Employees beware of the side hustle

The Fair Work Commission has upheld a dismissal of a senior staff-member for taking up a secondary job because it contravened their contractual duties.

With side jobs and secondary careers becoming increasingly common, this decision highlights the importance of reviewing the terms of employment before considering taking on an additional position.

The Facts

• The employee worked in a managerial position at a small recruitment firm.
• The employee had been conducting a secondary career in life-coaching outside of this role over a period of many months.
• The employer dismissed the employee on the grounds of breach of contract, stating that this breached loyalty duties enshrined in the employment contract.
• The employee brought an unfair dismissal action under the Fair Work Act 2009 (Cth) ('the Fair Work Act'). They argued that the employer had been aware of the secondary career and that a separate conflict was the true cause of termination.
• The employee also argued that as the secondary career was not being conducted during work hours, there were no grounds for breach of contract.

The Legal Issues

The primary issues in this decision were as follows:

• Whether the employer had condoned the employee's secondary career and thus waived their right to terminate his employment contract on those grounds;
• If they had not waived that right, was dismissal because of the secondary career harsh, unjust and unreasonable under the criteria in section 387 of the Fair Work Act.

The Decision

On the question of whether the employer had condoned the secondary career, the Fair Work Commission established that the element of 'full knowledge' required for condonation (summarised in Rankin v Marine Power International Pty Ltd [2001] VSC 150) is relatively strict. It was accepted that the employee had discussed their life-coaching business at work and that evidence, such as their LinkedIn account, would certainly hint at its existence. Nevertheless, the facts did not clearly affirm the employer's knowledge and thus they could not be said to have condoned it. The Commission considered the terms in the contract, which defined what the employee could do with respect to a second job.

The employment contract stated that employees were required to 'serve efficiently, faithfully and diligently' and devote their time and attention exclusively to the employer. It also prohibited undertaking any other business or profession which would create a conflict of interest. Persistent or sustained breach of these duties would constitute serious misconduct.

Emails on the employee's work devices revealed that they were discussing their secondary career with actual and prospective clients of the employer, instead of providing them with the services of his employer. Further emails the employee had sent discussing the business showed that it was a 'consuming passion' drawing their attention away from their work for the employer.

The employer was experiencing a downturn and looking for ways to reinvigorate; rather than assisting, the employee was creating extensive social media content and a digital marketing strategy for their own pursuits.

In light of these facts, the Commission found that there was a valid reason for dismissing the employee on the basis of the secondary career.

Section 387 of the Fair Work Act also states that the procedural requirements for a fair dismissal may be eased if the enterprise is small and absent a dedicated human resources management specialist. The employer had recently lost seven employees and was down to just four at the time the employee was dismissed; the Commissioner found that this could explain the employer's failure to give the employee an opportunity to respond to their claims.

The employee also brought an argument that their dismissal was invalid because it was actually for a different reason than what was given to them. Under the Small Business Fair Dismissal Code, employers must be dismissing an employee for the reason stated at termination. The employee alleged that a dispute over a shareholder agreement was the true operative factor in his firing, not the alleged breaches of their employment contract. However, the Commissioner noted that the employee has the practical onus of establishing this, and on the evidence put forth this could not established.

Key Takeaway for Employees & Employers

Employers can lawfully require an employee's undivided attention even outside of work hours, potentially barring secondary careers.

However, this will depend on the nature of the position (managerial vs. lower-level), the relationship between the careers as well as any terms in the employment contract, particularly those relating to conflicts of interest and the exclusive 'loyalty' of employees. Contractual terms must still be lawful and reasonable.

In order for an employer to condone a secondary career and waive the right to dismiss on that basis, they must have full knowledge of it; employees should take heed and disclose as early as possible.

In light of this case employers should review their employment contracts to ensure they are adequately protected. If you require assistance with the review of your employment agreement or have any other queries about this case please contact Michael Bishop or Amelita Hensman of our Employment Team.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.