Articles on Law, Science, and Engineering

Part I: Duties of Employees to Their Employers (cont'd)

The duty of an employee not to cempete with his employer has been documented extensively in legal cases. For example, a 1978 New Mexico case involved four employees who applied for a federal grant for both their non-profit employer and for a non-profit organization they formed. Their employer sued for $87,360 in damages. The employees argued that the non-profit status of their employer and its dependence on public support obviated their usual duty of loyalty. The court disagreed, finding that the employees owed "an undivided and unselfish loyalty" to their employer. (Las Luminarias of the New Mexico Council of the Blind v. Isengard, 92 N.M. 297, 587 P.2d 444 (N.M.App. 1978)).

Similarly, a 1980 case from Florida involved three employees who set certain activities in motion in preparation for forming their own buisness while still employed by another. The employees then resigned and began competing with their previous employer in their newly-formed business. The employer sued for injunctive relief (close the business) and money damages. The court found that their activities in their own behalf prior to termination of their employment violated the ex-employee's duty to their previous employer. Even though there was not an explicit noncompetition agreement, the court found that the competition by the newly-formed company was unlawful.

In addition to the duty to not compete with his employer, an employee has a duty not to act, or agree to act, for third parties whose interests conflict with those of his employer. This duty not to act for third parties with conflicting interests is breached if an employee acts for another in an undertaking which has any substantial tendency to cause him to disregard his employment duties. This is true even though the employment is part time and the acts were done during time which was not paid for by his employer. The danger that an employee will not be impartial, and that he will use confidential information belonging to his employer, makes it improper for him to work for third parties with conflicting interests.

Thus, if a scientist or engineer accepts employment by employers with adverse interests, without the knowledge of all such employers, he breaches his fiduciary duty to those to whom he fails to reveal the existence and extent of such adverse interests. If a professor employed by a university consults with another company, he must disclose all relevant facts about research activities to each employer. Since this is usually the very information the consultant wishes to sell, an inherent conflict and breach of duty is difficult to avoid.

The most difficult situation arises when a consultant accepts employment by two companies which have (or develop) competing interests. Because the consultant has a duty to disclose all relevant facts about his activities to each employer, he must violate the corollary duty not to breach this employer's confidences. This latter rule prohibits the use of such confidential information for any purpose likely to cause harm to the employer or to interfere with his business activities. It extends to information given to him in confidence, as well as data obtained during the consulting period.

Such confidential information includes all information which the consultant should know his employer would not care to have revealed to others or used in competition with him, even though such information does not relate to the consultant's work for the employer. Since both non-disclosure and unauthorized disclosure of confidential information breach an employee's fiduciary duty, it is difficult for a consulting scientist with more than one employer to avoid breaching his fiduciary duties to one or more of the employers.

An employee's duty to his employer does not end with a full disclosure of the extent of all his own adverse interests. In addition, an employee has the obligation to deal fairly with his employer and disclose to it all facts which the employee knows or should know which would reasonably affect the employer's judgment. Thus, an employee cannot inadvertently fail to reveal relevant facts. To the extent that he has a duty to have or acquire relevant information, his obligation for disclosure extends to all information which he would have if he had been competent and attentive to his duties as an employee.

In the case of an expert such as a scientist or engineer, the facts which must be disclosed include competent interpretations that would not be apparent to a non-expert employer. If the employer has limited experience in the area of expertise, an employee cannot properly fail to give such information merely because the employer says he does not want it. An employee's duty of fair dealing is satisfied only if the employee reasonably believes that his employer understands the implications of the transaction.

This duty is a heavy one for university professors because it requires not only full disclosure, but a full explanation of the scholarly work conducted to non-expert university administrative personnel. A professor who fails to satisfy this obligation, and leaves for a position elsewhere, may find that ownership of his creative or inventive works remains with the university he left, or, in the case of public universities, in the public domain. While this is not likely to matter for works of small monetary value, it becomes extremely important when the stakes are highest.

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