Do employees owe their employer a duty of fidelity?

Every employment contract contains an implied term that the employee will serve their employer with good faith and fidelity (see Faccenda Chicken Limited v Fowler [1986] 3 WLR 288).

In Attorney General v Blake [1998] 2 WLR 805, Lord Woolf MR described this duty as follows:

"The employee must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third party without the informed consent of his employer".

The Court of Appeal has held that the extent of the duty of fidelity has to be consistent with the terms of the employee's contract, requiring an analysis of the employee's contractual obligations (including their job description) as "an essential foundation for determining the scope of the obligation of fidelity" (Customer Systems Plc v Ranson [2012] EWCA Civ 841)

Whether, and if so to what extent, the duty is reduced during garden leave depends on the factual circumstances. It is therefore sensible to state expressly that the implied duty of fidelity will continue during a garden leave period.

The duty of fidelity continues throughout the duration of the contract and extends to the employee's off-duty time (Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Ch 169) but ceases when the employment ends. However, if the employee is also a director, or holds a position of particular seniority or responsibility, the duty may continue after the employment or directorship ends (Island Export Finance Limited v Umunna (1986) BCLC 460).

While the duty exists, the Court of Appeal in Ranson held that while an employee had to have regard to their employer's interests, it did not require the employee to subjugate their interests to those of the employer. The court approved the finding of Elias J in University of Nottingham v Fishel [2000] ICR 1462 that "the employee does not in general promise to give his employer the benefit of every opportunity falling within the scope of its business".

The duty of fidelity is probably the most important and wide-ranging of an employee's implied obligations. A number of more specific aspects of the implied term have been developed by case law:

• Duty not to disrupt the employer's business.
• Duty not to compete.
• Duty not to solicit the employer's customers and suppliers.
• Duty not to entice employees.
• Duty to disclose wrongdoing.
• Duty of confidentiality.
• Duty not to misuse the employer's property.
• Duty to account.

However, there are limits to this implied duty of fidelity. While it may in some cases mean that the employer's interests will trump those of the employee, it does not go so far as to require an employee to sacrifice their own contractual rights for the benefit of the company. For example, an employee is not required to waive a contractual bonus to save the employer from financial crisis (see Fish v Dresdner Kleinwort Ltd; Hatzistefanis v Dresdner Kleinwort Ltd [2009] IRLR 1035 (QBD)).