The Regional Labor Court of Tel Aviv recently ruled that anyone seeking to be hired for a job has an increased duty to disclose to the interviewer his ownership of any intellectual property right relating to his future employer’s main area of business. The court held that the employer lawfully terminated the contract it had signed, having not been informed of a provisional application for registration of a patent over the course of the interviews up to the signing.
The employee claimed before the court that his contract had been wrongfully terminated by his employer. The employee was interviewed for a job at a 3D-printing company and at the end of the interview process an employment contract was signed by both parties. Based on the evidence brought before it, the court held that over the course of the employee’s job interviews (three in all), the employee had not disclosed to the company’s representatives that he was co-owner of a provisional application for registration of a patent in the US, the subject of which is technology directly related to 3D printing, nor that he was involved in a side business selling printer equipment. The employee provided the employer’s representative details of the provisional application and details about his side business concurrently with the company signing the contract. It turned out that both the subject of the provisional application and the employee’s involvement in this side business put the employee in a situation where real concern had existed of a conflict of interests and of wrongful competition with the employer; when this concern could not be resolved, the employer terminated the agreement.
The regional labor court reiterated the fact that an employer-employee’s relationship is not a typical commercial contractual relationship and thus the scope of the duty to disclose during negotiations for the signing of an employment contract is broader and places a heavier burden on the two parties negotiating. This duty derives directly from the duty of negotiating parties to act in good faith and it applies to both employee and employer. As such, in the case at hand, the employee had only himself to blame.
This ruling demonstrates the importance of providing full disclosure about an employee’s involvement in activity that could pose a conflict of interest with his employer, and it emphasizes the need to include in employment contracts a declaration by the employee about absence of a restriction on entering into a contract and about absence of a concern of a conflict of interests or of prohibited competition.