Resigning to Work for a Competitor? Damages could follow....


The High Court has ruled in Kynixa Limited v Hynes & others [2008] EWHC 1495 (QB) that substantial damages were payable by three key employees who did not warn their employer that

they were going to work for a subsidiary company of a competitor. The employees were not subject to any post termination restrictive covenants in their employment contracts. However, the court held that the employees deliberately misled their employer regarding their intended resignation, thereby breaching the implied term of good faith and fidelity. The court further held that two of the

employees, who were shareholders and held the position of director and head of business development respectively, were also in breach of their fiduciary duty by failing to disclose this information and in breach of the restrictive covenants in the shareholders agreement.

The High Court ruled the three employees positively misled their employer with regard to their intended resignation because at no time prior to or after their resignation did they volunteer the fact that they would be working for a subsidiary of a competitor even though all three employees had negotiated and signed contracts of employment with their new employer before they left Kynixa Limited. The court further held that two of the employees breached their fiduciary duty by failing to act in the best interest of their employer because they failed to report that the employees were in negotiations with a competitor group.

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