A security company had not forfeited the right to summarily dismiss an employee, even though the company did not summarily dismiss the employee until more than 3 weeks after the company became aware that the employee had set up and operated a competing business.

Skrevet af

If an employee violates a contractual ban on engaging in competing secondary employment, it generally constitutes gross misconduct and a material breach of the duty of loyalty, which entitles the employer to summarily dismiss the employee provided this is done without undue delay. In this case, the Eastern High Court had to decide whether a summary dismissal was justified and whether the employer had shown inaction.

The case concerned a security guard and team leader who, during his employment with a security company, started his own business aimed at providing security and security guard services and asked his colleagues if they were willing to join him. The employee’s employment contract specified that he was not allowed to perform security and security guard-like duties for anyone other than the security company without prior written approval.

The security company became aware of the employee’s activities in early August 2020 and called him in for a meeting on 7 August 2020. However, as the employee was unable to attend a meeting on that day because of the summer holiday, the meeting was rescheduled for 24 August. The employee was not suspended in the interim period. At the meeting on 24 August, the employee was dismissed summarily for performing competing business activities in breach of his employment contract.

The employee had sold his security business before the summary dismissal, but he was registered as CEO of the business in the Central Business Register (CVR) until the day after the summary dismissal. The employee brought an action against the security company, claiming that the dismissal was unjustified because, among other things, there were no activities in the business prior to the summary dismissal, and that the security company had shown inaction by not reacting quickly when a suspicion of misconduct arose.

Disloyal behaviour by the employee
First, and not surprisingly, the Court found that the employee had displayed such disloyal behaviour when setting up the competing security business and approaching his colleagues about a possible job change that the summary dismissal was justified. The fact that the employee had sold the business to another party prior to the summary dismissal, or that there were no business activities in the business prior to the summary dismissal, could not lead to a different outcome.

No inaction leading to forfeiture of rights
Second, the question was whether the security company had forfeited the right to summarily dismiss the employee because the company had shown inaction amounting to forfeiture of rights. The Court took into account that the employee was unaware that the meeting on 24 August would concern his competing security business and that the security company knew about the establishment of the competing business. Based on this, the Court found that considerations of expectation/planning on the part of the employee, which are a key element when assessing whether an employer has shown inaction, were not present in the case.

In addition, the Court noted that although the security company became aware in early August that the employee had set up a competing business, the security company was justified in wanting to get a full picture of the background and intention behind the establishment of the competing business before moving to summary dismissal.

Overall, the Court found that the summary dismissal was justified and that the security company had not forfeited its right to summarily dismiss the employee. Accordingly, the Court ruled in favour of the security company. 

Norrbom Vinding notes

• that the judgment shows that if an employee sets up a competing business the clear starting point is that this constitutes gross misconduct which justifies a summary dismissal;

• that the judgment further illustrates that, in order to avoid showing inaction, the employer must react as quickly as possible if it becomes aware of an employee’s possible breach of their obligations under employment law which may justify a summary dismissal; but

• that the judgment also emphasises that the employer has a certain scope of action before inaction occurs if the employer needs to obtain sufficient information before deciding on employment-related sanctions, and that such scope of action is expanded when the employee is unaware of the employer’s suspicion and investigation of the possible misconduct.

The content of the above is not, and should not be a substitute for legal advice.