Good Faith in Employment Contractual Obligations

Disclosure of confidential information about the Cliamant's business with a third party as an issue of a Good Faith in Employment...

FEBRUARY 17, 2020

Background:

The case is about an employment contract, between an employer (hereinafter referred to as the “Claimant”) and an individual employee (hereinafter referred to as the “Defendant”). The contract was from September 2016 until the termination by mutual consent on February 2017. Moreover, the parties entered into a settlement agreement for an amount over 300,000 AED. In March 2017 the Claimant has paid over 200,000 AED from the whole payment, however subsequently the Claimant discovered a certain unlawful relation of the Defendant with a third party.

Legal Issues

  • Disclosing confidential information about the Claimant’s business with a third party (obligation of secrecy).
  • Termination of a cooperation agreement with Defendant which the Defendant had signed in his capacity as an authorized signatory for the Claimant.

Legal Arguments:

1. The trust and confidence in the contractual relationship: according to Article 58(1) of DIFC Law No.5/2005 “a person is the fiduciary of another if they have undertaken to act for on behalf of another in a matter in circumstances which give rise to a relationship of trust and confidence.”

2. The fiduciary of the employer is his employee according to Article 158(2) of DIFC Law No.5/2005.

3. The good faith and loyalty according to Schedule 3 of DIFC Law No.5/2005. That confirms the good faith, no conflict of interest, no secret profits and confidentiality. Under the good faith obligation, the fiduciary must act in good faith and in a principal’s best interests without regard to their own interests, which means provide the full disclosure of any information.

4. The misrepresentation arises where a statement is made in order to induce a person to enter into a contract according to Article 29(c) of DIFC Law No.5/2005.

5. The person is liable for misrepresentation if they are the representer in relation to a misrepresentation according to Article 30 of DIFC Law No.5/2005.

6. The non-disclosure cannot amount to representation unless the non-disclosure is a breach of a specific duty to disclose according to Article 29(5) of DIFC Law No.5/2005.

Court Decision: The Court found a relationship exists between the Defendant and the third party. The Defendant was in breach of his duties according to the employment contract with the Claimant. In addition, the Defendant made correspondence with the third party without the Claimant’s consent as a senior employee. Therefore, the court decided in favor of the Claimant.

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