Employee Breached Implied Duty of Fidelity by Organising Team Move
An employee broke his implied duty of fidelity by colluding with a competitor to recruit staff and by failing to inform his employer of the planned poaching raid.
In Thomson Ecology Ltd and another v APEM Ltd and others, H was operations manager at a marine biology laboratory and was the most senior employee at its Letchworth premises, but was not a director. He had no formal employment contract and simply had a statement of terms and conditions which provided for a one month notice period. There were no restrictive covenants or confidentiality provisions.
H resigned on 27 November 2012 and was put on garden leave. He started working for a competitor on 2 January 2013. Shortly after his resignation, another 17 biologists left to work for the competitor and it became apparent that H had been working with the competitor to orchestrate a team move.
The employer brought a claim against H for breach of the implied duty of fidelity. The Court found that H had breached this duty by failing to disclose the threat to the employer’s business and staff from the competitor and by actively helping the competitor to recruit staff. It noted that the starting point for assessing the existence and scope of the implied duty was to look at H’s contractual obligations, including his job description. He was operations manager, with overall responsibility for the conduct of the business and his job description contained an express obligation to report on a fortnightly basis. This meant that he should have informed his employer of the planned poaching raids, even more so as he was involved in arranging them.
He was also in breach of his duty of fidelity by formulating a plan with the competitor to entice away his employer’s staff and assisting them in implementing the plan. It was irrelevant that the staff were entitled to leave on one month’s notice.
This case demonstrates that employers who have omitted to include express loyalty and confidentiality provisions in employment contracts can still gain protection against competition from employees during employment through the duty of fidelity. That duty is implied into all employment contracts. However, it is important to note that the implied duty does not protect against competitive activity which takes place after the termination of employment. Had the employee in this case waited until after the termination of his employment before organising the team move, there would have been very little the employer could have done to stop him. For that reason, employers should always include appropriate confidentiality restrictions and post-termination restraints on soliciting staff and customers in the contracts of senior employees and those with an influence over customers.
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