An employee’s dismissal was upheld as fair due to breach of trust arising from running a competing business and destroying evidence, following a fair disciplinary process.

The Complainant contended that he was unfairly dismissed for setting up a business that, in his view, did not compete with or conflict with his employer’s interests. He claimed the dismissal was both substantively and procedurally unfair. The Complainant had been promoted to Principal and noted that his workload had increased significantly prior to his dismissal. He disputed the enforceability of the unsigned terms of employment, which restricted outside business activity, arguing it lacked proportionality and objective justification under s.6E of the Terms of Employment Information Act 1994 (as amended). The Complainant said he was verbally permitted to operate a private career guidance service and even placed a sign for the Respondent’s school at the premises. He maintained his business promoted the Respondent’s profile and did not poach students or reduce turnover. He alleged that his dismissal was pre-determined, citing procedural flaws and prejudgment, including the seizure of school keys and passwords before the investigation concluded. The Complainant also noted unrelated tensions with management and claimed his dismissal was due to unresolved internal grievances. He was granted a disciplinary hearing and independent appeal but maintained that the decision was disproportionate.

The Respondent argued that the Complainant was dismissed for gross misconduct after secretly setting up a competing grind school business, in breach of a restrictive covenant in his employment contract. The Complainant was suspended on full pay, invited to respond in writing, and given the right to appeal, which he exercised. The Respondent maintained that the dismissal was fair, based on a clear contractual breach, dishonesty, and the loss of trust. It submitted that the disciplinary process was procedurally sound, involving an independent appeal, and that dismissal was within the range of reasonable responses. The Respondent’s witness, the business owner, provided detailed testimony regarding the sequence of events, the contract terms, and his lack of prior knowledge about the competing venture. He stated the Complainant refused to provide proper clarification and destroyed relevant diary records. The Respondent submitted there was no loss as the Complainant had already established another business and failed to mitigate his losses. The Respondent strongly opposed any request for reinstatement, citing the breakdown in trust and confidence caused by the Complainant’s conduct.

The Adjudicating Officer found that while both parties agreed the Complainant was dismissed and had destroyed his work diaries, the dismissal was not unfair. Although the Complainant argued that the dismissal was an overreaction and claimed he had verbally informed the Respondent of his outside business activities, his credibility was seriously undermined by his admitted destruction of evidence. The Adjudicator accepted that the Complainant had been given a fair disciplinary process, including an oral hearing, representation rights, and an independent appeal. While the written contract containing a non-compete clause was unsigned, it was clear that the Complainant was aware of its terms. The Adjudicator concluded that the Complainant’s operation of a grind school was similar enough to the Respondent’s private secondary school to be considered competitive. The disciplinary process substantially complied with the Code of Practice, and dismissal fell within the band of reasonable responses. As such, the claim of unfair dismissal was rejected.

Employers should ensure all employees are provided with clearly worded contracts, including clauses on confidentiality, competing business activity, and outside employment. Where misconduct is suspected, follow fair disciplinary procedures in line with the WRC Code of Practice. This includes giving the employee notice of allegations, an opportunity to respond, and the right to representation and appeal. Maintain impartiality throughout and document all steps. Destruction of evidence by the employee may justify dismissal, but it is essential that the process remains procedurally fair. Finally, ensure all employment contracts are regularly reviewed and updated to reflect changes in law and business operations.    

The full case can be found here.