Employees Obligations to Their
By: Lauren M. Bernardi
Shelley works with a management consulting company and has decided that within a year, she wants to open her own consulting company. In the meantime, she takes steps to set up her business, including getting letterhead and business cards in the name of her new company. She also begins to offer her services outside working hours. A few months before her planned departure from the company, she starts leaving business cards on her desk when meeting with her employer’s clients and, indirectly suggests that she can offer better service at a lower price. Is Shelley allowed to do this?
It is an implied term of all employment relationships that the employee will act in good faith towards his or her employer. This obligation, called the duty of fidelity, applies during the employment relationship and, in some cases, survives termination. The overriding consideration is that there be an alliance of interest between the employer and the employee. The components of the duty of fidelity include:
the employee’s duty to avoid conflicts of interest and the duty not to compete with the employer or work for others during working hours
the employee’s obligation to maintain the confidentiality of the employer’s proprietary information, such as trade secrets and customer lists; and
the employer’s presumptive right to ownership of any inventions or copyrights the employee has made during the course of employment.
In addition to the duty of fidelity, fiduciary obligations may also apply to certain employees.
Conflicts of Interest
Employees must not be in a conflict of interest with their employer. Employees may be considered to be in a conflict of interest position if:
1. the employee is competing with the employer
2. the employee is not in direct competition with the employer but has a side business and the commitment to this business interferes with the duty to the employer; or 3. the employee uses the employer’s resources to advance his or her own interests. Obviously it would be unreasonable to allow an employee to compete against the employer, since that would leave the employer vulnerable to unfair competition. This rule prohibiting conflicts, applies even if the employer has not suffered any economic harm as a result of the competition.
Employees Obligations to Their Employers
In addition, even if the employee is not competing with the employer, having outside employment or business interests may breach the implied duty of fidelity. The courts will find a breach if such outside interests interfere with the employee’s duties e.g., the employee spends time that should have been spent working for the employer, working on the side venture. It makes sense that this is a breach of the duty of fidelity, since the employee is effectively stealing time away from the employer. Similarly, the employee is stealing from the employer if the employer’s resources are used to advance the outside enterprise, e.g., if the employee uses the employer’s computer, fax machine, email or photocopier for his or her own business.
In our example, it is clear that Shelley is in a conflict of interest position with her employer. She is attempting to set up her own business during time she should be spending working for the management consulting company.
It is not just business interests or outside employment that breach the duty of fidelity. Volunteer activities can also result in a conflict of interest. This is because employers are entitled to the undivided trust and loyalty of the employee. For example, the courts would be inclined to find a conflict of interest if an employee worked at the Canadian Cancer Society and, in her spare time, was a volunteer with a smokers’ rights group. To protect themselves, prudent employers often implement conflict of interest policies. These kinds of policies cover things like outside employment and business or volunteer...
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