Can You Dismiss An Employee For Looking For Another Job?

Under Australian law, simply searching for a new role is not a valid reason for dismissal. A recent Fair Work Commission (FWC) case highlights the legal risks employers face when terminating staff for job-hunting. Employers should proceed carefully and seek legal advice to avoid unfair dismissal claims.

A recent FWC case has drawn attention to the legal complications that can arise when an employer discovers one of their workers is looking for another job.

Finding out an employee is shopping around for new opportunities can put HR and managers in a tricky position.

This dilemma was explored in a recent case heard by the Fair Work Commission (FWC) involving a former employee of a small design business who lodged an unfair dismissal claim, arguing that she had been summarily dismissed after her employer found emails suggesting she was open to new roles.

The employer maintained the dismissal was justified under the Small Business Fair Dismissal Code, claiming the worker had used company resources and contacted a competitor during a period of leave.

However, the FWC found there was no reasonable basis for believing that her actions amounted to misconduct. While she had discussed possible opportunities with an industry contact, there was no evidence she had breached confidentiality or acted against her employer's interests.

"Ultimately, the employee was dissatisfied with her employment and utilised her network contacts outside of company time to seek other opportunities," says Mariam Chalak, Senior Associate and Team Leader at Harmers Workplace Lawyers.

"Such conduct does not fall within the threshold of misconduct and does not constitute a valid reason for dismissal."

The Commission also noted that the worker had not been given a fair chance to respond before being terminated, and that the employer's decision had been made in advance.

However, even if the employer had afforded procedural fairness, the lack of credible evidence of misconduct means the outcome would likely have been the same, says Chalak.

"This defect alone, regardless of process issues, would have rendered the dismissal harsh, unjust or unreasonable."

As a result, the worker has been awarded compensation equivalent to four weeks' pay.

This ruling offers valuable lessons about where the line is drawn between acceptable job-seeking behaviour and genuine misconduct.

Below, Chalak and Michael Byrnes, Employment Partner at law firm Swaab, shed light on some of the key HR questions raised by this case.

Are employees allowed to use company contacts to look for another job?

Australian law doesn't expressly ban employees from seeking another job through a connection they gained at their current employer, says Chalak.

"However, this can still be risky, and the employee will need to ensure that they comply with all of their contractual, statutory and general law obligations to the employer."

As part of these obligations, employees are not permitted to disparage their current employer or harm the interests of the business – including by breaching confidentiality.

"The employee must also ensure that they do not embark on the job search using the employer's resources, property and time," says Chalak. "It can be a hard balance to strike."

How can HR prevent employees from taking information or contacts to a competitor?

To protect themselves from losing intellectual property or clients to a competitor, HR should ensure employment contracts include clear terms around protecting confidential information, says Chalak.

These terms should also explicitly state that confidentiality extends to all sensitive business relationships, including clients, customers and suppliers.

The Australian government is set to ban non-compete clauses for most workers starting in 2027, meaning employers will not be able to prohibit workers from moving to a competitor – which makes these safeguards all the more important.

"Employers should also ensure they have well-drafted non-solicitation clauses to ensure that departing employees cannot take important company connections including existing employees, clients, suppliers and customers," says Chalak.

What if existing employees ask for a reference?

When a prospective new employer contacts the organisation for a reference, HR practitioners and managers who are nominated as referees need to balance the needs of the business and the individual, says Michael Byrnes, Employment Partner at law firm Swaab.

"Particularly if you're a referee and you're talking to a competitor of the company for which you presently work, and then you give them all that information as part of the reference, in a way you are helping to facilitate a process which is to the potential advantage of this competitor," he says.

"Perhaps [they are] even poaching or soliciting an employee of the business, and you end up effectively helping or taking part in that process."

For this reason, it's important for employees to be transparent when they nominate a manager or HR practitioner as a referee, as that person may well need to reflect on their position and whether or not they can provide a reference without compromising the needs of the organisation.

How should HR respond to an employee looking for another job?

Although discovering that an employee is looking for another job often leads to a difficult conversation, a considered response can help protect both relationships and reputation.

As a first step, it's a good idea to try and understand the employee's reasons for wanting to leave and how serious they are about it, which can help you tailor your response.

While a manager or HR person's first instinct may be to keep these exchanges confidential, Byrnes warns that there are some circumstances in which you may have a responsibility to notify others.

"Depending on the nature of your role with the organisation, it may well enliven an obligation for you to make [management] aware of that in some way, so they can take steps to counteract the solicitation – whether that be offering more money, improving their working conditions or whatever it might be to help [retain] that employee," he says.

At the same time, it's important to acknowledge that employees may explore the market as a natural step in their professional development.

"The extent to which an employee can actively look for work while they're still in employment is an interesting issue, because that's what most people endeavour to do," says Byrnes.

"It's often said, and I think rightly so, that it's easier and you're in a stronger position if you're looking for a new job while you're still in employment, rather than once employment comes to an end... but it can be a tricky and delicate balancing act.

"The most important thing is that [the employee] doesn't become disengaged from their current employer, and doesn't do anything which is inconsistent with their obligations to that employer, while looking for other work."

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.