Divided Loyalty: Damages For Employee Disloyalty Claims

At first blush, two principles regarding the loyalty due to a current employer from an employee seem irreconcilable: On one hand, an employee owes his employer complete loyalty; on the other, an employee may incorporate a competitive business prior to departure from employment as long as he does not use his employer’s time, facilities or proprietary secrets in the process.¹ Despite the apparent inconsistency between these two modes of conduct, they can peacefully co-exist. However, when they collide—i.e., when an employee fails to honor his duty of loyalty by using his employer’s time and facilities to get a “head start” on a soon-to-be competitive business—litigation often follows.

The Appellate Division, First Department’s 1984 decision in Maritime Fish Products Inc. v. World-Wide Fish Products Inc.² is one of the leading decisions on the ramifications of employee disloyalty. In Maritime Fish, plaintiff sold dried fish purchased from Canadian packers to wholesale distributors and retail chains throughout the United States. Maritime’s president, Roald Hertzwig, hired his cousin, Roy Christensen, as a salesperson for the New York market. From the time of his hiring in 1970, Mr. Christensen rose quickly through the ranks, was named vice president in July 1976, and became the sole signatory of Maritime’s checking account. Mr. Christensen was not bound by a restrictive covenant during his tenure with Maritime.