Australia: Com­pet­ing con­sid­er­a­tions: An employ­ee and her ​hob­by business

Last Updated: 16 November 2018
Article by Michael Byrnes

In the cur­rent age where any organ­i­sa­tion, irre­spec­tive of size, can adver­tise to the world through the inter­net, the bar­ri­ers to entry for ​"micro" or ​"hob­by" busi­ness­es are low­er than ever. Increas­ing­ly, employ­ees are show­ing their inge­nu­ity and entre­pre­neur­ship by set­ting up their own hob­by busi­ness­es to the side of their main employ­ment. Some of these busi­ness­es even lever­age the skills and expe­ri­ence that the employ­ee may gain dur­ing the course of their employ­ment. (Of course, they should nev­er use the con­fi­den­tial infor­ma­tion of the employ­er – anoth­er top­ic for a dif­fer­ent day.)

While many employ­ers are hap­py to accom­mo­date an employee's side busi­ness, pro­vid­ed it doesn't com­pete with their own oper­a­tions, there can some­times be a con­flict between the two.

A scent busi­ness caus­es a stink.

Such a con­flict arose in the recent case of Abi­gail Jack­man v Lek Sup­ply Pty Ltd T/A Lek Sup­ply [2018] FWC 6154, an unfair dis­missal deci­sion of the Fair Work Com­mis­sion (FWC).The appli­cant, Ms Jack­man, was employed in inter­nal sales by Lek Sup­ply Pty Ltd (Lek Sup­ply). On 23 April 2018 Lek Sup­ply ter­mi­nat­ed the employ­ment of Ms Jack­man on the basis of con­flict of inter­est. This breach was said to arise by rea­son of con­duct relat­ing to Ms Jackman's side business.

This busi­ness, Roy­al Scent & Co., was start­ed while Ms Jack­man was on mater­ni­ty leave and sold prod­ucts such as can­dles, reed dif­fusers and bath and body prod­ucts from her home. It derived rev­enue of less than $10,000 per year. Impor­tant­ly for this case, Face­book and Insta­gram pages were estab­lished for the busi­ness (as is de rigueur for almost any busi­ness in this age).

Ms Jack­man estab­lished the busi­ness in July 2017 and returned to work from mater­ni­ty leave in Jan­u­ary 2018. She signed a new employ­ment con­tract for a revised role with Lek Sup­ply in April 2018. That con­tract of employ­ment rel­e­vant­ly includ­ed the fol­low­ing terms:

"You must at all times... devote your full work­ing hours to the require­ments of your role."

"Your hours of work are 8.00 am to 5.00 pm, Mon­day to Fri­day plus any rea­son­able addi­tion­al hours as required from time to time."

"While employed by Lek Sup­ply Ltd, you must not engage in pri­vate busi­ness or under­take oth­er employ­ment in direct or indi­rect com­pe­ti­tion with Lek Sup­ply Pty Ltd using any knowl­edge or mate­ri­als gained dur­ing the course of your employ­ment under this agree­ment. Any such activ­i­ty will be deemed to be a con­flict of inter­est with Lek Sup­ply Pty Ltd and may lead to the ter­mi­na­tion of your employ­ment under the terms of this agreement."

"Use of Lek Sup­ply Pty Ltd's inter­net facil­i­ties to access social media appli­ca­tions or ser­vices is pro­hib­it­ed dur­ing work­ing hours unless specif­i­cal­ly approved for your role. This includes access­ing such sites dur­ing work­ing time on your busi­ness or per­son­al mobile. Mak­ing exces­sive per­son­al calls and send­ing per­son­al text or chat mes­sages, is also prohibited."

The cat­a­lyst for the sequence of events in this case was a cus­tomer com­plaint about Ms Jack­man in rela­tion to plac­ing a wrong cus­tomer order. In the course of inter­nal enquiries about this mat­ter var­i­ous employ­ees claimed to man­age­ment that Ms Jack­man was con­stant­ly on the phone for non-work pur­pos­es and she had her own business.

These obser­va­tions from employ­ees prompt­ed the employ­er to look into Roy­al Scent & Co. The pro­file for the busi­ness on Face­book and Insta­gram showed Ms Jack­man to be the sole ​"team mem­ber" of the busi­ness and it list­ed her mobile phone num­ber. Fur­ther, the hours of oper­a­tion were adver­tised as Mon­day to Fri­day 9.00 am to 5.00 pm. The Face­book site assert­ed that the busi­ness ​"typ­i­cal­ly replies with­in a few hours". There were also a series of Face­book posts that were made on work days dur­ing busi­ness hours.

For her part, in the hear­ing Ms Jack­man denied being pre­oc­cu­pied on her phone at work and respond­ed that a friend of hers was enlist­ed to under­take tasks for her busi­ness dur­ing work hours. Ms Jack­man fur­ther sub­mit­ted that any social media posts for her busi­ness were made dur­ing break times but con­ced­ed she respond­ed to enquiries dur­ing busi­ness hours through per­son­al mes­sages. Ms Jack­man sub­mit­ted that she did not notice the con­flict of inter­est claus­es in the employ­ment con­tract and did not think she had rea­son to tell Lek Sup­ply about her side business.

Con­duct of com­pet­ing busi­ness was a breach of obligations.

Com­mis­sion­er McK­in­non held that:

"... Ms Jack­man engaged in pri­vate busi­ness activ­i­ties while at work and that she did so dur­ing work­ing hours. I do not accept that these activ­i­ties were always con­duct­ed dur­ing breaks. Ms Jack­man con­ced­ed as much. Whether she did so ver­bal­ly or in writ­ten form is beside the point. It was activ­i­ty that detract­ed from her duty to Lek Supply."

Com­mis­sion­er McK­in­non continued:

"I do not accept that Ms Jack­man was unaware of her oblig­a­tions under her con­tract of employ­ment. The hand­writ­ten nota­tions make it more like­ly that the con­tract was read care­ful­ly before it was signed, with nego­ti­a­tions tak­ing place to address any con­cerns. I also do not accept the sub­mis­sion of Ms Jack­man that the con­tract only pre­vents pri­vate busi­ness that is in ​"direct or indi­rect com­pe­ti­tion" with Lek Sup­ply. There is no rea­son to read the con­flict of inter­est in such a lim­it­ed way. On a fair read­ing, it pre­vents employ­ees from engag­ing in pri­vate busi­ness dur­ing their employ­ment as well as oth­er employ­ment in com­pe­ti­tion with Lek Sup­ply. It requires employ­ees to devote ​"their full work­ing hours" to the require­ments of their role. It pro­hibits access to social media appli­ca­tions or ser­vices dur­ing work­ing, unless specif­i­cal­ly approved for the role, either on a busi­ness or per­son­al mobile phone. It pro­hibits the send­ing of per­son­al text or chat mes­sages at work."

Com­mis­sion­er McK­in­non con­clud­ed that Ms Jackman's con­duct of her pri­vate busi­ness dur­ing work­ing hours on her mobile phone was in breach of the employ­ment con­tract and was, there­fore, a valid rea­son for dismissal.

The impor­tance of pro­ce­dur­al fair­ness is empha­sised yet again.

Notwith­stand­ing the valid rea­son for dis­missal, the dis­missal was found to be unfair on pro­ce­dur­al grounds. The rel­e­vant man­ag­er, Ms Dao, held the view that Ms Jack­man oper­at­ing her busi­ness at work was seri­ous mis­con­duct and that noth­ing Ms Jack­man could say would pro­vide an ade­quate response. She then asked anoth­er offi­cer of Lek Sup­plies, Mr Lek, to meet with Ms Jack­man for the pur­pose of ter­mi­nat­ing her employment.

On 23 April 2008 Mr Lek did this. Ms Jack­man was nei­ther told the rea­son for the meet­ing pri­or to its com­mence­ment nor asked any ques­tions about the alle­ga­tions. She was sim­ply hand­ed a let­ter of dis­missal. Upon ask­ing why she was being dis­missed, she was told that a home busi­ness was a con­flict of interest.

Not sur­pris­ing­ly, Com­mis­sion­er McK­in­non found that there was no notice of the rea­son for dis­missal until the time of dis­missal and Ms Jack­man was not giv­en any oppor­tu­ni­ty to respond to the rea­sons for dismissal.

Hav­ing con­sid­ered these and oth­er fac­tors, Com­mis­sion­er McK­in­non held that the dis­missal was harsh finding:

"It was a dis­pro­por­tion­ate response to a valid con­cern, which had only recent­ly become appar­ent. A warn­ing would have been a more appro­pri­ate response."

Fur­ther, Com­mis­sion­er McK­in­non held (once again rein­forc­ing the impor­tance of pro­ce­dur­al fairness):

"The view expressed by Ms Dao that noth­ing Ms Jack­man would have said would have made any dif­fer­ence denied Ms Jack­man the chance to acknowl­edge the inap­pro­pri­ate­ness of her con­duct and to adjust her behav­iour accord­ing­ly. In my view, her his­to­ry as a val­ued employ­ee of the busi­ness sug­gests she would have done just that."

On this basis an order was made for Ms Jack­man to be rein­stat­ed to her for­mer position.

Deci­sion not a green light for employ­ee businesses.

Lest it be con­sid­ered that the FWC was con­don­ing the oper­a­tion of the side busi­ness dur­ing work­ing hours, and con­sis­tent with find­ings on valid rea­son for dis­missal, Com­mis­sion­er McK­in­non noted:

"Ms Jack­man is on notice that it is not appro­pri­ate for her to con­duct her per­son­al busi­ness at work, whether by phone, text mes­sage, or oth­er­wise. If her busi­ness is to con­tin­ue to oper­ate, Ms Jack­man will need to make arrange­ments for it to occur out­side of work­ing hours."

Employ­ers are enti­tled to expect employ­ees devote their ​"full time and atten­tion" dur­ing work hours to their duties. Gen­er­al­ly speak­ing this will large­ly pre­clude an employ­ee oper­at­ing their own busi­ness dur­ing these hours in the absence of agree­ment with the employ­er to the contrary.

Employ­ers might want to consider:

  1. Includ­ing con­trac­tu­al terms or adopt­ing an enforce­able pol­i­cy address­ing the issue of employ­ee side or ​"hob­by" businesses;
  2. Express­ly pro­hibit­ing involve­ment in any oth­er busi­ness that direct­ly or indi­rect­ly com­petes with the busi­ness of the employer;
  3. Requir­ing employ­ees involved in side busi­ness­es to dis­close and seek con­sent for con­duct­ing such busi­ness­es (which can­not be unrea­son­ably with­held – the lim­its of an employer's pre­rog­a­tive need to be observed); and
  4. Estab­lish­ing sen­si­ble lim­its and pro­to­cols for use of tech­nol­o­gy and social media for an employee's side busi­ness dur­ing work hours and con­sis­tent­ly enforc­ing them.

For further information please contact:

Michael Byrnes, Partner
Phone: + 61 2 9233 5544
Email: mjb@swaab.com.au

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions