IMO:
1. Like all answers to umpiring questions, it depends...
2. See answer 1 above.

Cheers,
Steve

As Steve said, "It depends".

Generally, however . . .
1) No, unless the conflict (and there is a conflict) is stated in advance and everyone (OA and competitors/coaches) agrees to allow it. Having the OA and competitors/coaches sign a statement acknowledging the conflict and permitting it would be a good idea.
2) See #1. Depending on the employee's position at the club, the conflict may be less serious than #1, but there is still a conflict.

A qualified yes is in order, but the smell test applies. Coaches often swell the ranks of umpires at team racing events but generally do no umpire their own team. The limitation is notional, since the same conflict of interest exists when umpiring other teams as does for ones own. But is the conflict significant in the context of a local or regional event? I am reminded of my experience umpiring Opti team racing (neither often nor well, but I recognise that I am a judge rather than an umpire) where often as not my partner has been a coach or team manager. The same considerations apply to a club manager. In both cases, there comes a point (the importance of the event) where the conflict-of-interest considerations outweigh pragmatism.

I have always been to events where some of the umpires are from the same club as the teams.

I have never known a problem here in GBR it is common and accepted.

It's a matter of people and culture, I note in the USA they would not allow anyone in an event who was a parent to be on a PC even if in a different division of fleet. There appeals committee endorsed this. World Sailing had to pass a rule allowing for this kind of conflicts.
Conflicts are accepted, and for a PC by consent or decision, some conflicts is permitted.

The same is good for umpires.

I have experience of refereeing soccer in a competition where linesmen (assistant referees) were provided by each club. It was the only way to ensure that there actually was a linesman as the comp was short of referees. Most were fair average quality in their performance in spite of the potential conflict of interst, one or two had a bad reputation about favouritism. I also had to sometimes referee a team from my club. I think if anything I was a bit harder on them - just less benefit of the doubt.
So 3 things
1) sometimes that is the only way to get the competition to happen
2) often a potential conflict of interest remains theoretical
3) sometimes a potential conflict of interest works in the opposiion's favour
Like it was said - It depends, to which I would add "avoid it if you can, particularly in the more important competitions, including the most important rounds within a competition and for anytime that the penalty is really severe eg disqualification, and for situations of only two competitors like match racing.

As a matter of interest, the US Interscholastic Sailing Association (High School) has for decades included in their Procedural Rules, " A coach or a person in a similar capacity may serve as part of the Protest Committee, subject to challenge in accordance with RRS 63.4."

The new RRS Conflict of Interest structure puts an improved twist on the old Interested Party rules which allows, among others things, a pre-competition disclosure of CoI and a "Complain or Shut Up" period. WS has published some good guidance on CoI and the when and how much to worry about it.

Just that you ask the question tells you the answer - NO It is not the actual conflict of interest, it is just the appearance of a conflict of interest that forbids the participation. John Eilers

Matt Bounds
said

As Steve said, "It depends".

Generally, however . . .
1) No, unless the conflict (and there is a conflict) is stated in advance and everyone (OA and competitors/coaches) agrees to allow it. Having the OA and competitors/coaches sign a statement acknowledging the conflict and permitting it would be a good idea.
2) See #1. Depending on the employee's position at the club, the conflict may be less serious than #1, but there is still a conflict.

You say this very confidently.

Rule 63.4 applies to members of protest committees.

Please cite what rule.applies to other race officials.

World Sailing Regulation 34 (a rule by definition) addresses CoI for World Sailing Race Officials - http://www.sailing.org/raceofficials/conflict-of-interest.php
US Sailing Regulation 14.04 addresses CoI for US Sailing Race Officials - https://www.ussailing.org/wp-content/uploads/2018/05/USSailingRegulationsAmended2018-04-23.pdf
I've found references to a document entitled "Australian Sailing Conflict of Interest Policy" document, but I can't find it on the AS website. It's hard to find anything on that site relating to the conduct of Race Officials.

I think technically there must be a conflict of interest. Quite often a teacher is more aware of the sins of his own pupils than anyone else and may be stricter than anyone else, but on the other hand his reputation may well depend on his team doing well.
Having said that I can also tell you that in English Public Schools - and you should know that Public Schools in England are actually the top rank private schools - it is normal for the teachers to umpire in team racing events. I often umpire the Eton events and I am usually the only independent umpire with three or four teachers working with me, coming from one of the other schools putting in a team. They usually avoid umpiring the finals and semis if their own schools are involved.
The situation is different for school national championships, etc., when qualified, independent umpires are brought in.

The World Sailing IJ manual contemplates different types of events.

E.2 Conflict of Interest
Rule 63.4 guides judges to determine whether they might have a conflict of interest related to a protest or request for redress, and to declare it as soon as he is aware of it. The rule prohibits a member of a protest committee who has a conflict of interest from hearing a protest, except in three circumstances:
a) if all parties to the hearing have been fully informed of the conflict and consent;
b) if the protest committee decides that the conflict of interest is not significant;
c) when the conflict between the protest committee members is balanced (RRS M2.3).
The rule guides the protest committee on considerations in determining whether a conflict is significant.

The reason for these options is that it is not practical at all events, and especially at club events, to exclude all judges who have a conflict of interest. Some flexibility is needed to suit different events. Rule 63.4(d) does not permit a person with a conflict of interest to be a member of a protest committee at World Sailing major events. World Sailing guidance on conflict of interest is available at http://www.sailing.org/raceofficials/conflict-of-interest.php

The reference is on page 25 http://www.sailing.org/tools/documents/JudgeManual1710182-[23619].pdf

I am very involved in High School Sailing and it is done all the time. Sometimes judges and umpires make things too hard in my opinion. My answer is heck yes! We have coaches hear protests very regularly. These coaches know as much as most judges. We try to use coaches without a big steak in the offense being protested. I have been a judge probably about 100 times at High School events. I always tell those in the protest that they can get rid of me and we can get someone else and have never had an issue. Is this a perfect solution. Maybe not but with the amount of events we do and the low registration cost it is very tough to actually get a judge at every regatta. Yes, sometimes an active club with plenty of judges can get a member to judge but this may create the other conflict you were worrying about. The amount of High school events around the country has expanded drastically over the last decade. And most coaches are as good a judge as you are going to get. They understand the rules and I have found them to be very unbiased.