By Karl Nicholas

An employee will be under various implied obligations during the course of his employment. Some of these implied obligations may continue even after the end of employment. A breach of any of these obligations during employment may well justify the summary dismissal of the employee. The duties are broad in their application and are flexible as to whether there has been a breach or not by an employee.

Duty of fidelity

Implied into every contract of employment is a duty on the employee to serve his employer with fidelity and good faith, which continues throughout the period of employment. The precise extent of the duty of fidelity will depend on various factors such as the seniority of the employee, and his position in the employer’s business.

The duty of fidelity encompasses a number of more specific duties:

• honesty: an employee is required to be honest in his dealings with his employer;

• competition: an employee must not, without the employer’s consent, do anything other than work for his employer during his contracted working hours, and in particular must not compete with his employer;

• preparation to compete: once an employee leaves employment, he will generally be free to work in competition with his ex-employer. Certain preparatory steps, such as looking for work, are permissible before the employee leaves. However, generally the employee may not:

o take those steps during working hours
o solicit the employer’s customers
o discuss or accept offers from customers or potential customers of his employer
o offer employment to a fellow employee
o memorise or copy trade secrets or confidential information

• secret profits: an employee must not make secret profits by using his employer’s assets

• inventions and discoveries: those made in the course of employment are normally the employer’s and must be disclosed

• disclosing trade secrets or confidential information to third parties: this is generally unlawful during employment

• disclosure of information to the employer: an employee has a duty to disclose to the employer some types of information relevant to its business.
However, an employee is not generally under a duty to disclose his own or other employees’ misconduct to his employer.

Categorising information

Employees will become aware of various types of business information in the course of their employment. It can be subdivided into four broad categories:

• information largely incidental to the employer’s business interests which may be readily available from public sources

• general knowledge

• confidential information

• trade secrets

Trade secrets

Trade secrets are business information:

• which would significantly damage the business if disclosed

• in respect of which the information’s owner has made efforts to prevent widespread publication

Often the distinction between trade secrets and information which is merely confidential is unclear. Various factors are relevant:

• the nature of the employment

• the nature of the information

• how the employer treats the information: the more carefully the employer treats it, the more likely it is a trade secret

• separability: if the information is not readily separable from other less confidential information, it is less likely to constitute a trade secret

Confidential information

General skill and knowledge that would equip an employee as a possible competitor will not generally amount to confidential information, whereas knowledge which would enable an employee to take advantage of the employer’s trade connections, or to utilise information confidentially obtained is likely to be categorised as confidential information. If a man of average intelligence and honesty would think it was improper to disclose certain information to a competitor, it is probably in the category of confidential information. If an employer is unable precisely to identify the information it seeks to protect, it is less likely to be categorised as confidential.

Examples of potentially confidential information include price lists, supplier lists, customer lists, order lists, business plans, and information regarding finances or internal processes.

The difficulties inherent in categorising information can be overcome by using express covenants which explicitly define what is to be treated as a trade secret and/or what is classed as confidential information.

Karl Nicholas is a Barrister specialising in Employment Law at Ellis Whittham www.elliswhittam.com – For any further details or advice please contact him at karlnicholas@elliswhittam.com

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