Preparing to Compete

[Thanks to Naomi Cunningham of Outer Temple Chambers for preparing this case summary]

Is it gross misconduct for an employee to take preliminary steps towards setting up in competition with his employer?

Not necessarily. The judgment of the EAT in Khan and Hemming v Landsker Child Care Ltd is a salutary reminder that for summary dismissal for gross misconduct to be fair, the misconduct in question must be capable of amounting in law to a fundamental breach of the contract of employment. And although employers have a considerable freedom to define what they will treat as gross misconduct, that freedom is subject to common law limits on restraint of trade.

Here, the employees had put together a detailed plan for a business competing with their employer, making use of knowledge and expertise acquired in the course of their employment. The first instance decision dismissing their unfair dismissal complaint was quashed and remitted for rehearing because the ET had failed to engage with the question whether the kind of information they had used for their own purposes could, as a matter of law, be regarded as confidential to the employer.