When sabotage became self-sabotage

An operations manager was married to the CEO and shareholder of a tourist company. Due to a conflict with the company’s new owner, the CEO sold her shares and resigned. The employee also resigned shortly after. During his notice period, the company received an anonymous tip that he had acted disloyally and sabotaged the company during the employment.

While employed, the employee had dumped the ticket sale prices without authorisation, encouraged co-workers to “lose” the company’s daily cash income and purchase unnecessary equipment. He had also made unauthorised purchases for items himself that were unnecessary or never appeared.

While they both were employed, the employee and the CEO had purchased designs for a newly established competing company. A friend and former co-worker of the couple had established the competing company. An e-mail address had been established for the employee at the competing company, and the employee had transferred his work number to the competing company. Two busses owned by the couple had also indirectly been rented to the competing company without compensation.

Motive and means

The court concluded that the employee had breached his duty of loyalty and was liable for damages. This was because the employee’s disloyal behaviour and sabotage caused a loss of income. However, the employee was only liable for NOK 2 million, NOK 14 million less than the company’s claim.  

Based on witness statements, the court found it sufficiently documented that the employee had embezzled and sabotaged the company during his employment. Because of the employee’s interests in the competing company, his wife’s conflict with their previous employer, and the employee’s managerial position, the court concluded that the employee had both the motive and the means to sabotage.

IUNO’s opinion

This case illustrates that employees will be subject to a duty of loyalty during the employment relationship even if no restrictive clauses have been agreed upon. Where a breach causes financial loss for the company, the company can hold the employee liable for damages.

Employees can also be restricted from competing businesses after their employment has ended. The parties can agree on non-competition and non-solicitation clauses that apply for one year after the employment relationship. It is also possible to agree on the regulation of liability in case of a breach. However, as non-competition clauses are restrictive and costly, IUNO recommends that companies assess if and to where there is a need for such clauses.

[Eidsivating Court of Appeal’s judgement of 3 April 2023 in case LE-2022-139540]