How to protect your business from exploitation by employees - Part 3

This article considers the main implied terms that can be enforced by an employer against an employee, and which may assist the employer in protecting its business, and include the following:

1. Duty of Fidelity - every contract of employment contains an implied term that the employee will serve his employer with good faith and fidelity. The duty of fidelity is probably the most wide-ranging of an employee's implied obligations and consist of the following specific aspects which are derived from case law: a. Duty not to disrupt the employer's business – includes conduct of the employee with the motive of disrupting the employer's business. b. Duty not to compete - an employee may not work in competition with his employer. The duty applies during working hours and does not extend after termination of the contract of employment. Express contractual provisions are required to restrict competition on termination of employment. c. Duty not to solicit the employer's customers - an employee must not solicit the employer's customers for the employee's own purposes or for a rival. d. Duty not to entice employees - an employee must not, during the course of employment, entice fellow employees to leave employment to work in competition with the employer. e. Duty to disclose wrongdoing – in general employees are not under a duty to report a fellow employee's misconduct or breach of contract except: (i) where the employee is also a director and has a fiduciary duty to disclose such wrong doing; (ii) where the employee's contractual duties and the position he occupies mean he has a duty to report the misconduct of others. f. Duty of confidentiality - During the course of employment the employee must not: (i) disclose to third parties the employer's confidential information and trade secrets obtained during the course of his employment; (ii) use the employer's confidential information for his own purposes. g. Duty not to misuse the employer's property. h. Duty to account - an employee who receives a bribe or secret commission as a result of their employment must account for it to the employer. 2. Duty to obey lawful and reasonable orders - this underpins the managerial framework in the day-to-day running of business. It also provides a legal basis for company policies including staff handbooks. It does not generally form part of the contract of employment, and as such can be altered unilaterally by the employer. The employee must nonetheless obey them, as a result of this implied term. 3. Duty to be adaptable - allows the employer to make changes to the employee's duties and working methods or place of work etc. 4. Duty to exercise reasonable care and skill - A skilled employee is subject to an implied warranty that he is reasonably competent to perform the job. An employee also owes a duty to the employer under the contract to exercise reasonable care in performing his duties. Thus if the employer suffers loss as a result of the employee's negligence it may seek an indemnity or contribution from the employee.

The author, Christian Browne is a business solicitor and the Managing Director of Summerfield Browne Solicitors (http://www.summerfieldbrowne.com). Christian Browne is also a legal advisor with the Institute of Directors in London. Christian Browne can be contacted on (0044) (0) 1858 414284 or by email on cbrowne@summerfieldbrowne.com

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