Can You Work While on Long Service Leave?

Long service leave (LSL) is one of those employee entitlements that can feel straightforward until a real-world scenario lands on your desk - like an employee asking whether they can take a few paid weeks off, and do some work elsewhere at the same time.

From a small business perspective, the question isn’t just “is this allowed?” It’s also:

What are the legal risks if an employee works while on long service leave?
Can it impact payroll, workers’ compensation, or leave accruals?
What if they work for a competitor or start their own business?
What do you do if you suspect they’re working when they said they were “taking leave”?

This guide breaks down what “working while on long service leave” can look like in practice, why it can be risky, and practical steps you can take to protect your business while still being fair to your team. It’s general information only - because the answer can turn on the employee’s State or Territory LSL law, any award or enterprise agreement, and the wording of your contract and policies.

What Does “Working While on Long Service Leave” Actually Mean?

“Working while on long service leave” can cover a few different situations, and the details matter. For employers, it helps to get clear on what’s happening before jumping to conclusions.

Common Scenarios We See In Small Businesses

Working for another employer during the LSL period (casual shifts, short-term contracts, temp roles).
Running a side business (for example, consulting, freelancing, or eCommerce).
Helping out a family business (paid or unpaid).
Doing “informal work” that is not on payroll (which can still create legal and reporting issues - this article isn’t tax advice).
Continuing to do work for your business in an ad hoc way while they’re “on leave” (answering emails, taking calls, doing tasks remotely).

Each of these scenarios can raise different issues across employment law, workplace policies, confidentiality, safety, and business reputation.

Why Employers Care (And Why It’s Not Just About “Fairness”)

It’s natural to feel frustrated if an employee takes a break that’s meant to reward long service - but then uses that time to earn income elsewhere.

But beyond feelings, employers care because:

it may breach employment contract terms (especially conflict of interest or restraint clauses)
it may create safety and fatigue risks
it may raise questions about workers’ compensation coverage (depending on what happens and where)
it may involve misuse of confidential information or client relationships
it can damage trust and workplace culture if handled poorly

Is It Illegal To Work While on Long Service Leave in Australia?

In many cases, it’s not automatically “illegal” for an employee to work while on long service leave. But that doesn’t mean it’s always permitted under every arrangement - or risk-free.

Long service leave in Australia is mostly governed by State and Territory laws (and sometimes industrial instruments like awards and enterprise agreements). That means the exact rules can vary depending on where the employee is based, whether they are in the national or State industrial system, and what instrument covers them.

The Core Legal Idea: LSL Is Leave From Your Employment

Long service leave is an entitlement that gives an employee time away from their employment with you. It does not always come with a blanket ban on working elsewhere. Where restrictions exist, they typically come from:

the relevant long service leave legislation in their State or Territory (and any applicable industrial instrument)
their employment contract
your workplace policies (for example, secondary employment, conflict of interest, and conduct)
common law duties (like duties of fidelity and confidentiality)

So the legal question is usually less “can they work at all?” and more “does the outside work create a conflict, breach confidentiality, compete unfairly, or otherwise breach obligations owed to the employer?”

What If You Approve It?

Sometimes, the best solution is simply being clear and agreeing on boundaries upfront. For example, you might be comfortable with an employee doing casual shifts in a different industry during LSL, but not comfortable with them servicing your clients or working for a direct competitor.

Keep in mind: your ability to refuse or condition outside work depends on the contract/policy wording and whether the restriction is reasonable and connected to a legitimate business interest. The key is to document any approval clearly, including any conditions (more on this below).

What If You Don’t Have a Policy or Contract Clause Covering It?

This is where many small businesses get caught out. If your contracts and policies are silent, you may still have options - but you’ll be relying on broader duties and the facts.

Having a tailored Employment Contract makes a big difference, because it can set expectations about secondary employment, confidentiality, and conflicts before the issue arises.

Key Risks for Employers When an Employee Works While on Long Service Leave

Even if the employee believes they’re doing nothing wrong, working while on long service leave can create real risk for your business. Here are the big ones to watch.

1) Conflict of Interest and Competition Issues

If the employee works for a competitor (or starts a competing business) while on leave, you can face immediate commercial damage - including lost clients, leaked pricing, or staff poaching.

This is where clear contract terms and well-drafted restraints matter. If you’re trying to prevent competitive conduct, it can be worth getting restraint of trade advice so the clause is practical, enforceable, and suited to your industry.

2) Confidentiality and Misuse of Information

Even if they’re not working for a competitor, an employee doing paid work elsewhere might be using the same skills, templates, contacts, or processes they developed with you.

Confidentiality issues often show up in subtle ways, like:

using your customer lists or supplier arrangements
reusing proposals, scripts, or internal documents
approaching your clients during “time off”

These risks are much easier to manage if your employment documents clearly define what is confidential and how it must be handled.

3) Fatigue, Safety and Workers’ Compensation Exposure

From a practical viewpoint, if an employee is working a second job during long service leave, they may return fatigued - which can raise work health and safety concerns.

In some cases, if an employee is injured while working elsewhere, it can raise questions about:

capacity to return to work
medical clearance and fitness for duties
workers’ compensation claims and evidence gathering (which will depend on the State/Territory scheme and the circumstances)

If you’re considering what you can request before they return, the rules around medical clearance are an important starting point.

4) “Working” for You During Their Leave (Hidden Payroll and Compliance Risk)

One of the most common issues is the reverse scenario: your employee is on long service leave, but still “checks in” and does some work for your business.

It might feel harmless - a quick call, an email reply, a small task - but it can create problems such as:

disputes about whether they were truly on leave
underpayment risk if they perform work but aren’t paid correctly for it
unclear boundaries and expectations (especially if they later claim they were pressured to work)

As a general rule, if someone is on leave, it’s best to treat it as genuine time away from work unless you have a specific plan (and ideally a written agreement) for limited duties.

Practical Guidelines: How To Manage Requests To Work While on Long Service Leave

If you want to handle these situations consistently (and avoid a “make it up as you go” approach), it helps to implement a simple decision process.

Step 1: Check Which Long Service Leave Rules Apply

Because long service leave is often State/Territory-based, the first step is identifying which jurisdiction applies to the employee and whether any award, enterprise agreement, or other industrial instrument affects their entitlement or related conditions.

If you operate across multiple States (or have remote staff), it’s especially important not to assume one set of rules applies to everyone.

Step 2: Review Their Employment Contract and Your Policies

Before you approve or reject anything, check what you already have in place:

Does the contract require approval for secondary employment?
Is there a conflict of interest clause?
Is there a confidentiality clause that covers client and commercial information?
Do you have a workplace policy addressing side work?

If your documents are outdated (or missing), this can be a good time to fix the underlying issue rather than relying on ad hoc decisions.

Step 3: Ask the Right Questions (Without Overreaching)

You generally don’t need to interrogate employees about every detail of their personal life. But you can ask reasonable questions that relate to your legitimate business interests, such as:

Who is the work for (industry and nature of employer/client)?
Will it be paid work?
Will it overlap with your business hours or roster patterns on return?
Could it compete with your business, suppliers, or clients?
Will they use any of your equipment, systems, or confidential information?

For many businesses, the “competition / conflict / confidentiality” angle is the core issue - not the fact that they’re earning income.

Step 4: Decide Whether To Approve, Decline, or Approve With Conditions

Often, the practical outcome is conditional approval. If you approve, consider setting boundaries like:

no work for direct competitors (where that restriction is reasonable and relevant)
no solicitation of your clients, staff, or suppliers
no use of confidential information or business resources
confirmation the work won’t impact their fitness for work when they return

If you’re documenting this in writing, keep it plain-English and specific. You’re aiming for clarity, not legal jargon.

Step 5: Keep Records and Apply a Consistent Approach

Consistency is a big part of risk management. If you approve one employee to work elsewhere during leave, but refuse another without a clear reason, you can create grievances or allegations of unfairness.

Keep a simple record of:

the request
what you considered
the outcome and any conditions

This is particularly helpful if issues come up later (for example, performance concerns after their return, or a dispute about what was agreed).

What If You Suspect an Employee Is Working While on Long Service Leave Without Telling You?

This situation needs careful handling. Even if you strongly suspect they’re working, acting too quickly (or too aggressively) can create its own legal and workplace culture problems.

Start With the Documents and the Facts

Before you take action, check:

what the employment contract says about secondary employment and misconduct
what policies apply (and whether they were properly communicated)
what evidence you actually have (not just rumours)

Sometimes what appears to be “working” is actually volunteering, helping family, or activity outside employment.

Have a Calm, Procedural Conversation

If you do raise it with the employee, aim to keep the discussion factual and non-accusatory. You’re trying to understand:

what they’ve done
whether it breaches any obligations
whether there is any risk to your business

If it may be a misconduct issue, you should follow a fair process. Many businesses use a formal “show cause” pathway when allegations are serious, supported by a properly drafted show cause letter.

Avoid Common Mistakes (Even When You’re Frustrated)

Don’t stop paying leave entitlements without proper grounds and advice.
Don’t pressure the employee to return early unless you have a lawful basis.
Don’t conduct surveillance or recording without getting specific advice first - workplace surveillance, listening device, and privacy rules vary by State/Territory and the method used.
Don’t terminate on the spot without investigating and following a process.

If you’re considering disciplinary action, it’s also worth reviewing how termination risks work generally - including warning processes and fairness - so you don’t accidentally trigger an unfair dismissal claim.

How To Reduce Risk With the Right Contracts and Policies

The easiest time to manage working while on long service leave is before it happens - by setting expectations in your employment documents and workplace policies.

Employment Contract Terms That Help

Your employment contract is your first line of protection. Depending on your business and the role, you may want clauses covering:

Secondary employment (whether approval is required and when it may be refused on reasonable grounds)
Confidentiality (what information is protected and how)
Conflict of interest (including duties to disclose potential conflicts)
Restraint of trade (where appropriate and enforceable)

If you’re hiring, updating templates, or managing growth, having a tailored Employment Contract for your workforce type (full-time/part-time vs casual vs contractors) is a practical investment in risk reduction.

Workplace Policies That Create Clear Boundaries

Policies help you set expectations consistently across your team, including how employees should handle side work and conflicts of interest.

Depending on your workplace, policies might cover:

secondary employment and approval processes
confidentiality and information security
code of conduct and social media
fitness for work and fatigue management

Putting these into a central handbook can reduce misunderstandings, especially in small teams where boundaries can blur.

Practical Tip: Put Approval Outcomes in Writing

If an employee asks for permission to do other work during their long service leave, it’s best to respond in writing (even if it’s a short email) confirming:

what they requested
whether you approve
any conditions (for example, non-compete and non-solicit expectations, where appropriate)
that long service leave is still a break from duties for your business

This doesn’t need to be overly legalistic - but it does need to be clear.

Key Takeaways

Working while on long service leave isn’t always automatically prohibited, but it can still create serious legal and commercial risks for your small business.
The rules can depend on the employee’s State/Territory long service leave laws, plus any applicable award/EBA and what their employment contract and your workplace policies say.
The biggest employer risks are conflict of interest, competition, confidentiality breaches, safety/fatigue issues, and unclear boundaries if the employee continues doing work for you while “on leave.”
A consistent decision process helps: identify the applicable rules, review contracts/policies, ask reasonable questions, document any conditions, and keep records.
If you suspect unauthorised work during leave, it’s important to investigate calmly and follow a fair process before taking disciplinary action.
Clear employment contracts and workplace policies are one of the most effective ways to prevent disputes about long service leave and side work.

If you’d like help setting up the right Employment Contracts and policies (or advice on a specific long service leave situation), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Can You Work While on Long Service Leave? Legal Risks and Rules