Selling competitor’s goods warrants termination

Selling competitor’s goods warrants termination

A recent case involving the dismissal of an employee of a food manufacturer highlights the key obligation on employees to always display fidelity and loyalty to their employer. Failure to do so is likely to result in the valid termination of an employee.

The employee commenced with Arancini Art (Arancini) on 7 October 2019 as a storeman and then later delivered company products to customers until he was summarily dismissed on 10 May 2021.

Arancini Art produces, imports and sells a range of traditional foods to various restaurants and retail stores in the Melbourne area.

The reason for his dismissal was a belief by Arancini that the employee was directly selling a competitor’s product and arranging supplies while he was engaged on behalf of the business when making deliveries to clients. It is important to note that the employee’s wife conducts a business trading as Dolci Momenti, which is in direct competition supplying certain goods with Arancini.

Several of Arancini’s clients approached them to discuss conversations and text messages which suggested the employee was selling products on behalf of his wife’s businesses while employed by Arancini, on occasion when driving an Arancini delivery van. Arancini held two meetings with the employee to discuss the issue.

Despite his protestations, he was issued a letter on 10 May 2021 summarily terminating his employment.

As noted by Deputy President Val Gostencnik,

“the law nonetheless imposes on an employee several obligations relevantly the duty of fidelity and loyalty. This duty will prohibit conduct which is inconsistent with the employee’s obligation to the employer, including, for example, engaging in conduct during employment which involves soliciting the employee’s customers for the purpose of diverting those customers or business opportunities for their own business or the business of another”.

Overall, the Deputy President found the employee’s testimony to be inconsistent and somewhat unreliable. He determined that based on the evidence provided, the employee did engage in several of the transactions claimed as well as promoting his wife’s products while engaged by Arancini.

As he summarised in describing the employee’s actions, “The conduct taken together is plainly inconsistent with the Applicant’s duties as an employee to the Respondent as his employer. The conduct constitutes a breach of the Applicant’s duty of fidelity and loyalty in which the Applicant engaged provided a sound basis for summarily dismissing the Application”.

Determining that the termination was valid, not unfair or harsh, the application was dismissed.

DLTP v Piccoli Lussi T/A Arancini Art (U2021/4129) 15 September 2021

For questions about duties of employees, including fidelity and loyalty, or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 925 529, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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