In a somewhat surprising Fair Work Commission decision, a majority Full Bench has upheld an unfair dismissal verdict in circumstances where the employee was dismissed for running a business outside of work hours - selling products that were competitive to her employer.

The employee was employed by The Body Shop in an administrative role when she also became a consultant (that is, an independent contractor) to PartyLite - a direct sales "party" business selling scented candles, oils and other products. The employee's role involved promoting PartyLite via a stall at a travelling expo. She sought hosts to conduct parties at which PartyLite products would be sold and also sought to sell these products directly through her Facebook page. Upon discovering these activities and viewing PartyLite as a competitor of The Body Shop, the employee was directed to end her consultancy. When she refused, arguing that no conflict existed because The Body Shop's business was in a different "market" to PartyLite, the employee was summarily terminated.

In dismissing the employee, The Body Shop relied upon a conflict of interest clause in the employee's contract which stated "[i]t is considered an employee cannot be totally committed to The Body Shop if working for a competitor. Thus, whilst working for The Body Shop employees cannot simultaneously work for any other enterprise this Company considers a market place competitor; to do so is considered misconduct and may lead to termination of employment".

At first instance, the FWC held that the two businesses were not in competition. The employee was found to have been unfairly dismissed, and compensation of $20,000 was awarded.

Unfortunately, The Body Shop had no better luck on appeal with the majority Full Bench also finding that the employee had not infringed the "conflict of interest" clause, and also that she had not breached more general, implied obligations of fidelity.

This was because:

  • she "was not working for PartyLite" but "was running her own business";
     
  • there was no evidence to suggest that she had used any of her employer's information to run her own business - she worked in administrative capacity for The Body Shop, and not in relation to the sale of product; and
     
  • there was only a "minor" overlap in the product ranges of the employee's own business and The Body Shop. Although, Deputy President Hamilton dissented.

This case suggests that an employer's concern that an employee's external activities may give rise to a conflict (even if there is no conflict at the time of discovery) will not be sufficient grounds for termination - at least in the context of unfair dismissal laws. The FWC's focus on the employee's status as a contractor was pivotal in this case, because of the way that the conflict of interest clause in the employee's contract was drafted. It is possible that the case may have had a different outcome if the conflict of interest clause prohibited working for or providing services to another entity in any capacity. Employers should be careful to review their conflict of interest clauses and policies following this case.

Adidem Pty Ltd T/A The Body Shop v Suckling [2014] FWCFB 3611 (30 June 2014).