Fair Work finds out-of-hours work breached employment contract

In a recent decision, the Fair Work Commission considered the extent to which an employee was prohibited from working for a competitor of his employer. The applicant was employed as the Lead Graphic Designer with Sydney Tools Pty Ltd (“the respondent”), a company that sold trade power tools to individual customers at its retail store. The applicant was responsible for photographing, editing and listing products on the company website and liaising with the imports team.

The applicant’s employment contract expressly prohibited him from directly or indirectly engaging in or assisting any direct or indirect competitor of Sydney Tools. His contract also required that the applicant keep any information related to the respondent’s intellectual property, including client lists, supplier lists and trade secrets, confidential.

At the end of 2020, an ex-colleague, who had previously worked for the respondent for five years, asked the applicant to design a catalogue to be used by a company called Tilbury Global. Tilbury was an importing agent, which targeted government and international retailers. The applicant agreed, reasoning that he worked on the catalogue outside his working hours for the respondent.

Soon after, the respondent called the applicant to a meeting to discuss “rumours” that he was working freelance with competitors. When the applicant confirmed that he was working for his ex-colleague, the respondent summarily dismissed him. The applicant relied on several reasons to defend his actions, namely that Tilbury did not compete with the respondent, targeted different customers to the respondent, and did not plan to operate retail stores as the respondent did.

However, although the applicant initially denied it, cross-examination revealed that he had used images from the respondent’s secure database for his work for Tilbury, rather than using images from the respondent’s publicly available website as he had first claimed. The Commission found that the applicant was “clearly aware” that the images he created during his employment at the respondent became the respondent’s intellectual property. It further held that the fact that the two companies served different target markets was irrelevant.

“[I]t is difficult to imagine a more wilful or deliberate example of behaviour by such an employee that is inconsistent with the continuation of the contract of employment, and so serious misconduct,” the Commission said.

With this, the Commission held that the applicant’s dismissal was not harsh, unjust or unreasonable.

Key Takeaways:

• An employment contract may prohibit employees from engaging with competitors
• Working out-of-hours may not excuse an employee working for a competitor
• Products created by an employee may become their employer’s intellectual property
• Companies that serve different target markets may still be considered competitors