Every employee owes a duty of loyalty during employment, independent of any written agreement.
What it prohibits. Competing with the employer while employed; soliciting the employer’s customers or employees for a competing venture; diverting opportunities; misusing confidential information; and accepting secret commissions from those dealing with the employer.
Preparing to compete is permitted. Forming an entity, obtaining financing, leasing premises and consulting advisers are lawful while employed. The line is crossed by soliciting customers or colleagues, by using the employer’s resources, and by misappropriating information.
Higher duties for officers and key employees, approaching fiduciary obligations, including a duty to disclose competing plans in some jurisdictions.
Remedies. Forfeiture of compensation paid during the period of disloyalty in several states — a remedy that can exceed the actual loss; damages; disgorgement of profits; and injunctive relief.
The faithless servant doctrine in some jurisdictions requiring return of all compensation earned during the disloyalty, regardless of the value of services rendered.
Practical value. For an employer without enforceable restrictive covenants, this duty is frequently the strongest claim available, and it requires no agreement at all.