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Employer-Employee Fiduciary Duties, Non-Compete, Non-Solicitation

A fiduciary relationship exists or is established when one reposes trust and confidence in another in the handling of certain business affairs. Every employee owes his or her employer a duty of loyalty. Nat’l Rejectors, Inc. v. Trieman, 409 S.W.2d 1, 41 (Mo. 1966). This makes sense because the employer is paying the employee to carry on the employer’s business and in many ways is a representation of the employer. Practically, what does the duty of loyalty require? In general, an employee must not, while employed, act contrary to the employer’s interest. However, an employee may agree with others to compete upon termination of the employment and may plan and prepare for their competing business while still employed — but cannot go beyond mere planning and preparation and act in direct competition. Scanwell Freight Express STL, Inc. v. Chan, 162 S.W.3d 477, 481 (Mo. 2005). As such, absent a signed non-compete or non-solicitation agreement by an employee, the employee is generally free to begin competing with his or her former employer pretty much immediately after the employment ends.  

With respect to employees-employers, another potential issue is whether there is legally a “confidential relationship.” An employer-employee relationship, without more, is insufficient to create a confidential relationship. For there to be a confidential relationship, there must be an express understanding as to the confidential nature of the information or it must be acquired under such circumstances that the employee must necessarily be aware of the confidence. Western Blue Print Co., LLC v. Roberts, 367 S.W.3d 7, 16 (Mo. 2012). Without an express agreement, whether a confidential relationship exists is largely going to be a factual inquiry. If a court determines that there is a confidential relationship — and that the employee is in breach — that could result in a suit for damages. 

To summarize, an employee may leave his or her employment and establish a new business in competition with the former employer, absent a valid restrictive covenant, or breach of a confidential relationship, and in connection with the new business utilize his or her knowledge, memory, skill and experience gained in former employment. Id. at 17. For employers, it is important to have the necessary non-compete, non-solicitation and confidentiality agreements in place for employees/agents who possess sensitive information. For employees, prospective employees or ex-employees, it is important to gain an understanding whether you are bound by any employment agreements, and if not, whether the law may impose fiduciary obligations on you nonetheless.