Can Employees Work While on Long Service Leave in Australia?

Long service leave (LSL) is a valuable entitlement that recognises years of continuous service. But what happens if an employee wants to “pick up a few shifts elsewhere” or even work for a competitor while they’re on LSL?

This is a common scenario for small businesses, especially in industries with seasonal peaks. As an employer, you need to balance your team’s entitlements with your legitimate business interests like confidentiality, customer relationships and fair rostering.

In this guide, we’ll unpack when employees can work while on long service leave, where the red flags are, and the practical steps you can take to protect your business with the right contracts and policies.

What Does Long Service Leave Allow (And Prohibit) In Australia?

Long service leave is governed by state and territory laws, not the Fair Work Act. That means the exact rules about entitlement amounts, when it accrues and how it’s taken can vary depending on where your employee ordinarily works.

Generally, LSL is paid leave that employees take after a long period of continuous service. While on leave, the employment relationship continues. So, the employee still owes core duties to you (for example, obligations of fidelity, confidentiality and not misusing your information) even though they’re not actively working.

Most state LSL laws don’t directly say whether an employee can or can’t work somewhere else during their LSL. Instead, whether it’s allowed usually turns on three things:

• What your Employment Contract says about secondary employment, conflicts and confidentiality.
• What your workplace policies say (for example, a Workplace Policy on outside work and conflicts of interest).
• Whether the outside work competes with your business, conflicts with the employee’s duties, or risks misuse of your confidential information or IP.

In short, long service leave doesn’t give employees a free pass to harm your business. But it also doesn’t automatically stop them from doing any other work, particularly if it’s non-competing, casual or unrelated.

As a best practice, make sure your leadership team understands the basics of your jurisdiction’s LSL scheme and that you have a consistent internal process for approving (or refusing) outside work requests during extended leave.

Can Employees Work Another Job While On Long Service Leave?

Often, yes-provided it doesn’t breach their contract or your policies, and it doesn’t create a genuine conflict of interest. The devil is in the detail.

When It’s Usually Fine

• Unrelated work that doesn’t compete with you (for example, a retail employee doing occasional shifts at a café).
• Short-term, low-risk freelance work that doesn’t involve your customers or confidential information.
• Volunteer work for a charity or community organisation.

In these situations, it’s still wise to require disclosure and obtain written approval first. A simple notification process helps you assess risks consistently.

When It’s Risky Or Not Allowed

• Working for a direct competitor (especially in the same geographic area or customer segment).
• Approaching or servicing your customers while on leave.
• Using your confidential information, documents, pricing or know-how to benefit another business.
• Breach of any restraint, non-solicitation or secondary employment clause in the Employment Contract.

If you discover risky activity, act quickly but fairly. Gather the facts, check the contract and relevant policies, and follow a procedurally fair response (more on this below).

It’s helpful to also understand the broader rules around outside work. Our guide to secondary employment and our piece on dual employment step through the common traps for employers and how to stay compliant under Australian employment law.

How To Manage Secondary Employment And Conflicts Of Interest

Proactive systems are your best defence. Clear expectations up front make it easier to assess requests and deal with issues consistently.

Set A Clear Approval Process

• Require written disclosure of any outside work, including details about the employer, duties, hours and whether the work relates to your industry.
• Make approval conditional on “no conflict” and “no competitor” unless expressly permitted in writing.
• Set a time limit on approvals (for example, limited to the period of leave) and reserve the right to withdraw approval if circumstances change.

Define Conflicts Of Interest

Spell out what “conflict” looks like in your business, such as serving your customers through another business, promoting a competitor, or using your information or resources externally. A dedicated Conflict Of Interest Policy is an excellent anchor for this.

Protect Confidential Information And IP

• Reinforce confidentiality obligations and make sure employees understand what information is protected.
• Set clear rules for devices, files and cloud access during long leave periods.
• If relevant, consider limited restraints (for example, non-solicitation of your customers) that are reasonable and carefully drafted for your industry. Where appropriate, get tailored restraint of trade advice.

Keep It Consistent And Documented

Apply your process consistently, record decisions and the reasons, and communicate outcomes in writing. Consistency reduces risk and helps defend your approach if it’s ever challenged.

Update Your Contracts And Policies

If your current documents don’t speak to outside work during leave, now is a great time to update them. The goal is to set expectations, get disclosure early and preserve your right to say no when there’s a real risk to your business.

Key Clauses To Include In Employment Contracts

• Secondary Employment: Require prior written approval for any outside work (including while on leave) and set reasonable grounds for refusal (for example, competition or conflict).
• Confidentiality: A strong confidentiality clause that survives leave and termination, covering information, documents, systems, customer lists and pricing.
• Intellectual Property: Make sure IP created in the course of employment belongs to the business and that employees can’t use or license it elsewhere.
• Restraints (if appropriate): Carefully drafted non-solicitation or limited non-compete obligations can help manage risk, provided they’re reasonable in scope, time and geography.
• Notification Obligations: Require employees to promptly disclose potential conflicts and any changes to outside work arrangements.

If you’re not sure where to start, have your template Employment Contract reviewed and updated so it’s fit for purpose in your industry.

Workplace Policies That Support Your Position

• Outside Work/Conflict Policy: Explains what is and isn’t allowed, the approval process, and examples of conflicts.
• Confidentiality & Information Security: Sets rules for devices, access and data handling during leave.
• Leave Policy: How to request LSL, reasonable business considerations (for example, peak season), and expectations while on leave.

Well-written policies give you operational clarity and help you act fairly and consistently. If you need a framework to bring these together, a Workplace Policy suite is a simple way to standardise your approach across the team.

Non-Compete And Non-Solicitation

Non-compete requirements are highly scrutinised in Australia and must be reasonable to be enforceable. In many small businesses, a targeted non-solicitation clause (preventing active poaching of your customers or staff) is more realistic and effective than a broad non-compete.

Where you have genuine concerns (for example, senior staff with deep client relationships), it may be appropriate to use a tailored non-compete agreement or post-employment restraint. Always get advice so the clause fits your business and is more likely to hold up.

Responding If An Employee Works Elsewhere During LSL

Discovering an employee has been working elsewhere during LSL can be frustrating-especially if there’s a suspected conflict or customer contact. A measured, fair process will help you resolve the issue and reduce legal risk.

1) Gather The Facts

• Confirm the nature of the outside work (employer, duties, hours, whether it relates to your sector, any overlap with your customers).
• Collect relevant documents (emails, approvals, policies, contract copies).

2) Assess Against Contract And Policy

• Did the employee seek and obtain approval?
• Is there a secondary employment, confidentiality or restraint breach?
• Has there been contact with your clients or use of your information?

3) Procedural Fairness

Invite the employee to respond to the concerns and provide their explanation. If formal action may follow, issue a clear letter setting out the allegations and potential consequences. When appropriate, a structured process supported by a show cause letter helps maintain fairness and clarity.

4) Decide On Next Steps

• No Issue: Confirm approval (with any conditions) and remind them of confidentiality and conflict obligations.
• Minor Issue: Provide a warning, clarify expectations, and update any approvals or policies as needed.
• Serious Breach: Consider disciplinary action consistent with your policies and the law, which may include withdrawing approval, revoking access, or in serious cases, termination (seek advice before making this call).

Throughout, keep clear written records and ensure your response is proportionate to the risk and evidence.

Practical Tips For Approving (Or Refusing) Outside Work Requests

To keep things simple and defensible, use the same criteria each time. Consider:

• Competition Risk: Is the proposed work in the same market, geography or with similar customers? Does it involve direct competitors?
• Customer Contact: Will they service, market to or approach your customers?
• Confidentiality: Could the outside work benefit from your confidential information or pricing?
• Reputation & Safety: Does the work pose reputational risks or WHS implications when they return?
• Duration & Scope: Is it short-term and low-risk, or ongoing and material?

If you’re comfortable, issue approval in writing, with conditions (for example, “no customer contact, no competitor work, no use of confidential information, approval limited to ”). If you decide to refuse, give a brief written reason linked to your criteria and policy (for example, “direct competitor in the same territory”).

Payroll, Accruals And Practicalities To Keep In Mind

Outside work doesn’t change your LSL payroll obligations. You still process LSL according to your state or territory rules and any applicable industrial instrument. As part of workforce planning, it can help to model costs and leave balances across the year so LSL doesn’t take you by surprise.

If you’re budgeting or sense-checking entitlements, tools like our Long Service Leave Calculator can help you estimate what might be payable. And if you’re wondering about edge cases during extended absences, our guide to long service leave accrual during maternity leave explains how accrual can work alongside other types of leave.

For employees who have worked in different states or under different corporate entities, be mindful that eligibility and portability can get complex. In those cases, it’s sensible to document your decision-making and get advice.

How This Differs From Other Leave Types

Don’t confuse LSL with other scenarios where working elsewhere is clearly restricted or managed differently. For example, on garden leave employees are typically paid to stay away from the business and competitors while serving notice, and restrictions are often very tight. If you’re weighing up options during a separation process, see our guide to garden leave for how that works.

By contrast, LSL is a long-service entitlement and doesn’t automatically prevent all outside work. Your control comes from contracts, policy and the ongoing duty not to harm the employer’s legitimate business interests.

Key Takeaways

• Long service leave doesn’t automatically ban outside work, but employees remain bound by confidentiality and loyalty duties while on leave.
• Your best protection is clear documentation: a modern Employment Contract (with secondary employment and confidentiality clauses) and a practical Conflict Of Interest Policy.
• Approve or refuse outside work requests using consistent criteria focused on competition, customer contact and confidentiality risk.
• If concerns arise, follow a fair process-confirm facts, check the contract/policies, seek a response, then take proportionate action, using tools like a show cause letter where appropriate.
• Plan for payroll and entitlements during extended absences, and use resources like our Long Service Leave Calculator to sanity-check figures.
• Restraints must be reasonable to be enforceable-targeted non-solicitation often works better than broad non-competes, so get tailored advice.

If you’d like a consultation about managing employees who want to work while on long service leave, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.