Thursday, September 15, 2016

What Fiduciary Duties do Employees Owe to Their Employers? Taking Your Employer's Confidential Information Before Resigning Violates an Employee's Duty of Loyalty

You Owe Your Current Employer Duties of Loyalty, Good Faith and Diligence

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Violating Duty of Loyalty Can Have
Serious Repercussions (Not This Serious, but...)
An Employee Can Get in Trouble for Taking an Employer's Confidential Information or Helping a Competitor While Still Employed

Under Pennsylvania's common law (i.e. the law developed over hundreds of years through court decisions) an employee owes a duty to act with the utmost good faith, loyalty and diligence in the furtherance and advancement of the employer’s interests. Sylvester v. Beck, 406 Pa. 607, 178 A.2d 755 (1962). The duty of loyalty includes an employee’s duty not to do anything while employed that is intended to further the interest of another company that competes with his/her current employer.  This duty exists whether or not you have a non-compete agreement.  Pennsylvania's Supreme Court cited to Matthew 6:24 for the proposition that “no man can serve two masters,” and certainly not where the interests of those masters conflict. Onorato v. Wissahickon Park, Inc., 430 Pa. 416, 244 A.2d 22 (1968).

An employee is an agent of his/her employer, and an agent is a fiduciary with respect to matters within the scope of the agency, and is required to act solely for the benefit of his/her principal in all matters implicating same. SHV Coal, Inc. v. ContinentalGrain Co., 376 Pa. Super. 241, 545 A.2d 917 (1988).

It Belongs to Your Employer...
An employee may not use his/her employer’s confidential information collected surreptitiously during the employment without the knowledge or consent of the employer, and doing so violates an employee’s fiduciary duties to his/her employer. Morgan’s Home Equipment Corp. v.Martucci, 390 Pa. 618, 136 A.2d 838 (1958). 

Employees who covertly intend to terminate their employment may not solicit customers for a rival business before doing so, nor may they do other similar acts in direct competition with the employer’s business. Colonell v. Goodman, 78 F.Supp. 845 (1948).

Common Law Protects Your Employer
Even Without a Contract
Soliciting Clients to Join You With Your New Employer While You Are Still Employed With Your Current Employer is Strictly Forbidden 

From these and many other case flow a number of principles.  For example:

·       An individual who seeks employment with a competitor of his/her employer despite having agreed not to so violates his/her duty of loyalty;

·       an individual employed to acquire business opportunities for one company who seeks to divert business to a competing company with whom the employee has agreed to accept employment will be held liable for breach of the duty of loyalty;

·       it is a violation of the duty of loyalty to use an employer’s time or resources in order to locate or procure replacement employment;

Resist the Temptation...
      using confidential information misappropriated from one’s employer to increase one’s employability with another constitutes a breach of the duty of loyalty, as does using such information for the benefit of a competitor of a former employer.                

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John A. Gallagher is an employment attorney who represents employees who need an employment lawyer in the Philadelphia area, including individuals who live or work in Philly or nearby communities such as Chester County, Delaware County, Montgomery County, Bucks County, Berks County and Lancaster County.

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