Virginia Employment Law: Employee Breach of Contract, Duty of Loyalty and Misappropriation of Trade Secrets
I often represent clients on claims that an employer’s business interests were harmed by the disloyal or otherwise unlawful conduct of a former employee. Typically, these employer lawsuits allege breach of contract, breach of the duty of loyalty, misappropriation of trade secrets, conspiracy, tortious interference and related claims. Below are some questions and answers designed to present these concepts in general terms.
Question: What is the common law fiduciary duty of loyalty?
Answer: In Virginia, employees owe employers a duty of loyalty simply by virtue of the employment relationship. Whether certain conduct by an employee constitutes a breach of the duty of loyalty depends on the specific facts and circumstances. Nevertheless, Virginia courts have identified the following conduct as constituting a clear breach of the duty of loyalty:
- misappropriating trade secrets during or after employment;Therefore, if an employee engages in any of these actions, the employer has a potential claim. It is important to note that the acts listed are some but not all of the acts that may constitute a breach of the employee’s duty of loyalty.- misusing confidential information during or after employment;
- soliciting an employer’s clients before employment ends;
- soliciting an employer’s employees before employment ends; or
- competing with an employer before employment ends.
Question: In addition to the duty of loyalty, what other obligations does an employee have to not harm the employer’s legitimate business interests?
Answer: Employees are bound by the terms of their employment agreements (if any) and Virginia laws that apply generally to employment or business relationships.
A typical employment agreement will include provisions governing the employer’s intellectual property rights, confidentiality and non-disclosure of proprietary information, and various restrictive covenants such as non-compete and non-solicitation provisions. Assuming that the provisions comply with Virginia law, employees are bound by them. Because Virginia courts generally “disfavor” restrictive covenants, it is important for employers to have such covenants reviewed by an experienced employment lawyer.
Employees must also comply with all other applicable Virginia laws. For example, Virginia’s Trade Secret Act expressly prohibits misappropriation of trade secrets. Virginia’s conspiracy statute prohibits employees from conspiring with another person or entity to harm the former employer’s business. Similarly, employees may not interfere, unlawfully, with the former employer’s business contracts or business relationships.
Question: Can an employee who is planning to leave make plans to compete with his employer?
Answer: Ordinarily, an employee may make preparations to resign if the preparations do not (a) breach the duty of loyalty, (b) violate a non-compete or other contract terms, or (c) violate an applicable law. The right to plan is not absolute. It must be balanced against the importance and fairness that attaches to the employer-employee relationship.
The information in this article is not intended to and should not be used as legal advice for any specific situation. If you have questions about a specific case or issue, contact Searcy Law Offices, LLC at 703-644-4122 in Virginia or 202-393-1443 in the District of Columbia.
