Are Employees Under a Duty to Disclose Their Intention to Compete After Their Employment Ends?

The case of MPT Group Limited v Shaun Peel, Michael Birtwistle and Mattresstek Limited looks at, amongst other matters, whether an employee is under a duty to disclose their intention to compete.

The Claimant, MPT, is a leading producer and supplier of mattress machinery and was until March 2017, the only company manufacturing such machines in the UK.

Shaun Peel and Michael Birtwell were employed by the Claimant in senior positions as Technical Manager and Technical Sales Manager until they both resigned.  Both were subject to restrictive covenants preventing them from dealing or soliciting customers for a 6 month period following termination of their employment.  Almost immediately after the 6 months period expired, they set up a limited company, MattressTek Limited which was the third Defendant in this case.  MattressTek was in direct competition with the Claimant.

MPT alleged that both individuals had wrongly misused and disclosed their confidential information, wrongly solicited and dealt with their clients during the 6 month restricted period, failed to answer questions truthfully about their intentions going forward and wrongly interfered with their supply chain.

When Mr Peel and Mr Birtwell were questioned by their employer concerning their future intentions following their decision to resign from their employment, the Claimant alleged that they were dishonest about their plans and denied any intention to go into partnership together.

The Judge found that he was far from satisfied that the employees were under a duty to disclose their true intentions to MPT.  He said he was “reluctant to hold that an incident of the duty of fidelity is that, when asked a straight question a departing employee is under a contractual obligation to explain his own confidential…plans to set up in lawful competition”.

It should be noted however that the Court may have reached a different decision had the defendants in question being senior enough to owe fiduciary duties to their employer.

If you are an employer or employee and require any advice concerning post-termination restrictions (restrictive covenants), setting up in competition or any other employment advice, please contact Farleys Solicitors on 0845 287 0939 or submit your enquiry through our online contact form.