Legal Updates

One can not restrict occupation of an employee who breached fiduciary duties under a previous employment term employment term

February 16, 2021

A company that provides services to yacht owners has discovered that a former employee, who was employed as a skipper, started providing a private service to one of the company’s customers despite an explicit ban on doing so. The company sought to prevent him from providing service to all of the company’s customers for a year on the grounds that he was breaching his non-compete obligation and confidentiality in the employment agreement.
The Labor Court dismissed the motion due to lack of employment agreement and lack of trade secret. While restricting an employee's employment for the purpose of protecting trade secrets does not require an explicit provision in the employment contract, restricting an employee's employment due to a breach of good faith and fiduciary obligations is possible under certain conditions only if there is an employment restriction clause. A stipulation in an employment contract that restricts an employee's freedom of occupation in one period of employment will not apply to a later period of employment with the same employer. Here, it is an employee who has been employed for a number of different and separate periods when an employment agreement was signed only in relation to the first period of employment. Therefore, even though the employee has allegedly breached the employer's duty of good faith and trust, the employee's employment cannot be restricted. In addition, as these are not customers who could not be reached independently, it was determined that there is no "trade secret" and therefore, also for this reason, there is no justification for restricting the employee's occupation.