Law for Business 12th Edition by James Barnes,Terry Dworkin,Eric Richards

Exercise 5

Ronald Chernow is in the business of auditing telephone bills for customers. He determines whether the customer's phone equipment is in place, properly billed, and in working order. He also checks for overcharges and receives half of any overcharge refund the customer receives from the telephone company. Chernow hired Angelo Reyes as an auditor. During his employment, Reyes, without Chernow's knowledge, took various steps to establish a business that competed with Chernow's. He obtained three auditing contracts and performed work under those agreements while still employed by Chernow. He also solicited a fourth account but did no work for that firm until after terminating his employment with Chernow. None of the businesses with whom Reyes contracted was one of Chernow's existing customers. Further, Reyes's personal soliciting and auditing activities did not take place during his regular working hours. He devoted that time exclusively to Chernow's business. Did Reyes breach the duty of loyalty he owed Chernow?