We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
03 March 2021
In a recent case, a court ruled that an employer's summary dismissal of a manager was justified, since the manager had entered into a contract with one of the employer's business partners without the employer's approval.
Employees are subject to a duty of loyalty to their employer. This duty means that employees must not harm their employer's interests by, for instance, taking up secondary employment. In this case, the court had to decide whether a manager had breached her duty of loyalty and the possible consequences thereof.
The case concerned a manager who, based on her qualifications, held a key position in the company. The manager performed central roles, as required by the law, and had detailed knowledge of strategic matters in the company.
At some point, the employer was contacted by a business partner that wanted to make use of the manager's qualifications. The employer wished to further consider the enquiry but also presented it to the manager because if she was not interested in working for the business partner, the employer's reply to the enquiry would be self-evident.
After that, the manager contacted the business partner – without an agreement with the employer – even though it was still being discussed internally in the company whether a collaboration should be established. Irrespective of the fact that the issue was undecided in the company, the manager informed the business partner that the employer had agreed that the manager could make her qualifications available to them.
The manager then signed a contract with the business partner stating that she, in her own name, could perform work for the business partner. She did not inform the employer of this contract.
Being unaware of the conclusion of the contract, the employer was still considering the business partner's enquiry. In the end, the employer declined the collaboration proposal. The employer was unaware of the fact that the manager had already started working for the business partner until the day after it declined the collaboration proposal. At that point, the employer dismissed the manager summarily.
The manager argued that the summary dismissal was unjustified because, among other things, the reason for the summary dismissal was not of a nature justifying summary dismissal. The manager stated that she had entered into the contract at the employer's request and that the employer had not objected. The manager also referred to the fact that the business partner was not a competitor to the employer.
Based on the parties' statements, the court considered that the manager had not informed the employer of her dialogue with the business partner. Moreover, the manager could not rightfully have had the impression that she had been given approval by her employer to enter into a contract in her own name. On the contrary, the manager had to have known that her employer's approval was required if she were to enter into a contract with the business partner. Since the manager nonetheless entered into the contract, and subsequently kept it hidden, the court found the summary dismissal justified.
A situation where an employee contacts their employer's business partners in their own name will often constitute a breach of the duty of loyalty and this may justify summary dismissal.
The case highlights the difficult considerations regarding evidence that employers must make before making a choice of disciplinary action – especially in situations where the course of events can be proven only through witness statements.
For further information on this topic please contact Elsebeth Aaes-Jørgensen at Norrbom Vinding by telephone (+43 35 25 3940) or email (firstname.lastname@example.org). The Norrbom Vinding website can be accessed at norrbomvinding.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.