Hamilton Perspectives Nyhetsbrev

Recent court cases regarding an employee’s duty of loyalty to the employer

An employee is bound by a ge­ne­ral du­ty of loyal­ty to the employer by vir­tue of the employment agre­e­ment. Generally, the du­ty of loyal­ty en­tails that an employee is ob­li­ged to put the employer’s in­te­rests ahe­ad of the employee’s own in­te­rests. Thus, it in­clu­des an ob­li­ga­tion to not di­sclo­se any in­for­ma­tion which may harm the com­pa­ny and to not com­pe­te with the employer’s bu­si­ness du­ring the employment. As a ge­ne­ral ru­le, the du­ty of loyal­ty ce­a­ses by the end of the employment. An employee who has be­en in bre­ach of the du­ty of loyal­ty du­ring the employment may be sum­ma­rily dis­mis­sed. In cer­tain ca­ses, the employee shall al­so com­pen­sa­te the employer for the loss in­cur­red as a re­sult of the bre­ach. The Swedish Labour Court (Sw. Arbetsdomstolen) has re­cent­ly ru­led on se­ve­ral ca­ses re­gar­ding an employee’s bre­ach of the du­ty of loyal­ty to the employer.

AD 2018 no. 25

Three employe­es in a lo­gistics com­pa­ny plan­ned and pre­pa­red to start a new com­pe­ting bu­si­ness du­ring the employment, e.g. by re­gis­te­ring a new com­pa­ny in which they we­re part­ners and en­ga­ging in con­clu­ding an agre­e­ment between the new com­pa­ny and the employer’s custo­mer. The Swedish Labour Court sta­ted that plan­ning and pre­pa­ring for a new bu­si­ness which is com­pe­ting with the employer’s bu­si­ness con­sti­tu­tes a bre­ach of the du­ty of loyal­ty. The Swedish Labour Court con­clu­ded that the employe­es, by such plan­ning to start a com­pe­ting bu­si­ness, we­re in bre­ach of the du­ty of loyal­ty and we­re li­ab­le to com­pen­sa­te the employer for the loss in­cur­red as a re­sult of the bre­ach. The employer was awar­ded da­ma­ges in the amount of SEK 2,1 mil­li­on.

AD 2018 no. 31

Four employe­es in a com­pa­ny of­fe­ring per­so­nal as­sistan­ce had ter­mi­na­ted their employments to be­gin new employments with a com­pe­ting employer. During the employment, the employe­es had e.g. plan­ned to bring custo­mers to the new bu­si­ness, so­li­ci­ted a custo­mer to hi­re the com­pe­ting com­pa­ny and ac­qui­red a ma­jo­ri­ty of the sha­res in the com­pe­ting com­pa­ny. The Swedish Labour Court ma­de a si­mi­lar as­sess­ment as in AD 2018 no. 25 and the for­mer employer was awar­ded da­ma­ges in the amount of SEK 800,000.

AD 2018 no. 49

Four employe­es in a com­pa­ny had ter­mi­na­ted their employments to be­gin new employments with a com­pe­ting employer. One of the four employe­es had al­so be­en of­fe­red a part­ners­hip with the com­pe­ting employer and had par­ti­ci­pa­ted in the pre­pa­ra­tions for the new bu­si­ness. The Swedish Labour Court con­clu­ded that two of the employe­es we­re in bre­ach of the du­ty of loyal­ty. However, the for­mer employer had not pro­ved the fi­nan­ci­al loss in­cur­red by the bre­ach (e.g. by pre­sen­ting evi­dence of which custo­mers that had left the com­pa­ny du­ring the pe­ri­od) and was the­re­fo­re not awar­ded da­ma­ges.

In con­clu­sion

In the jud­ge­ments, the Swedish Labour Court con­firms that pre­pa­ra­to­ry me­a­su­res to start a new com­pe­ting bu­si­ness du­ring the employment is in bre­ach of the du­ty of loyal­ty. In ad­di­tion to the employee be­ing sum­ma­rily dis­mis­sed, the employer could claim com­pen­sa­tion for da­ma­ges. In such ca­se, it is of sig­ni­fi­cant im­por­tan­ce for the for­mer employer to pre­sent evi­dence to pro­ve the fi­nan­ci­al loss in­cur­red as a re­sult of the bre­ach of the du­ty of loyal­ty.