Thomson Ecology v APEM: the concept of the duty of fidelity
Employment lawyer, Nathalie Stewart, explains the concept of the duty of fidelity to an employer while employed in the case of Thomson Ecology v APEM.
Mr Hall was an operations manager for the Claimant. He wasn’t a director, but was a senior employer. He had no formal contract of employment and only had his basic statement of terms and conditions from some 10 years before. There were no covenants that prevented him from working in competition and there was no right to put him on garden leave. There was a basic confidentiality clause.
Mr Hall resigned and 6 weeks later started working for the Respondent. This was followed by 17 of the Claimant’s other employees, which would in reality almost destroy that section of the business. The Claimant realised that Mr Hall had been planning this transfer of all the staff for a while including while he was still an employee for them. Other things were discovered. Mr Hall had also registered a new company with a similar name for setting up and running an identical business for the Respondent.
Amongst other claims, the Claimant sued Mr Hall for breach of his implied contractual duty of fidelity. Duty of fidelity means that while you’re employed you must not disrupt your employer’s business, compete or solicit clients and employees. You must also report each other’s wrongdoings.
The Judge held that Mr Hall had breached this duty. As a senior employee who reported to the board, he should have reported any existence of a threat to the business and staff including the ‘planned poaching raid’ (even though he was driving it). The Judge also held that while Mr Hall was an employee, it was a breach of fidelity to recruit or solicit other employees and clients. The Judge considered this duty would apply whether in the business or on garden leave and also during any notice period that had not expired.
You can find full details of Thomson Ecology v APEM here.
What this means for you
Had Mr Hall waited until he was no longer an employee, there was not much to stop him working in a competing business and soliciting clients and employees provided he didn’t breach his ongoing duty of confidentiality.
The issue here was that Mr Hall was employed and being paid by the Claimant during the time he was preparing to compete and seriously damage if not destroy the Claimant’s business. Obviously employees are allowed to look for and apply for other jobs while they’re still employed with their current employer. But this case gives protection where the employee is trying to set up in competition or affect the employer’s business while they’re still being paid to be an employee.
To avoid this, make sure senior employees have a list of their fidelity clauses. You should also make sure there are good restrictive covenants to prevent competition for some time after the employee leaves.
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