By Charles Power

An employer has the right to demand information about an employee’s personal life when there is a chance it may give rise to a potential conflict with the employer’s interests.

A recent Fair Work Commission (FWC) ruling has taken this a step further, suggesting that an employee is obligated to disclose their partner’s relationship with a competitor to their employer.

The FWC decision (Lakatos v Termicide Pest Control Pty Ltd (2014)) considered whether it was fair to dismiss an employee for refusing to confirm whether her partner had joined a competitor. The employee initially refused to cooperate with her employer’s questioning.

The FWC upheld the dismissal, taking the view that:

• it was reasonable for the employer to enquire about this matter; and
• the employee’s refusal to reply “damaged fatally her employer’s confidence in her to manage the very risks which were the subject of the enquiry.”

What if there is no conflict with the employer’s interests?

An employee’s failure to respond to an employer’s queries justifies dismissal, even where there is no actual harm being caused to the employer’s business.

In Villani v Holcim (2011), the Federal Court accepted that a concrete supplier was entitled to ask an employee whether he was operating a concrete cartage business for a competitor. The employee refused his employer’s requests for an explanation as to why this business ‘on the side’ did not conflict with his employment. The Court accepted that this provided grounds for the employee’s dismissal, even though there was no evidence the employee’s conduct of his private business inflicted any commercial damage on the employer’s business.

What if disclosing information will incriminate the employee?

An employee can resist answering an employer’s questions about misconduct where this might incriminate him or her in a pending criminal investigation.

Generally, an employee is obligated to answer their employer’s questions about matters relating to the employer’s interests. However, the employee is not obligated to:

• act on their own initiative to confess their own wrongdoing; or
• report the misconduct of fellow employees.

For example, an employee is not generally obligated to let their employer know of plans to set up a competing business or to join a competitor, unless keeping quiet would be incompatible with the employee’s duty to faithfully serve the employer. For example, an employee would be obligated to advise their employer of such plans if those plans:

• involved a misuse of the employer’s information or other resources;
• was done on work time; or
• involved sitting on corporate opportunities so they could be exploited later.

In Hodgson v Amcor (2012), a non-disclosure was incompatible with the employee’s duty to faithfully serve the employer. In this case, a senior manager and director concealed his involvement in establishing a consultancy business that would compete with his employer. By not disclosing this commercial intelligence to his employer, the Court considered the employee broke the essential element of the confidence his employer had in him.

The disclosure obligation may be express or implied

An employee’s obligation to make disclosures can be imposed by an express term of the employment contract. For example, an employment contract may require an employee to warrant there is nothing in their background or employment history that is incompatible with the employee’s ability to fulfil the inherent requirements of their position.

The duty to provide information about other employees may also arise by implication. For example, it would be incompatible with a senior manager’s duties to do nothing after witnessing serious sexual harassment by a work colleague.