Employer's Complaints Upheld (Employer awarded $223, 500)
The finding of the Employment Authority upholding a complaint by the employer (Bradford Trust trading as Interclean) demonstrates a desire for this to be a warning to others.
Basically two employees used commercially sensitive and valuable information to set up in opposition to their employer. The Authority found them to be “deceptive, dishonest and underhanded-that it was difficult to imagine a more serious breach of fidelity”.
The Authority ruled that the two employees had colluded in a blatant breach of their common law, statutory and express contractual duties, and that this was aggravated by their positions of responsibility.
Unlawful Competition
In the case of Bradford Trust Ltd v Roebeck and Pakieto (February 2008), two senior employees set up a business in direct competition with their employer and (while still employed) used their knowledge of sensitive information to pursue their own commercial interests. The unusually large sum of $223,500 awarded to the employer, and the robust denunciation of the employees by the Authority, shows a desire for this case to be a warning to others.
The employer, Bradford Trust Ltd, is the sole trustee of a Trust which trades as Interclean, a provider of industrial cleaning services in New Zealand. The two employees, Mr Roebeck and Mr Pakieto, were both employed by Interclean in managerial roles.
During their employment, the two employees started a company called PC Environmental Limited and appointed themselves as directors. Then a second company, PC Environmental Coatings Limited, was incorporated with Mr Roebeck's nephew as its director and shareholder.
Both employees had intimate knowledge of and unrestricted access to Interclean's client details, pricing data, and information relating to current and future tenders. They were also heavily involved in Interclean's tender process for various projects. For at least three of these large projects, the two employees submitted tenders on behalf of the PC Environmental companies. These were either at cheaper prices than the tenders they had submitted for Interclean, or Interclean did not tender at all.
The Authority ruled that the two employees had colluded in a blatant breach of their common law, statutory and express contractual duties, and that this was aggravated by their positions of responsibility.
Had they carried out their duties faithfully rather than submitting other tenders, the Authority said that they would have secured the three business contracts for Interclean. The Authority calculated the profits Interclean had lost as a result, and awarded damages of $223,500 to Interclean.
Additionally, as punishment for their dishonesty and failure to disclose their interests in the other companies or their knowledge of the three projects when confronted by Interclean, the Authority awarded penalties of $5,000 against each of the employees. This is the maximum penalty that can be awarded against an individual for breach of contract or breach of the Employment Relations Act.
What this case means for Employers
The Authority described the employee's behaviour as deceptive, dishonest and underhanded, and said it was difficult to imagine a more serious breach of fidelity. The Authority said it wished to “soundly denounce” their conduct and was awarding penalties as a deterrent to others. Employers should be reassured by this determination, as it shows that such a breach of an employee's duties can result in hefty damages.
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