Employees must not act contrary to the employer’s interest, nor compete with his or her employer during their employment.- Additionally, NJ courts have held that a breach of the duty of loyalty is found when an employee takes legally protected information from his or her employer, in order to seek a competitive advantage upon resignation.
Today’s employees are mobile and changing jobs frequently. Because of this they may (or may not) pay attention to some long standing employer/employee obligations to each other. For example, The New Jersey Supreme Court has held, “loyalty from an employee to an employer consists of certain very basic and common-sense obligations.”
In New Jersey, an employee not bound by a “covenant not to compete” (click here to see our dedicated page on Covenant Not To Compete) after the termination of employment, may reasonably anticipate that in the future, he or she will terminate or be terminated from his/her employment, Therefore, while still employed, this employee is lawfully permitted to make arrangements for new employment by a competitor or the establishment of his or her own business in competition with his former employer. Although an employee has the right to make preparations to go into a competing business even while he or she is still employed, he/she may not breach their undivided duty of loyalty owed to the employer while still employed, by soliciting his employer’s customers or other acts of secret competition.”
Moreover, “the courts have recognized the damage a former disloyal employee is able to inflict on his employer, even in the absence of a covenant, where he has launched or assisted a competing business while he is employed.”
In a recent case being handled by our firm, a former employee of a NJ company was accused of a breach of her duty of loyalty that while she was an employee of our client, she was no longer loyal, but rather to the new employer (her new company.) She was using the customers lists, factory information, and other confidential information to create her own company. She continued to interfere with our client’s business by taking and selling products for her new company while still an employee.
Our position in the case was that this employee breached her undivided duty of loyalty she owed to our client while still employed, by soliciting their customers and creating other acts of secret competition while still employed with our client. There was no question that this defendant launched her competitive business while employed without the company’s knowledge and consent.
The case is pending in the Superior Court of New Jersey.
To discuss your NJ business litigation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Business Litigation Attorney