No, said the High Court in MPT Group Ltd v Peel & others.
MPT is a leading producer and supplier of mattress machinery and equipment. It brought proceedings against two former employees, Mr Peel and Mr Birtwistle, who set up a business in competition with MPT, after their non-compete restrictions expired. Both employees had been questioned about their reasons for leaving MPT and neither had disclosed their plans to set up in competition. MPT sought an injunction prohibiting Mr Peel and Mr Birtwistle from soliciting, dealing or contracting with their customers and suppliers. They sought a separate injunction prohibiting them from disclosing or using any of their confidential information.
The Judge was unconvinced that, as a result of the duty of fidelity Mr Peel and Mr Birtwistle were bound to tell MPT their confidential plans to set up in lawful competition, even when directly asked the question. The Judge confirmed that, while the law would prevent unfair competition, or bind employees to enforceable restrictive covenants and confidential information provisions, employees were free to ‘make their own way in the world’.
The decision in this case might have been different if Mr Peel and Mr Birtwistle were more senior and so owed fiduciary duties to their employer. While the common law duty of fidelity requires employees to have regard to their employer's interests, this will not compel an employee to disclose their own confidential information. However, a fiduciary duty calls for single-minded or exclusive loyalty. Employers should bear in mind that most employees won’t be under a fiduciary duty. Employers hoping to compel employees to disclose personal and confidential plans to set up a competing business would be wise to include this as an obligation in employment contracts.
For more information, please contact Nia Cooper.
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