Kelly Sayers: Preparing to compete and ‘fessing up’.

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Employees changing jobs is a fact of life. But what preparatory steps can an employee take with a view to competing with their existing employer once their employment ends? And do they have a duty to pass on to their current employer any relevant information they receive, in confidence, whilst in the process of finding alternative employment?

There have been many cases relating to these issues, the latest of which, Customer Systems plc v Ranson and others, is quite significant. The case recognised that there was an ‘interplay between two concepts’. On the one hand an employee should be free to prepare for their future while still employed but on the other hand, whilst still employed, they should serve their employer’s best interests.

This particular case involved claims by Customer Systems plc (CS), an IT Consultancy, against four of its former employees in connection with a company set-up by one of the defendants, Mr Ranson, whilst still employed by CS. The new company, Praesto Consulting UK Limited, subsequently employed the three other defendants and the company went on to compete with CS.

Several claims were made by CS but of particular interest is the part of the Judgment which concerns another defendant, Mr Offland.
Whilst Mr Offland was still employed by CS, Mr Ranson asked him to look at a proposal in respect of work to be carried out by Praesto. This work was on behalf of AstraZeneca Global in Manchester. CS had previously worked with AstraZeneca in Manchester but they were not a current customer. AstraZeneca in Luton, however, was an important CS client for which Mr Offland was responsible and the Praesto proposal described Mr Offland’s work for AstraZeneca as if it had been done on behalf of Praesto. Mr Offland did make some amendments to the proposal but in the end Praesto didn’t get the work.

The Judge’s conclusion was that because of his level of seniority, Mr Offland could not be treated as if he was a Director owing fiduciary duties generally, however, he was to be treated as a fiduciary when he assisted Praesto. Therefore, the Judge was of the view that Mr Offland should have informed CS of the work he was doing for Praesto.

The next question was whether Mr Offland had a duty to inform CS about “the threat posed by Praesto”. The conclusion was that an employee should be able look for a new job without having to advise their current employer of anything they learn in confidence while doing so. Therefore, it appears that implied obligations to an existing employer can be ‘trumped’ by the duty of confidence owed to the new employer.
But is this the right approach?

The view held by CS was that the position should be the other way round, ie that the obligation to the current employer should always defeat any duty of confidence owed to the new employer. However, this was rejected on the grounds that an employer must accept that an employee is free to job hunt and that in so doing they may be entrusted with confidential information by a prospective employer.
So is this the end of the matter?

I doubt it. It was made clear that each case depends on its own particular facts which could be affected by express terms in the ‘Contract of Employment’ (as opposed to implied obligations which this particular case dealt with). Therefore, the ruling in this case is not definitive and another case could have a very different outcome.

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About KellySayers

Kelly Sayers, Partner and Head of Employment Services at law firm Prettys

As Head of Employment Services at Prettys, Kelly leads a highly experienced team advising on a full range of HR and employment related issues and helping clients through difficult and often complicated disputes.

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