Duty of Loyalty
Employees who work in New York and New Jersey have a legal duty of loyalty to their employers. In general, this means you cannot do something that is contrary to the interests of your employer until after your employment relationship is over. If you violate your duty of loyalty to your employer, it not only could fire you but it potentially could sue you for money damages.
There are numerous ways an employee can breach his duty of loyalty. For example, you could misuse your employer’s confidential or proprietary information, use the company’s resources for your own benefit, make disparaging or negative statements about the business, or otherwise harm your current employer.
One key restriction imposed by the duty of loyalty is that even if you have not signed a non-compete agreement you generally cannot work for a business that competes with your current employer until after your employment relationship ends. For example, you cannot open a business that sells the same or similar products or provides the same or similar services as the company for which you are working without your employer’s permission.
Of course, the duty of loyalty does not prohibit you from searching for a new job, interviewing, or accepting a job offer from a competitor as long as you do not start your new job until after you leave your current job. Likewise, it does not prevent you from taking initial steps to establish a competing business. For example, you can file the paperwork to form a corporation, sign an office lease, or develop a website.
However, you cannot actually advertise or make efforts to provide any goods or services on behalf of your new business. You also cannot perform any activities to find a new job or open a new business during your working hours or use your current employer’s equipment, property or resources, including your current company's computers, cell phones or e-mail.
Working for another employer in violation of the duty of loyalty can have serious repercussions. Aside from being responsible for any actual damages caused, at least in some situations an Employee Can Forfeit Salary he or she received from a competitor.Prohibition Against Poaching Employees
Similarly, even if you have not signed a non-solicitation agreement you cannot attempt to hire someone who works for your current employer to work for a competing business until after you end the employment relationship. For instance, if you are planning to open your own business you cannot offer a job to one of your coworkers until after you have resigned and no longer work for the company.Other Prohibitions
The duty of loyalty also prohibits you from taking potential business opportunities for yourself or for a competing business rather than providing them to your current employer. Likewise, you could violate your legal obligations to your employer if you chose not to tell your company about such an opportunity. It even could violate your legal obligations to your employer if you stop working as hard because you plan to leave to work for a competing business.
Although the duty of loyalty primarily applies while you are working for your current employer, you continue to owe a limited duty to your former employer after you stop working for it. For instance, you have an ongoing obligation not to use your prior employer’s trade secrets or confidential or proprietary information. For more information, you may want to read our article: New Jersey Passes Trade Secrets Act.
Of course, if you signed a restrictive covenant such as a non-compete or non-solicitation agreement, those restrictions are likely to continue after you have left your job as well.Contact Us
If you have any questions, or would like to schedule a consultation with one of our New Jersey duty of loyalty lawyers, please contact us online or call us at (973) 744-4000.