Current employment law evolved from the feudal relationship between the lords and the peasants. In many legal indexes this is still termed the law of the master-servant relationship. Modern employment law has merged the notion of masters and servants with the legal idea of an agency relationship. In modern terms, an employee of a corporation, university, or other entity ("employer") is an "agent" and the employer is his "principal." The employment contract sets the explicit terms of the employment relationship. The old law of master-servant relationship creates a set of implicit duties that greatly expand the employee's duty to his employer.
An employee has what the law calls a fiduciary duty toward his employer. This is a common law duty that derives its name from the duty of fides, or fidelity, between the master and the servant. The employee's fiduciary duty is to act primarily for the benefit of his employer in matters related to the employment. Among the employee's specific fiduciary duties are the duty to account for profits or render benefits of the undertaking to the employer, the duty not to act as, or account of, an adverse party without the employer's consent, the duty not to compete on his own account or for others in matters relating to the subject matter of employment, and the duty to deal fairly with his employer in all transactions between them.
In the case of a scientist or engineer employed to conduct research and/or development for a company or university, these fiduciary duties obligate the employee to offer all benefits of the work he conducts for the employer to the employer. Further, the scientist or engineer is bound not to conduct similar R&D for any competitor or potential competitor without the permission of his employer. In general, the scientist or engineer is obligated not to act in antagonism toward the interests of the enterprise that employs him. He must deal fairly in all matters with his employer.
A scientist or engineer with interests that are adverse to a potential employer must disclose the existence and extent of such adverse interests. Through disclosure, the agent or employee asks the company or university to waive his fiduciary duty to it. (Both the disclosure, and the company's acceptance of the conflict, should be in writing.) In one common situation, the scientist or engineer knows that he has an interest that might affect his judgment in the conduct of the work to be performed for his employer. In this case, the employee is obligated to disclose completely the extent of his own adverse interests to his employer. Failure to do so is fraud, especially if the employee intends to take advantage of his employer.
Even if the employee acts in good faith and without consciousness of wrongdoing, however, nondisclosure of adverse interests is a violation of the fiduciary duty the scientist or engineer owes his company or university. This is true even if the employer is not harmed by (or receives benefit from) the undisclosed adverse interest of an employee. For example, assume a scientist is hired by a university to conduct research in biological treatment of toxic materials. This scientist violates his fiduciary duty to the university by conducting unauthorized research based on his own undisclosed interests, even if this unauthorized work leads to the development of cold fusion. The university's remedies for such a breach include the right to refuse to pay the employee any compensation and to rescind the employment contract, including agreements therein to share the benefits of patents resulting from the employee's research.
Similarly, unless otherwise agreed, an employee is subject to a duty not to compete with his employer concerning the subject matter of the employment. This duty exists even though the employee does not use his employer's facilities or time to accomplish his competitive objectives. Modern universities are now in the business of selling and leasing the technologies developed by the professors and students they employ. Thus, a scientist hired by a university to conduct research in cold fusion cannot compete with the university by creating Cold Fusion, Inc. and working for it on his own time. Further, a university professor cannot be employed as a consultant by any private company that competes with the university for grants or income from the sale of technologies.
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