Legal Updates

An employee who after termination contracts suppliers and clients with whom the employee worked may be breaching the duty of loyalty and be required to pay the employer damages

November 29, 2016

An employee terminated her employment with a company, opened a competing business and contracted suppliers and clients of the company.

The National Labor Court held that the constitutional provisions of the Basic Law: Freedom of Occupations enable a person to work in any position or occupation if this is not prohibited by law.  To argue infringement of the Commercial Torts Law one must prove the existence of a commercial secret and it was not shown that details of the suppliers and client were a commercial secret.

However, the contracting of the employee with suppliers and clients in transactions dealt with by the employee, directly or indirectly, as part of her employment in the company reaches up to breach of the obligation of trust, fiduciary and fair behavior that apply to employees.  An employee has increased fiduciary duty and duty of trust and those apply even more to senior employee.  The use of the employee of commercial data as to transactions she managed or were under her responsibility in her work for the company is breach of the fiduciary duty and duty of trust applicable to her as an employee.  Thus, the employee was ordered to pay damages to the company in the amount of ILS 100,000.