I.        INTRODUCTION

Judgment 595/2026 of 28 May 2026 of the High Court of Justice of Santander (hereinafter ‘TSJ’)[1] analyses the employment law consequences arising from a breach of a company’s internal policies on conflicts of interest.

The judgement confirms the validity of the disciplinary dismissal of an employee who failed to disclose a family connection with a subcontractor whose work he was required to supervise, and who continued to oversee that work without the company being able to assess the conflict beforehand or authorise his actions.

The judgement highlights the importance of ensuring that compliance programmes are not limited to general statements of principle, but instead translate identified risks into specific obligations for those subject to the system, establish procedures for reporting and managing them, and enable a response to non-compliance.

   II.        CONFLICT OF INTEREST AND THE OBLIGATION TO REPORT IT

Although the employee did not participate in the selection of subcontractors, was not involved in the tendering procedures, did not manage tenders, and did not approve invoices or payments, his duties included controlling, supervising, and approving the work carried out on site, including work carried out by subcontractors.

During the employment relationship, the employee’s mother and the site manager’s wife acquired shares in a company. The employee’s mother was appointed sole director, and the site manager’s wife was appointed authorised representative. After amending its corporate purpose to engage in activities related to telecommunications and electricity, the company was contracted to carry out work on the construction sites where both employees were performing their duties.

Despite this connection, neither the worker nor the site manager disclosed the situation to the company. In particular, about the appellant, there was no written communication, nor was it established by any other means that he had provided such information.

  III.        THE IMPORTANCE OF THE COMPANY’S COMPLIANCE POLICIES

The company had codes of ethics and conduct, anti-corruption standards and policies specifically aimed at preventing conflicts of interest. These rules did not merely state a general need to act with integrity; they set out specific obligations.

The internal regulations defined a conflict of interest as any situation in which an employee’s or a related person’s personal interest might conflict with the organisation’s interests and compromise their objectivity or professionalism. Examples expressly covered included cases in which the employee or a family member had financial interests in a client, supplier or contractor of the company. Furthermore, the company established an obligation to report situations likely to give rise to a conflict. The judgement also highlights that the employee had been made aware of, accepted and signed these documents.

Therefore, from a compliance perspective, the problem lay not only in the possible existence of an interest, but in the failure to disclose it, which deprived the organisation of the opportunity to assess and manage the risk.

 IV.        THE SIGNIFICANCE OF A POTENTIAL CONFLICT: IT IS NOT NECESSARY TO WAIT FOR DAMAGE TO OCCUR

The employee argued that he had never derived any financial benefit, that he had not favoured his mother’s company, and that no financial loss to his employer had been proven. The TSJ rejected the notion that these circumstances were sufficient to negate the breach’s seriousness.

The Chamber states that the employee need not prove that he enriched himself or acted in a manner detrimental to the company. What matters is that the employee breached the rules designed precisely to manage the conflict while performing supervisory, monitoring, and control functions over a company directly linked to his family.

The TSJ emphasises that financial loss is only one factor that may be taken into account for disciplinary purposes. The objective situation of risk created and the breach of trust may also be decisive.

This reasoning is fully consistent with the preventive purpose of compliance systems. Conflict-of-interest policies exist precisely to act before the risk materialises. In this case, the Supreme Court of Justice identifies a situation of risk – at least a potential one – arising from the fact that the person responsible for supervising a subcontracted company had a direct family link with its director.

   V.        INTERNAL POLICIES AS A SPECIFIC MANIFESTATION OF THE DUTY OF GOOD FAITH

The Supreme Court of Justice does not consider dismissal justified simply because the employee breached a rule in a Code of Ethics. The disciplinary relevance arises because the obligations to disclose and to abstain were directly related to the duty of contractual good faith and to the trust placed in the employee.

The Chamber pays particular attention to the employee’s duties. His position as a manager involved tasks of supervision and control and, therefore, a particular requirement for objectivity towards the companies whose work he supervised.

The judgement states that, regardless of the extent of the financial loss caused, what is particularly relevant is the loss of trust resulting from the conduct once it has been discovered.

Thus, a properly designed and implemented compliance policy can help to establish specific guidelines for behaviour linked to the general duty of good faith, provided there is a genuine connection between the breached internal obligation and the employee’s responsibilities.

 VI.        INTERNAL INVESTIGATION AS A MECHANISM FOR DETECTION AND RESPONSE

The judgement refers to the preliminary investigation report on the contracting and supervision of the subcontractor, as well as to the involvement of the person responsible for compliance with the codes of ethics and conduct and for internal audit. Through this process, the existence of the family link, the content of the internal policies, and the breach of the duty to report were analysed.

It is also relevant that, before deciding on dismissal, the company informed the employee of the opening of disciplinary proceedings and granted him a period to submit his defence, which he exercised.

The TSJ considers that this procedure satisfied the requirement for a hearing before dismissal, as it allowed the employee to be informed of the allegations against him and to defend himself before the final decision was taken.

From a compliance perspective, this case reminds us that the effectiveness of a disciplinary system depends not only on its ability to sanction breaches, but also on whether investigations and subsequent decisions respect relevant safeguards and are properly documented.

VII.        CONCLUSIONS

The judgement highlights the importance of conflict-of-interest policies that go beyond generic references, define which situations must be reported, include sufficiently clear examples, and set out what an employee must do when faced with such a situation.

It is also essential to demonstrate that these policies have been effectively communicated to and understood by those to whom they are addressed.

The ruling also highlights the preventive nature of compliance. It is not necessary to wait until the conflict causes actual financial loss. An objective risk situation and the company’s inability to assess and manage it because it was concealed may be sufficient grounds.

The case also demonstrates the importance of investigation and disciplinary response mechanisms. The company not only had internal policies in place, but also investigated the facts, documented the breach, granted the employee a hearing and subsequently took the appropriate action.

[1] Appeal No. 201/2026, ECLI:ES:TSJCANT:2026:595.