Leaving your job? Three things not to do before you get your P45

For an employee who has decided to move on to pastures new and has handed in his/her notice, or has been told they are to be made redundant, there are certain pitfalls to be avoided. They may seem obvious (like serving notice), but people still fall foul of them. Walking out there and then is a big step for an employee – we’re in constructive dismissal territory here and legal advice should be taken  before you do it. In other cases some employees only have regard to the restrictive covenants in their contracts of employment (which are the clauses that say the departing employee won’t try to solicit work or custom from the clients he’s been dealing with, or prevent him from joining a competing business once he’s left).  Whether those restrictions are always legally enforceable is another matter and constitute another material for another blog post or three, but in this post I want to highlight for employees that trying to get ahead by taking confidential information, or by acting inappropriately whilst stil an employee (even if on garden leave) could end in tears.

The basic common law position is that all employees owe a “duty of fidelity” to their employers whilst they remain employed and to breach it may be a serious matter, even justifying dismissal for gross misconduct. This comprises several specific duties but the three main ones are ;

1. Duty of Confidentiality – It sometimes happens that when an employee is thinking of leaving their job they take some liberties with the employer’s confidential information, such as downloading the client database or copying confidential information.  Don’t do it: every employee owes his/her employer a duty of confidentiality, which may be expressly stated in the contract of employment/staff handbook or implied under common law
2. Duty not to Compete -  Don’t start working for another business, whilst still employed by current employer.   This situation should not be confused with restrictive covenants preventing the employee from dealing with or working for a competitor for a period of time after the employment has terminated.  Restrictive covenants can be difficult to enforce and will only be enforceable so long as they seek to protect an employer’s legitimate economic interests because the courts view them as being a restraint of trade.  However, before the employee actually takes his leave he should not be competing with his employer.  That is a breach of the duty of fidelity and, if the person concerned is a senior employee or a statutory director of the business concerned it may be a breach of fiduciary duty (“utmost good faith”).  That will be a disciplinary matter and, almost certainly, gross misconduct, leading to dismissal without notice pay and, quite possibly, a reference. The above all applies even when the employee is on garden leave. They’re still an employee even if they’re not attending the workplace or doing any work.
3. Duty not to Act against the employer’s best interests – ie not to act in Conflict of interest -  not whilst still employed.  The duty of fidelity requires the employee not to act in a way that damages the employer and, furthermore, requires the employee to notify the employer of his (and other employees’) wrongdoing. There is also a duty to report approaches from competitors.

How can an employer protect themselves?  The answer, as ever, is to have a properly (and professionally) drafted contract of employment that expands upon the various duties above and makes it quite clear what employees can and can’t do during employment.

So, this is all fairly straightforward, but can an employee prepare to compete? In other words can an employee take steps whilst in employment to prepare his own business when he leaves? Is buying an off the shelf company a breach of the duty of fidelity, or having stationery printed? It has always been the case that an employee can prepare to compete, but the recent case of Shepherds Investments Ltd v Walters [2006] EWHC 836 suggests that might not be quite so straightforward now.

I’ll deal with that in my next post.

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