This is one that always surprised people. On Thursday I wrote about those duties not defined in employment agreements.
Read this carefully – I am amazed at how few employees know they have a duty of loyalty to their employers.
4. FIDUCIARY DUTY OF LOYALTY
Virginia employees have a duty of loyalty to their employers. What does that mean? Stated simply, it means that you cannot compete with your employer while an employee. You cannot take business away for yourself or others or even plan to do so. If you are employed, your duty is to promote that business only, and no other.
Practically speaking, the following actions are prohibited under your duty of loyalty:
· Funneling business away from employer to self or another company
· Asking clients to follow you when you open your new business
· Asking vendors or contacts to work with you when you open a new business
· Starting your own competing business (this includes corporate formation, registration with IRS, etc)
· Asking employees to leave with you and start a new business
Under Virginia law, the following actions are allowed, but often lead to litigation:
· Allowed to make future employment plans while employed
· Allowed to plan (theoretically), your new business.
Although the Supreme Court states that the duty ends when the employment ends, employers are allowed to file suit after the employee has left regarding past breaches.
ADVICE: Don’t make plans to compete, until you have left. Don’t get a tax ID, start a website, or solicit clients until you are no longer on the payroll at Company 1.