The Employment Court has ordered an employee to pay $732,000 after the employee set up a business that was found to be a direct competitor of his employer’s business.

The employer brought the claim after finding out that the employee had been operating the business for seven years whilst also working for the employer. The employer claimed that the operation of a business constituted a breach of the employees’ employment agreement and that they should be paid compensation as a result.

In deciding whether the operation of a separate business was a breach of the employment agreement, the Court considered the circumstances under which the employees’ business was run. The business was a direct competitor with the employer’s business, as they served the same purpose. The employee did not seek permission, and even kept the business a secret from the employer. As well as this, the employer’s sales were negatively influenced by the competition.

The Employment Court decided that based on these considerations, the employee was in breach of their duty of fidelity to the employer and the business constituted a clear breach of the employment agreement between the employer and the employee.

The Court then had to decide on how much compensation to award to the employer. The Court decided that any profit earned by the business should be paid to the employer, due to the fact that their profits had been directly impacted by the competition posed by the employees’ business.

The Court ordered the employee to pay $732,000 in damages to the employer, equal to the total amount of profit made by the employee’s business over the course of his employment.

The employee filed an application in the Court of Appeal to request that the Court hear an appeal of this decision, but this was rejected as it was decided that there was little chance of success.

The Court of Appeal dismissed the application to appeal, and upheld the Employment Court order of $732,000 in damages.

If there is confusion around employee rights, it is wise to seek advice from a professional with experience in the area.


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Alan Knowsley and Matthew Binnie