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The common law duty of an employee to work for an employer in good faith has been included in statute in the Employment Relations Act 2000.

An employee contemplating starting up a business in competition with their existing employer needs to be cautious so as to avoid breaching the duty of good faith.  An employee may withdraw from employment and advance their careers by taking the experience gained during employment with them into their own business or to another employer, however, a court will become involved if the employee's conduct involves some wrong doing.

In Walden v Barrance (1997) 5NZELC (Digest) 98,433; the Employment Court explained the rules relating to the employee's duty of fidelity in the following terms:-

• During employment, an employee is under a duty of fidelity not to deliberately do anything that is likely to injure   the employer's business.  The prohibition includes competing with the employer directly or working for a competitor.  Hostile acts committed during employment in preparation for competing after the employment has ended (eg removing, copying, memorising or compiling lists of customers or soliciting clients prior to departure) can also be classed as competing.
• In the absence of a valid prohibition expressed in the contract (such as a restraint of trade) the duty of fidelity does not survive employment.
• Even where there has been no breach of the duty of fidelity during employment, the former employee can still be liable for a breach of implied duty not to misuse information which has been entrusted to him or her on a confidential basis.
• Information is confidential if the employer and the employee has expressly or impliedly agreed that it should be confidential to the employer as against everyone else.  Information must be capable of being regarded as confidential by a reasonable employer.  Not all that an employee learns during employment belongs to the employer.
• The employee needs to be careful that they do not take any steps during the course of their employment which could inadvertently have them in breach of the duty of fidelity.  This would also include refraining from doing anything during any period of notice which could be interpreted as being detrimental to their former employee.
  

It would be wise to seek legal advice should you find yourself as an employee contemplating a change in direction or as an employer whose former employee has set up an opposition.