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Sales manager breached his duty when setting up rival company

Posted: 2nd February 2012   In: Dispute Resolution

A sales manager has been found liable for breaches of contract and duty to his employer after setting up a rival business.

The manager was working for an information technology consultancy when he decided to set up a new company of his own. 

While preparing his new venture, he downloaded some of his employer’s business contacts and copied invoices in order to use them for his own purposes. He also obtained contracts for his new company while still working for his employer. 

His employer took legal action to protect its business. 

The High Court held that an employee was entitled to set up a potential rival company and was not obliged to tell his employer that he planned to do so. He was also free to compete with his employer after resigning and setting up a new business. 

However, he should always serve his employer’s best interests while still employed. 

The manager in this case had breached his duty to his employer by obtaining contract work while still employed. It was also a breach of his duties to have transferred business contacts and to have copied invoices. 

The court therefore ruled in favour of the employer and found the manager liable for breaches of contract.

Please contact Neil O’Callaghan if you would like more information about the issues raised in this article.