Loyalty doesn't require written agreement
Published 11/12/04

A worker's duty of loyalty to his employer comes from the mere existence of the employment relationship.

A worker need not have a confidentiality agreement to prohibit him from misappropriating or disclosing company trade secrets to third parties. Not only would such an action make him liable under his general duty of loyalty to the employer, but such an action could also subject him to liability under the New Hampshire statutory law, the Uniform Trade Secret Act.

Likewise, a worker that has not signed a non-compete agreement effective subsequent to his leaving his employer cannot contact customers of his employer to see if those customers would go with him if and when he starts a new venture in competition with his current employer. Such action would be inconsistent with his loyalty obligation with his employer, and that worker could quite possibly be liable for any damages the employer sustained.

If the worker, after leaving his employment, seeks out these customers, as long as the now former worker does not induce the customer into breaching an existing contract with his former employer, generally there would be no liability to the worker unless he had signed a covenant not to compete or other agreement prohibiting him from soliciting or accepting business from these customers.

Another example of a worker's breach of duty of loyalty would be when the worker usurps an employer's opportunity. This can be a particularly difficult issue in the situation upon which the worker is not only employed by the employer, but also performs outside consulting work like so many skilled workers do in the hi-tech industry. If a worker, while employed with his employer, learns of a business opportunity that the employer is seeking and then uses that knowledge to acquire that business opportunity for his own direct benefit, the employer might have a claim for breach of loyalty as a result of that lost business opportunity.

To the extent that the employer and worker have made the effort beforehand to define as clearly as possible in writing their obligations to each other in regards to such potential conflicts of interest, they will be in a much better position to understand their relative rights and obligations, and a Court would have the benefit of interpreting the actual agreement between them rather than apply the general duty of loyalty to the particular facts of the case.

Lastly, a worker's duty of loyalty does not include participation in illegal activities or hiding those activities. Such actions could result in individual criminal liability for the worker. There are also some statutory and common law protections for workers who report to the appropriate government authorities what they believed to be criminal or civil transgressions of their employer.

However, to ensure those protections are available the worker would be prudent to consult legal counsel prior to said report so it is done in a way to maximize the legal protections available.

J. Daniel Marr is a director and shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and business persons on a variety of legal issues, including employment, and advocating on their behalf. You can reach Attorney Marr by e-mail at: dmarr@hamker.com

This information is general information and may not reflect the most current legal developments, verdicts or settlements. The information provided should not be relied upon as an indication of the actual state of the law or of future developments. The information contained on the Hamblett & Kerrigan website is for informational purposes only and does not constitute legal advice. If the information referenced may be of legal importance to you, you should consult with an attorney to provide you with legal guidance and opinion as the the effect of the current law upon your situation.