In judicial practice, such a position is supported that the employer has the right to independently determine the scope of the employee's duties, increase or decrease their volume, taking into account the specifics of the work. At the same time, clarifying job responsibilities does not mean changing the terms of the contract. (Appellate rulings of the Moscow City Court dated 11/24/2016 in case No. 33-47236/2016, Omsk Regional Court dated 04/29/2015 in case No. 33-2668/2015, Kirov Regional Court dated 01/16/2014 in case No. 33-20/2014; Cassation rulings of the Supreme Court of the Udmurt Republic dated 10/19/2011 in case No. 33-3741/11, Rostov Regional Court dated 07/11/2011 in case No. 33-9512). It should be noted at the same time that there are also opposite court decisions based on the fact that any provision of the job description is a condition of the employment contract, and any change requires the consent of the employee. (Appeal ruling of the Sverdlovsk Regional Court dated 04.10.2016 in case No. 33-17060/2016; Rulings of the Supreme Court of the Komi Republic dated 16.07.2012 in case No. 33-2986AP/2012, Irkutsk Regional Court dated 27.01.2012 in case No. 33-716/2012; Cassation ruling of the Supreme Court of the Altai Republic dated 27.10.2010 in case No. 33-644) ^{[1, p. 21]}. And although such a legal position is not dominant, nevertheless, any change in the official position of an employee without his consent creates, from the point of view of labor law, the risk of recognizing this decision as illegal, because such a construction as "adjustment of official duties without changing the labor function" is not normative, but is based on interpretation by judicial practice. In addition, the line between refinement and modification is very thin. Nevertheless, we believe that an employer can use this tool as a measure to resolve a conflict of interest, with a certain degree of caution, given the possibility of "turning" a change in job responsibilities into a change in labor function and, consequently, a transfer.

We have reviewed all the measures specified in the Anti-Corruption Law. We believe that the list of these measures is not exhaustive. Moreover, the very construction of the norm of Article 11 of the Law "On Combating Corruption" is constructed dispositively: "prevention or settlement of a conflict of interest may consist in ...".  So, what other measures are possible to prevent and resolve conflicts of interest?

The scientific literature ^{[2, 3, 4]} provides such additional measures (they are given as measures to prevent and resolve conflicts of interest in the civil service, but they are quite applicable in labor relations):

- restriction of employee's access to specific information;

- strengthening control over the performance of duties by a civil servant, in the course of which a conflict of interest arises;

- establishment of a collegial decision-making procedure on issues related to a conflict of interest;

- temporary delegation of powers of a civil servant who is a party to a conflict of interest to another employee;

- suspension of a civil servant on a permanent or temporary basis from performing functions that caused or caused a conflict of interest.

Based on such doctrinal proposals, the Ministry of Labor of the Russian Federation in Methodological Recommendations provides a number of ways to resolve conflicts of interest: removing an employee from making a decision that is the subject of a conflict of interest; removing an employee from performing work duties in relation to a parent, subsidiary or otherwise affiliated organization; introducing external control over the actions of a person (coordination with another employee or by a collegial body, an inspection by an anti-corruption unit, etc.).

All these measures, in our opinion, are ways to change the official position (work responsibilities) of an employee.

Failure to take measures to prevent and resolve conflicts of interest. Now let's move on to the most difficult issue of our research – the illegal behavior of an employee, which is the basis for dismissal. Let's consider what it means: "failure to take action."

First, let's turn to the subject of behavior in this part of the offense. Who should take action: is the employee himself or the employer represented by a representative? Some measures can be taken by the employee himself, such as giving up benefits. But everything else – suspension, transfer, change of official rights and duties (exclusion of certain types of activities, restriction of access to information, introduction of a collegial form of decision–making, etc.) - can only be done by the employer. Any legally significant actions in an employment relationship can only be performed by an employer. Even the employer must accept self-recusal (the employee's refusal to participate in some kind of labor action), otherwise it will be a failure to fulfill labor duties for the employee.

From this it can be concluded that the obligation to take measures to prevent and resolve conflicts of interest lies primarily with the employer – his representative. However, as can be seen from the wording of the composition of the disciplinary offense in paragraph 7.1 of part 1 of Article 81 of the Labor Code of the Russian Federation, the subject of this offense is only the employee himself. Because this reason for dismissal is established only for an employee who is a party to a conflict of interest. Accordingly, the head of such an employee (a representative of the employer), on whom the adoption of these measures depends, cannot be dismissed according to clause 7.1, part 1 of Article 81. This is a very strange situation. Moreover, the legislation on state civil service establishes the dismissal of the employer's representative in this case (Part 4.1 of Article 19 of the Law "On State Civil Service in the Russian Federation"). The labor legislation does not provide for such an opportunity.

What measures of responsibility can be applied to the head of an employee who is a party to a conflict of interest? The obligation of the employer to take measures to prevent and resolve conflicts of interest in the event that he became aware of such a situation is established by law (Part 3 of Article 11 of the Law "On Combating Corruption"). Consequently, failure to fulfill this obligation by an employer's representative in an employment relationship will be a disciplinary offense, for which another disciplinary penalty (other than dismissal) may be imposed – a remark or reprimand.

So, the subject of dismissal under clause 7.1 of Part 1 of Article 81 of the Labor Code of the Russian Federation is an employee who has a conflict of interest. What does "failure to take action" mean for him? It means rejecting the measures that the employer offers him. For example, an employee refuses to resign from a collegial body, does not agree with the introduction of additional control, with the restriction of his rights, with the withdrawal of some labor functions, with his withdrawal from participation in certain labor actions, etc. - all this can be considered as part of a disciplinary offense: "failure to take measures to prevent and resolve conflict of interest", for which dismissal is possible.

This is how it is understood in the scientific and practical literature ^{[5, p. 199; 6]}.

But it is difficult to agree with such a straightforward approach. In this situation, we see two problematic issues that have not been reflected in the literature and have not been taken into account by judicial practice.

1. Can an employee's refusal to transfer to another job be considered as a failure to take action?  Because, as mentioned above, the transfer is allowed only with the consent of the employee. Here there is a conflict between translation, which is a common labor law construction, and translation, which is a measure of conflict of interest settlement. A way out of this conflict would probably be possible through the ratio of the general and special norms, but the situation remains controversial anyway, because the understanding of translation as a measure to resolve a conflict of interest has not been formulated by the legislator as a norm.

2. Is the employee necessarily obliged to agree with the measures proposed by the employer? Perhaps he has his own vision of resolving a conflict of interest situation, and he suggests (may suggest) other settlement measures to the employer. For example, an employer considers it necessary to transfer an employee to another position or introduce an additional managerial position over him, and the employee declares that he will refuse benefits or will always recuse himself from labor actions in a conflict of interest situation. In short, how to resolve the contradiction between the measures proposed by the employee and the employer, what in this case is considered "non-acceptance"?

We believe that the priority of the decision here should be given to the employee. Let's not forget the very nature of labor relations, in which the employee is the "weak side", and the norms of labor legislation are aimed at protecting the employee from abuse by the employer of the economic power he has, with all its manifestations: dispositive, normative, disciplinary, organizational. Yes, of course, the duty to combat corruption imposes on these legal relations a complex imprint of protecting the public interest. But why should we assume that the employer will certainly protect this interest better than the employee? After all, both the employee and the employer are essentially equally indifferent to the public interest of combating corruption. In the sense that for them it is an external interest that does not lie within the labor relationship. For both the employee and the employer, the protection of such an interest is the fulfillment of a duty established by the State. Accordingly, if they are in an equal position in relation to the public interest, then their unequal position in relation to each other in labor relations should be taken into account.

Yes, of course, we can say that an employee can propose an imaginary measure, since he may be interested in maintaining a conflict of interest situation in order to get personal benefit from it. For example, such an imaginary measure may be the employee's self-dismissal when voting in a collegial body, since other employees will still be under his influence or associated with him. But the same – imaginary – measure can be offered by the employer. For the employer may also be interested in maintaining the employee's official position unchanged for various reasons: unwillingness or complexity of personnel changes, the employee's value as a specialist, the employee's authority in the organization, etc.

Therefore, we believe that when resolving a conflict of interest, priority should be given to the measures proposed by the employee. If their implementation is objectively impossible, then the employee is obliged to take the measures proposed by the employer. Otherwise, the employer has ample opportunities to abuse the right to resolve conflicts of interest. Firstly, if he wants to dismiss an employee, he can propose measures that are obviously unacceptable to him. Secondly, having the personnel power, he can intentionally create a conflict of interest situation for an undesirable employee.

A slightly different approach to the issue of choosing measures to prevent and resolve conflicts of interest is also possible. If, as before, the priority of choosing measures remains with the employer, then it is possible to provide for his obligation to propose measures from more "soft" to more "hard". Such a proposal is expressed in the literature as a recommendation for the implementation of the anti-corruption policy of the organization ^{[7, p. 194]}.

Separately, in the context of this article, I would like to draw attention to the notification by the employee of the employer of a conflict of interest. Is this a measure to prevent and resolve conflicts of interest? As we saw above, she is not named among the measures by the legislator. However, in accordance with Part 2 of Article 11 of the Anti-Corruption Law, an employee is obliged to notify about a conflict of interest or the possibility of its occurrence as soon as he becomes aware of it. In the literature ^{[8, pp. 200, 206]} and in judicial practice, notification is considered as one of the measures to prevent conflicts of interest, for failure to accept which dismissal is possible (Decision of the Kaluga District Court of the Kaluga Region of February 6, 2020 in case No. 2-290/2020; Ruling of the Fourth Cassation Court of General Jurisdiction of October 27, 2022 on case No. 88-24904/2022; Ruling of the Eighth Court of Cassation of General Jurisdiction dated January 18, 2024 No. 88-1571/2024).

On the one hand, we should agree with this. Indeed, notification of a conflict of interest is the most important anti–corruption measure, and in the vast majority of cases, the employer becomes aware of a conflict of interest precisely from employee notifications. Therefore, the establishment of a sanction for its non–compliance is a necessary condition for the efficiency of the procedure for identifying a conflict of interest.

On the other hand, this approach is questionable. Firstly, formally and legally these are different responsibilities: notification of a conflict of interest (Part 2 of Article 11 of the Law "On Combating Corruption") and taking measures to prevent and resolve a conflict of interest (part 4 of Article 11 of the Law "On Combating Corruption"), and dismissal in paragraph 7.1 of Part 1 of Article 81 of the Labor Code of the Russian Federation it is established only for failure to take measures. The law enforcement officer uses, in our opinion, an ill-founded broad interpretation of the duty of non-action. Interestingly, having embarked on this path – an expansive interpretation of the category of failure to take measures to prevent and resolve conflicts of interest – law enforcement practice goes further, including, for example, failure to notify any persons about contacting an employee in order to incite corruption offenses (the Appellate definition of the IC in Civil Cases of the Supreme Court of the Chuvash Republic - Chuvashia dated November 9, 2015 in case No. 33-4629/2015, the Appeal ruling of the IC on Civil cases of the Samara Regional Court dated November 14, 2017 in case No. 33-14425/2017). D.E. Zaikov cites these examples from judicial practice in one of his works, pointing out the illegality of such an approach ^{[8, p. 32]}.

Secondly, it is obvious that failure to inform about a conflict of interest, refusal to resolve a conflict and acting in a conflict of interest with personal gain are different in degree of illegality of the employee's actions, and they should entail different measures of responsibility. In our law enforcement practice, these acts are combined into one offense – failure to take action, and entail the dismissal of an employee. We believe that this is not a completely fair approach. But this issue requires a separate study.

Speaking about the category of non–acceptance of measures, we will designate another problem - "the impossibility of acceptance". What should I do if the existing conflict of interest cannot be resolved in any way? There are two options here: either permission to act in a conflict of interest, or dismissal of the employee. Neither one nor the other is provided for by Russian legislation. As for dismissal, the Labor Code of the Russian Federation provides only for dismissal as a measure of disciplinary responsibility of an employee. In a situation where it is impossible to resolve a conflict of interest, there is no unlawful behavior of the employee, and the application of this measure is impossible. In this case, another reason for termination of employment relations should be provided – not on the initiative of the employer and not for the guilty behavior of the employee, but under circumstances beyond the control of the will of the parties. In addition, it would be possible to consider the possibility of allowing action in a conflict of interest – if settlement is impossible and the benefits are insignificant. In the meantime, we have a situation of legal deadlock, which is also still awaiting its investigation and resolution.

The relationship between the concepts of "prevention" and "settlement" of conflicts of interest. The Labor Code of the Russian Federation in the paragraph 7.1 of Part 1 of Article 81 under consideration uses the construction "measures for prevention and settlement". Are these different measures? Are prevention and resolution different activities of an employee in relation to a conflict of interest? As can be seen from the above, the legislator does not separate prevention measures and settlement measures, although he uses a disjunction in the construction of the norm of clause 7.1, Part 1 of Article 81 of the Labor Code of the Russian Federation – "prevention or settlement", that is, as if assuming that these are different types of employee behavior. But the measures themselves are not shared, just as the legal consequences of this behavior are not shared – in both cases, the employee should be dismissed.

Note that the legislator treats the formulation of these types of employee behavior – prevention and regulation – with a certain degree of negligence. The Anti–Corruption Law uses a disjunction (union "or") in Parts 3, 4 and 6 of Article 11, and a conjunction (union "and") in Part 5 of the same article. The Law "On State Civil Service in the Russian Federation", just in case, uses both – "measures to prevent and (or) resolve conflicts of interest" (paragraph 1, part 1 of Article 59.2). All this also indicates that the legislator views prevention and settlement as synonymous. Of course, these concepts are not synonymous from the point of view of the Russian language and denote different situations, but let's call them "legal synonyms", because they have the same legal regime.

This approach does not seem entirely justified. And it's not just about the legal technique. Since conflict of interest prevention and its resolution are indeed different types of activities, they should be regulated in different ways. The more precisely the legal regulation corresponds to the specifics of public relations, the more effective the law is. Especially in such a complex and delicate issue as combating corruption in private or public-private legal relations, where the filigree skill of the legislator is required to coordinate the state interest in fighting corruption, the private interest of the employer and the employee's labor rights.

Examples can be given of foreign legislation that distinguishes between prevention measures and measures to resolve conflicts of interest. In this case, prevention is understood as a set of preventive measures in the form of anti-corruption prohibitions and restrictions, as well as obligations to exclude potential conflicts of interest from their public activities. Thus, I.P. Kenenova, in her comparative legal study of this issue, gives such an example. According to Part 2 of Article 3 of the Law of March 16, 2006 No. 159/2006 "On Conflict of Interests of the Czech Republic", you cannot use any information obtained in connection with your position to gain material or other benefits for yourself or any other person; seek the help of your subordinates on issues related to personal interests, for example doing business; using your name or image together with your official title for commercial advertising purposes for payment ^{[9, p.66]}. S.G. Eremin gives a similar example from the legislation of Croatia ^{[10, p.103]}.

We do not insist on the need for such an approach in Russian legislation. Perhaps this is excessive regulation, which complicates law enforcement, but it is also not possible to ignore the issue of the ratio of prevention and settlement of conflicts of interest. Because "superfluous words" are unacceptable in legal norms.

Thus, in the course of the study, conclusions were drawn:

- on the need to maintain wages for an employee in connection with suspension from work for the period of conflict of interest settlement;

- the contradiction between the change of official position as an anti-corruption measure and the restriction of transfer to another job as a labor law guarantee; 

- on the impossibility of dismissing an employer's representative for failure to take measures to prevent and resolve conflicts of interest and on the application of other disciplinary measures against him;

- the need to establish a priority right for the employee to choose measures to prevent and resolve conflicts of interest in order to avoid abuse of this right by the employer;

- on the unreasonableness of including in the category of failure to take measures to prevent and resolve conflicts of interest failure to inform about conflicts of interest and about inducement to commit corruption offenses;

- on the existence of a legal impasse if it is impossible to resolve a conflict of interest and on ways out of it: the introduction of an appropriate reason for dismissal due to circumstances beyond the control of the parties and permission to act in a conflict of interest if the benefits are insignificant;

- the difference between the concepts of "prevention" and "settlement" of a conflict of interest.

Concluding the article, we also note that in addition to the private legal problems of the institution of "failure to take measures to prevent and resolve conflicts of interest", our research once again highlighted a conceptual problem that has long been overdue in legal science – the need for a unified approach to combating corruption in official and labor relations. Of course, on the basis of the principle of unity and differentiation of legal regulation, establishing general rules based on the identity of the legal nature of relations, and specific rules reflecting their industry specifics.