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Firm wins damages from employee and his rival business

Posted: 7th January 2015   In: Business Employment

A firm has been awarded more than £50,000 compensation from one of its employees who set up a rival business with his two sons.

The court heard that the three had all worked together at the same glass recycling business. The father didn’t have written terms of employment until February 2013, when he signed a contract which contained provisions relating to confidential information and restrictions as to what he could do after leaving the firm.

In March 27, 2013, he gave three months’ notice of resignation. On April 2, his two sons gave one week’s notice of resignation. The two sons went on to become directors of their own newly formed glass recycling company.

The employer then discovered that the father had been canvassing its customers to take their business to his sons’ new company. He had also been involved in setting up the new venture and become a director.

The employer took legal action saying the father had breached his fiduciary duty as well as his duty of fidelity and good faith, and breached the restrictive covenant in his contract.

The court held that the father didn’t have sufficient responsibility to justify a finding that he owed fiduciary duty. It also ruled that he was not bound by the restrictive covenant as he had not received any benefit for entering into it.

However, the court ruled that he had helped to set up the rival company while still an employee and had canvassed his employer’s customers. This was a clear breach of his duty of fidelity and good faith as an employee.

The employer had lost revenue as a result of the actions of the father and the rival company, and was entitled to damages of £51,822.

Please contact John Carter if you would like more information about the issues raised in this article or any aspect of employment law and protecting your business.