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Detailed Practice Notes written by our Professional Support Lawyers, guiding you through the key issues in each topic.
Implied duties - overview
It is a basic principle of common law that a person is generally entitled to trade when, where and in what manner he wishes.
However, this entitlement is not without limits. An employee will be under various implied obligations during the course of his employment. Some of these implied obligations may continue even after the end of employment.
Duty of fidelity
Implied into every contract of employment is a duty on the employee to serve his employer with fidelity and good faith, which continues throughout the period of employment. The precise extent of the duty of fidelity will depend on various factors such as the seniority of the employee, and his position in the employer’s business.
The duty of fidelity encompasses a number of more specific duties:
honesty: an employee is required to be honest in his dealings with his employer
competition: an employee must not, without the employer’s consent, do anything other than work for his employer during his contracted working hours, and in particular must not compete with his employer
preparation to compete: once an employee leaves employment, he will generally be free to work in competition with his ex-employer. Certain preparatory steps, such as looking for work, are permissible before the employee leaves. However, generally the employee may not:
take those steps during working hours
solicit the employer’s customers
discuss or accept offers from customers or potential customers of his employer
offer employment to a fellow employee
memorise or copy trade secrets or confidential information
secret profits: an employee must not make secret profits by using his employer’s assets
inventions and discoveries: those made in the course of employment are normally the employer's and must be disclosed
disclosing trade secrets or confidential information to third parties: this is generally unlawful during employment
disclosure of information to the employer: an employee has a duty to disclose to the employer some types of information relevant to its business. However, an employee is not generally under a duty to disclose his own or other employees' misconduct to his employer
For further information, see The duty of fidelity.
Employees will become aware of various types of business information in the course of their employment. It can be subdivided into four broad categories:
information largely incidental to the employer’s business interests which may be readily available from public sources
For more information, see Categories of information.
Trade secrets are business information:
which would significantly damage the business if disclosed
in respect of which the information's owner has made efforts to prevent widespread publication
Often the distinction between trade secrets and information which is merely confidential is unclear. Various factors are relevant:
the nature of the employment
the nature of the information
how the employer treats the information: the more carefully the employer treats it, the more likely it is a trade secret
separability: if the information is not readily separable from other less confidential information, it is less likely to constitute a trade secret
General skill and knowledge that would equip an employee as a possible competitor will not generally amount to confidential information, whereas knowledge which would enable an employee to take advantage of the employer’s trade connections, or to utilise information confidentially obtained is likely to be categorised as confidential information. If a man of average intelligence and honesty would think it was improper to disclose certain information to a competitor, it is probably in the category of confidential information. If an employer is unable precisely to identify the information it seeks to protect, it is less likely to be categorised as confidential.
Examples of potentially confidential information include price lists, supplier lists, customer lists, order lists, business plans, and information regarding finances or internal processes.
The difficulties inherent in categorising information can be overcome by using express covenants which explicitly define what is to be treated as a trade secret and/or what is classed as confidential information.
Restrictions on use of information
Each category of information is protected to a different extent:
general knowledge, publicly available information, and information largely incidental to the employer’s business interests are not usually capable of protection either during or after employment, even through use of express covenants
confidential information is protected by the implied duty of fidelity during employment. After employment that protection ceases unless maintained by suitable express covenants
trade secrets are protected at all times, even in the absence of express covenants
For more information, see Restrictions on use of information.
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