Two-timing employees: When can you prevent an employee from moonlighting?

These days, it seems like every second person you speak to has a "side hustle". They're driving a ride share vehicle, selling essential oils, skincare or make-up, have an artisan stall at the local markets or online, create and deliver Instagram worthy share platters, provide graphic design services, or take photographs of newborn babies. The gig economy has made these means of secondary income accessible to the masses via social media and other online platforms. Gone seem to be the days of bar tending or waiting tables on the weekend after your "day job", although it is inevitable that this still occurs.

But can an employee lawfully engage in other gainful activities if they already have a job? The answer depends on the nature of the employee's employment and whether the side business or secondary work competes or otherwise interferes with it.

The Fair Work Commission recently determined that a regional accountancy and financial advisory firm was entitled to dismiss an employee who was conducting a consultant paraplanning business on the side on the basis that the undisclosed side business involved the provision of financial services similar to the operations of the primary employer. Similarly, an employee who was dismissed after sending a LinkedIn message indicating that he was expanding his side hustle to a full-time practice was found to have breached the obligations he owed to his employer by virtue of soliciting work from their current clients. Notably, the LinkedIn message sent to a number of his employer's key clients stated that they could get his "prior big business experience at small business rates".

By contrast, the dismissal of an employee for carrying on secondary employment while on annual leave was considered to be unfair, given no conflict of interest arose. In that case, a driver for a glass manufacturer performed freelancing driving work for a client of his employer, a supplier and installer of aluminium window and door installer, during 2 weeks of annual leave. Despite the connection between the businesses and the fact the driver had been introduced to the opportunity to drive for the client during the course of his primary employment, there was no evidence that the driver's work for the client would have otherwise been given to his employer and he did not perform the work on his employer's time.

If an employee's side hustle impacts their work performance or represents a safety risk due to fatigue or distraction, this may also give an employer cause to take action. The Fair Work Commission has previously found that a newspaper publisher was within its rights to terminate a newspaper machinist who refused to submit a secondary employment request form for the purposes of determining if it was unreasonable for him to drive an Uber outside of his work hours on the basis that the additional work may create a health and safety risk if he was tired when working night shifts on the printing machines.

Typically, undertaking secondary employment which does not encroach on the employer's business does not contravene the implied contractual term of fidelity and good faith. However, often employment contracts contain a clause expressly prohibiting the employee from engaging in other work without the prior written permission of the employer. Should the employee then engage in secondary work, without first seeking permission, the employer could look to rely upon such a clause to discipline the employee for breach of contract. Clauses of this kind will, however, typically be enforceable only to the extent that the prohibition on the secondary work is reasonably necessary to protect the business interests of the employer, for example from competition or the misuse of confidential, etc.

If an employer suspects that an employee is conducting a side business or undertaking other secondary work, it is necessary that they assess the nature of the conduct, and whether it amounts to grounds for disciplinary action. In order to make this assessment, it is necessary to establish the nature of the secondary work, including the products and services they offer, who their clients or customers are likely to be, when and where the work is conducted, and whether the employee uses any of the employer's property, including confidential information or intellectual property.

Subject to the answers to the above questions, an employer may have a right to discipline, including terminate, an employee who carries on a side business or engages in secondary work. But, typically, Australian employment law protects an employee’s right to carry on a business or engage in other work so long as it is not in competition with their employer's business, they do not use their employer's property, or it does not otherwise impact on their employment (because of, for example, implications for the employee's or anyone else's health and safety or because it interferes with their work for their primary employer).

Written by Erin Kidd and Elisa Blakers

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