Legal Updates

Incorporation of a competing business by an employee while being employed is a breach of fiduciary duties justifying a cease and desist order

February 26, 2017
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Employees of a company dealing with immigration permits resigned, opened a competing business and in cooperation with the company's lawyer changed the password of the email use through which the company communicated with the Immigration Authority, thus effectively paralyzing the company.  Concurrently the employees approached clients of the company, informed them of the intent to incorporate a competing business and assisted them in certain manners.

Although the employees were not of special expertise or senior, the Labor Court issued an order prohibiting the employees from competing with the company for 90 days and set that when an employee incorporates a competing business while being employed the employee is breaching the fiduciary duties and the same applied when the employee acts to cause damage to the employer while taking unfair trade actions.