Employees not under duty to disclose intention to compete

09 June 2017

Are employees under a duty to disclose their intention to compete?

Probably not, held the Chancery Division in MPT Group v Peel.

Two moderately senior employees planned to set up a new company in competition with their employer after their restrictive covenants expired.

When questioned by their employer (after handing in their resignation) they lied about their intentions.  The employer sought an injunction based misuse of confidential information, and also upon breach of the duty to answer questions truthfully.

The judge held that whilst there was a general duty to answer questions truthfully, he was "reluctant to hold" that a departing employee is under a contractual obligation to explain his own confidential plans to set up in lawful competition - see para 86 of the judgment.

Although the court did not need to consider this, it might have reached a different conclusion if the employees were sufficiently senior to owe fiduciary duties to their employer.

With thanks to Daniel Barnett’s employment law bulletin for providing this update.