What is an Employee’s Duty of Loyalty?
Employees owe a duty of loyalty to their employers under Minnesota law. The general principle underlying the duty of loyalty is the idea that an employee should not “feather his own nest” at the expense of the employer while still on the payroll. The most common context in which duty of loyalty claims arise is with respect to an employee who solicits the employer’s customers for his or her self or for another company while still employed.
Pre-Departure Solicitations: Minnesota courts have held that an employee’s duty of loyalty prohibits an employee from soliciting the employer’s customers for the employee’s own benefit, or from otherwise competing with his or her employer, while still employed. On the other hand, an employee may “prepare to compete” with his her employer while still employed. There is no precise line between acts by an employee that constitute prohibited “solicitation” and acts that constitute permissible “preparation.” Whether a violation has occurred depends heavily on the facts of the case. See Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301 (Minn. Ct. App. 1987).
Takeaway: Even if an employee does not have a Non-Compete Agreement, an employer may still have a viable legal claim against an employee who violates the duty of loyalty by engaging in pre-departure solicitations. Whether an employer has an actionable claim against the employee for breach of the duty of loyalty depends significantly on the facts of the case.