Legal Updates

An employee who acts in the framework of his position in favor of a competing business will be required to compensate the employer

October 31, 2021

An employee assisted the former CEO of a company, who set up a competing business, while working in the company and contacted a company customer to divert its business for the competing business.

The Labor Court held that the employee's conduct was extremely severe and the employee must compensate the company for breaching the duty of good faith and loyalty. In a relationship between an employer and an employee, the parties have a relationship of trust and by virtue of such, the employer may assume that the employee, who is employed full time, devotes all his energy to the benefit of his workplace. Here, the employee reported to the employer that she was ill, but during these days assisted the previous CEO in setting up a competing company, using the company vehicle given to her for work purposes and even approached a company customer, on behalf of her new employer, in order to direct the customer's activities to the competing business while misleading the client to believe that she is negotiating with him on behalf of the company and not the competing business. Although the company was finally able to save the transaction with the client, such conduct is extremely severe and justifies holding the employee accountable obligating her to pay compensation.