In this Justitia communication, we continue our round-up of recent cases, sharing key developments and cautionary lessons to help your organisation navigate staffing matters with clarity and confidence. Today we highlight a couple of recent cases which considered whether steps taken to establish a competing business or engage in secondary employment amounted to serious misconduct and a valid reason for dismissal.

In the first case, concealing secondary employment in a competing real estate business was serious misconduct and a valid reason for dismissal.

A software company summarily dismissed an employee for engaging in secondary employment without the employer’s prior written consent in breach of her employment contract.

In the unfair dismissal proceedings, the evidence revealed that during her employment with the software company in a client-facing role:

  • the employee had access to confidential information about the employer’s real estate agency clients; and
  • without seeking the employer’s written consent, the employee was involved in establishing a real estate agency in direct competition with the employer’s real estate agency clients, was featured in a publicly available profile of the competing real estate agency, and was employed by the competing business on a casual basis as an open house host.

In finding that the employee’s summary dismissal was not harsh, unjust or unreasonable, the Fair Work Commission (Commission):

  • was satisfied that the employee’s conduct was contrary to her employment contract and sufficiently serious to constitute “serious misconduct” as defined in the Fair Work Regulations, on that basis that the conduct was “wilful or deliberate” and “inconsistent with continuation of the services”;
  • was further satisfied that the employee was dishonest during the investigation process. This finding of dishonesty, on its own, was sufficient to establish that the employee had engaged in “serious misconduct”;
  • concluded that, whether considered together or separately, the employee’s conduct of dishonesty and engaging in secondary employment without consent constituted a valid reason for her dismissal; and
  • rejected the employee’s contention that the employer’s decision to dismiss her was “pre-determined”. The Commission noted that suspension from duties and systems access is “standard practice” during an investigation process, and the evidence demonstrated that the employer only made its final decision to dismiss the employee after considering all of the information, including the employee’s responses to a ‘show cause’ process.

Key takeaways

  • Performing work in another business that creates a real conflict with an employee’s duties to their primary employer, or would damage the interests of the primary employer, is likely to involve a breach of the employee’s obligations to their primary employer.
  • An employee’s dishonesty during an investigation into alleged misconduct can provide the basis for a separate finding of serious misconduct and establish a valid reason for dismissal.
  • It is standard practice for employers to suspend an employee and their access to systems pending the outcome of an investigation into allegations of serious misconduct.  These actions do not demonstrate that the employer has “pre-determined” the outcome.
  • Following the dismissal, the employer in this case discovered that the employee had also sent a confidential client list to her personal email address during her employment, in breach of the confidentiality obligations in her employment contract. The employer did not rely on this misconduct (discovered after the dismissal) in defence of the unfair dismissal claim. However, it is worth noting that in certain circumstances, and provided the relevant facts existed at the time of the dismissal, an employer can rely on the “full extent” of misconduct (including misconduct discovered after dismissing an employee) to justify the dismissal when faced with an unfair dismissal claim (see, e.g., Kieren Michael Chalk v Ventia Australia Pty Ltd [2023] FWC 121 at [88]).

Case: Taylah Chislett v iProperty Express Pty Ltd [2025] FWC 3420

In the second case, taking preparatory steps to establish a competing plumbing business was not in breach of the employee’s obligations to his existing employer.

A plumber was summarily dismissed from his employment with a small plumbing business for alleged serious misconduct. The employer believed that the plumber had created and registered his own competing business and had begun to promote the business using the employer’s resources and during his work time.

At first instance, the Commission found that the dismissal was not consistent with the Small Business Fair Dismissal Code because the employer’s genuinely held belief that the plumber had engaged in serious misconduct justifying immediate dismissal “was not based on reasonable grounds”. A proper investigation involving a “sensible conversation” with the plumber would have revealed that he had done no more than take preparatory steps towards establishing his own business (such as registering a company with ASIC, registering for GST with the ATO and engaging a web designer to build a website) and had not commenced conducting the proposed new business. While the plumber had also created an Instagram account for the proposed new business, the Commission accepted the plumber’s evidence that he set up the account as a “trial” for when he did eventually start up and need to promote his own business. There was no evidence that the plumber had attempted to solicit clients or suppliers of the employer, or advertised his proposed new business, prior to the termination of his employment.

The Commission found that the dismissal was otherwise harsh, unjust and unreasonable because there was not a valid reason for the dismissal, the plumber was dismissed without notice, the plumber was not given an opportunity to respond to the allegations before the decision was made and the employer’s size and absence of dedicated HR did not justify the “confrontational approach” to the dismissal. The employer was ordered to pay the plumber compensation of $11,726.14 (gross) plus a superannuation contribution of $1,348.51.

The employer sought permission to appeal the decision, which was refused on the basis that it was not in the public interest to grant permission to appeal. The Full Bench was not persuaded that the first instance decision undermined existing principles in relation to an employee conducting a business in competition with their employer.

Key takeaways

  • Whether an employee has breached their obligations to an existing employer will depend on the individual steps taken by the employee to establish a competitive business while remaining in the service of their existing employer.
  • Attempting to solicit clients or suppliers of the existing employer for the proposed new business, or actually performing work in a competitive business, are activities which are likely to involve a breach of the employee’s obligations.
  • Merely undertaking practical preparatory steps with a view to establishing another business after the cessation of the employee’s employment is less likely to constitute a breach of the employee’s obligations.
  • A higher threshold applies before permission to appeal a decision in unfair dismissal proceedings will be granted. The Commission must be satisfied that it is in the public interest for permission to appeal to be granted, and no residual discretion to grant permission exists.

Case: Gabriel Walker v Plumbtrax Pty Ltd [2025] FWC 872 (first instance) and Plumbtrax Pty Ltd v Gabriel Walker [2025] FWCFB 219 (appeal)