Danger of defecting to a rival company

EMPLOYEES who resign from their jobs to join a rival company could end up in trouble with the law.

In most cases, of course, firms are perfectly entitled to poach employees and clients from their competitors. It is natural business behaviour.

But the High Court has ruled that when a group of employees defect — and keep quiet about their plans until they are fully realised — they could be breaking their so-called “duty of fidelity” to their original employer.

All employment contracts have an implied duty of fidelity, which broadly means that employees must not act against their employers’ interests.

The High Court decided that three senior employees of a rehabilitation-management company broke this duty when they went to work for a competitor without telling their employer that the competitor had approached theme. The original employer found out only after they had started their new jobs.

Each defecting employee had known about the plans of the others for at least two months before they left. To make matters worse, they had misled their original employer about their own plans.

In another case, a senior employee at a large wealth-management business handed over resignation letters from 52 of its employees. All had accepted work in a new business the senior employee was setting up. Twenty-three more people followed.

The wealth-management business found out that people in the firm had co-ordinated the defections. It took the matter to the High Court.

The judge ruled it was unacceptable for employees, and particularly senior managers, to keep quiet when they knew of planned poaching raids — especially if they were among the plotters themselves. In doing so, they broke their duty of fidelity.