An Employee’s Duty of Loyalty
Massachusetts’ courts recognize that non-competition agreements can be valid under the right terms. However, many employees are not aware that they may owe a duty of loyalty to their employer even if they do not specifically have a non-compete agreement.
The Court in Agero v. Rubin et al. recently considered whether two former employees of Agero, Timothy Schneider and Matthew Capozzi, owed a duty of loyalty to the company after they left, began working for a competitor and took with them knowledge of an up and coming product that Agero was developing.
The facts are not complicated. Agero was in the process of developing software called ViewPoint that would allow tow-truck drivers and/or other service providers to photograph accident scenes and upload it to various insurance companies, in order to facilitate processing claims. The two employees left Agero and began competing against their former employer.
Agero did not argue that Schneider and Capozzi owed a duty of loyalty to the company based upon their technical expertise in developing the software. Rather, Agero argued that they had confidential access to the Company’s clients and client information. Agero also did not dispute that the two did not have non-competition agreements and that the two were not officers, directors or key executives of the Company.
The Court found that Schneider and Capozzi were “rank and file” employees that lacked access to truly sensitive proprietary information that would elevate them to a level of owing a duty of loyalty to the Company. The Court also found that the former employees did not have access to confidential information about ViewPoint so that it would impose a duty of loyalty. The Court wrote: “…there is no evidence in the record before us that the allegedly confidential information to which Schneider and Capozzi had access held substantial value for Agero. Plainly, neither ViewPoint nor any confidential ViewPoint information to which the defendants had access has been the course of any revenue for Agero, much less the cornerstone of its business.”
This decision is favorable for employees in Massachusetts who do not have non-compete agreements with their employer but who do work in industries that expose them to confidential and sensitive information. Employees should always be mindful when leaving a position to work for a competitor that a duty of loyalty can be imposed upon them if they meet certain requirements: i.e. their position held, the type of information they were exposed to, how the company made efforts to safeguard the “confidential” information, etc. However, the Agero Court’s decision is favorable for employees because it imposes more strict obligations on the Company to uphold an implied duty of loyalty.
Agero v. Rubin et al., Appeals Court, unpublished, No. 14-P-932, September 8, 2015.