DocketNumber: 87SC182
Citation Numbers: 771 P.2d 486
Judges: Lohr, Mullarkey
Filed Date: 3/20/1989
Status: Precedential
Modified Date: 8/22/2023
In Mulei v. Jet Courier Service, Inc., 739 P.2d 889 (Colo.App.1987), the Colorado Court of Appeals affirmed the trial court’s decision that the respondent, Anthony Mu-lei, did not breach any duty of loyalty to his employer, Jet Courier Service, Inc. (Jet), when he organized another company, American Check Transport, Inc. (ACT), to compete with Jet in the air courier business. The court of appeals also affirmed the trial court’s award of unpaid compensation due Mulei under his employment contract with Jet, plus a fifty-percent statutory penalty pursuant to section 8-4-104(3), 3B C.R.S. (1986). Finally, the court of appeals agreed with the trial court that as a matter of law, neither Mulei nor ACT engaged in a civil conspiracy to harm Jet’s business interests. We granted Jet’s petition for certiorari to review the court of appeals’ resolution of these issues. We now conclude that the court of appeals and the trial court applied unduly narrow legal standards in determining what actions constitute a breach of an employee’s duty of loyalty to his employer. Accordingly, we reverse the judgment of the court of appeals with respect to the issues upon Which we granted review.
I.
Although we remand this case for retrial, an understanding of the issues presented requires a familiarity with the background of this litigation. We obtain our description of the facts from the findings of the trial court, supplemented by other facts derived from' undisputed evidence in the record. However, this description of the facts is not binding upon the trial court on remand.
Jet is an air courier company engaged principally in supplying a specialized transportation service to customer banks.
In 1981 Jet was an established family-owned corporation headed by Donald W. Wright. The principal offices of the corporation were in Cincinnati, Ohio. Jet had no office in Denver. Anthony Mulei at that time was working in Denver for another air courier service in a management capacity. Mulei had worked in the air courier business for a number of years and was very familiar with it. He had numerous business connections in the banking industry in Denver and other cities. On February 18, 1981, Wright and Mulei agreed that Mulei would come to work for Jet and would open a Denver office and manage Jet’s Western Zone operations from that office. They orally agreed that Mulei would be vice president and general manager for the Western Zone and would have autonomy in matters such as the solicitation of business, the operation of the business, and personnel policies. The parties further agreed that Mulei would be paid $86,000 per year, plus a bonus of ten percent of the net profits of the Western Zone, to be calculated and paid every three months. Based in part on Mulei’s business relationships with several regional banks, Wright and Mulei expected that Mulei would be able to expand Jet’s business.
Late in 1981 Wright sent Mulei a written employment agreement containing the same terms as the oral agreement with the addition of a noncompetition covenant whereby Mulei would agree not to compete with Jet for two years after termination of his employment, without any geographic restriction, Mulei signed the written agreement. At some time before this litigation commenced, Wright also signed the agreement on behalf of Jet.
Mulei performed services as agreed and was successful in significantly increasing the business of Jet in the Western Zone as well as other areas of the United States. Although Jet regularly paid Mulei his monthly salary, and paid him additional sums from time to time totaling $31,000 over the period of his employment, Jet never computed or paid the quarterly bonuses in the manner contemplated by the contract. From time to time Mulei requested payments and accountings but was not successful in obtaining them.
Mulei became progressively dissatisfied with his inability to resolve the bonus issue and with what he believed to be intrusions into his promised areas of autonomy in personnel and operational matters. Toward the end of 1982 he began to look for other work in the air courier field and sought legal advice concerning the validity of the noncompetition covenant in his employment contract.
In the course of seeking other employment opportunities and while still employed by Jet, Mulei began to investigate setting up another air courier company that would compete with Jet in the air courier business. In January 1988, Mulei spoke with
On February 27, 1983, Mulei, while still employed by Jet and on Jet business in Phoenix, talked to two of Jet’s customer banks to inform them he would be leaving Jet in mid-March and to tell them he “would try to give them the same service.” He engaged in similar discussions with two bank customers of Jet in Dallas while still employed by Jet. Early in March 1983, Mulei met with representatives of three of Jet’s Denver customers, First Interstate Bank of Denver, Central Bank of Denver, and United Bank of Denver, and discussed the new air courier company that Mulei and Towner were forming. Mulei told the United Bank of Denver float manager that “if they wished to give us [ACT] the business,” then ACT would be able to serve them without any break in the service, and that ACT would be able to take over their business and fully satisfy their air courier service needs. Mulei further told United Bank of Denver that “by minimizing expenses, I would be in a position, sometime later, to reduce cost.” Mulei had similar conversations with representatives of First Interstate Bank of Denver.
Prior to the termination of Mulei’s employment by Jet on March 10, 1983, Mulei met with nine pilots who were flying for Jet to discuss his formation of ACT. Before his termination, Mulei also met with Jet's Denver office staff and with its ground couriers
ACT was incorporated on February 28, 1983. Mulei was elected president at the first shareholders meeting. On behalf of Jet, Wright fired Mulei on March 10, 1983, when Wright first learned of Mulei’s organization of a competing enterprise. On that same day Mulei caused ACT to become operational and compete with Jet.
Mulei filed suit against Jet in Denver District Court on March 10, 1983, the same day he was fired, seeking principally to recover unpaid compensation and penalties on such unpaid amounts pursuant to section 8-4-104, 3B C.R.S. (1986), and further seeking a declaratory judgment that the noncompetition covenant in his employment contract was void. Jet counterclaimed for breach of contract, breach of fiduciary duty, and civil conspiracy and sought damages and other relief.
The two cases were consolidated for trial. The district court concluded that Mu-lei’s noncompetition covenant was void for lack of consideration and unreasonableness, that Mulei was entitled to salary and bonus compensation totaling $93,740.34 plus a fifty-percent statutory penalty of $46,870.17 pursuant to section 8-4-104, as well as vacation pay, attorney fees in connection with the compensation and penalty claims, interest, and costs. The district court also concluded that Mulei did not violate his duty of loyalty to Jet. Accordingly, the district court dismissed Jet’s counterclaims against Mulei for damages, and it denied Jet’s civil conspiracy claim for damages and injunctive relief against ACT.
We granted certiorari to review the decision of the court of appeals on three issues: (1) whether the district court erred in concluding that Mulei did not violate a duty of loyalty to Jet, (2) whether any breach by Mulei of a duty of loyalty he owed Jet prevents Mulei from obtaining full recovery of the salary, bonus, and statutory penalty otherwise due him, and (3) whether the district court erred in dismissing Jet’s civil conspiracy claims against Mulei and ACT.
II.
The court of appeals affirmed the trial court’s conclusion that Mulei did not breach his duty of loyalty to Jet by his activities prior to the time he was fired by Jet. Specifically, the court of appeals concluded that Mulei did not breach his duty of loyalty either by meeting with Jet’s customers to discuss ACT’s future operating plans or by meeting with Jet’s employees to discuss future employment opportunities with ACT. We conclude that the court of appeals applied improper legal standards in reviewing the trial court’s conclusions as to what actions constitute a breach of an employee’s duty of loyalty to his employer.
Whether an employee’s actions in preparation for competing with his employer constitute a breach of the employee’s duty of loyalty is an issue of first impression for this court. We derive guidance in determining the nature of an employee’s duty of loyalty from the Restatement (Second) of Agency and from the decisions of other jurisdictions applying the standards found in the Restatement.
Thus, one facet of the duty of loyalty is an agent’s “duty not to compete with
Given the employee’s duty of loyalty to and duty not to compete with his employer and the employee’s corresponding privilege to make preparations to compete after termination of his employment, the issue here is whether Mulei’s pre-termination meetings with Jet’s customers and his co-employees to discuss ACT’s future operations constituted violations of his duty of loyalty or whether these meetings were merely legally permissible preparations to compete.
A.
We first apply the principles outlined above to determine whether the court of appeals erred in concluding that Mulei’s meetings with Jet’s customers did not breach Mulei’s duty of loyalty. The commentary to section 393 of the Restatement (Second) of Agency notes that in the absence of a contrary agreement, an employee may compete with his employer after the termination of his employment. However, an employee is not “entitled to solicit customers for [a] rival business before the end of his employment.” Rest. (2d) Agency § 393 comment e. Several courts have also stated the rule that pre-termination solicitation of customers for a new rival business violates an employee’s duty of loyalty. AGA Aktiebolag v. ABA Optical Corp., 441 F.Supp. 747, 754 (E.D.N.Y.1977) (by soliciting customers for rival business prior to end of his employment, employee violated his fiduciary obligations to employer); Fish v. Adams, 401 So.2d 843, 845 (Fla.App.1981) (employee may not engage in disloyal acts in anticipation of future competition such as soliciting customers prior to end of her employment); Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d 564, 569 (1978) (it is breach of duty of loyalty to solicit employer’s customers prior to cessation of employment); Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301, 304 (Minn.App.1987) (employee’s duty of loyalty prohibits her from soliciting employer’s customers for herself while she is employed); Las Luminarias of New Mexico Council of the Blind v. Isengard, 92 N.M. 297, 587 P.2d 444, 449 (App.1978) (employee may not solicit customers before end of his employment).
The court of appeals affirmed the trial court’s holding that Mulei’s pre-termi-nation meetings with customers did not violate a duty of loyalty since ACT did not become operational and commence competing with Jet until after Mulei left Jet’s employ. Mulei, 739 P.2d at 893. This reasoning fails to accord adequate scope to the duty of loyalty outlined in the Restatement and the cases cited above. While still employed by Jet, Mulei was subject to a duty of loyalty to act solely for the benefit of Jet in all matters connected with his employment. Rest. (2d) Agency § 387. Jet was entitled to receive Mulei’s undivided loyalty. Fowler v. Varian Associates, Inc., 196 Cal.App.3d 34, 241 Cal.Rptr. 539, 543 (1987). The fact that ACT did not commence operations and begin competing with Jet until after Mulei’s departure from Jet is not dispositive. Instead, the key inquiry is whether Mulei’s meetings amounted to solicitation, which would be a breach of his duty of loyalty. Generally,
We further conclude that a retrial will be necessary to determine whether Mulei violated his duty of loyalty to Jet by his conversations with some of Jet’s customers before he was discharged. The trial court concluded that Mulei did not violate a duty of loyalty to Jet. In its findings of fact, the trial court stated that
ACT was able, through the solicitation of [Mulei] before and after termination, to acquire business of certain banks, some of which had agreements with Jet.
Based on these findings and the record before us, we are unable to determine whether Mulei’s pre-termination meetings with Jet’s customers amounted to impermissible solicitation or were merely allowable preparations for competition. We cannot determine, for instance, whether Mulei specifically solicited Jet’s customers before he was fired by Jet. The trial court’s findings note only that “some” of the “certain banks” that Mulei met with either before or after his termination had agreements with Jet. Mulei’s testimony suggests that prior to his termination he met with several customers of Jet to discuss obtaining future business for ACT. However, whether an employee’s actions constitute a breach of his duty of loyalty involves a question of fact to be determined by the trial court in the first instance based on a consideration of all the circumstances of the case. See Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301, 305 (Minn.App.1987). Accordingly, this case must be returned to the trial court for retrial to determine whether under the standards governing an employee’s duty of loyally set forth in this opinion, Mulei’s pre-termination meetings with Jet’s customers amounted to impermissible solicitation in violation of his duty of loyalty to Jet.
B.
We next consider whether the court of appeals erred in concluding that Mulei’s meetings with Jet employees did not breach his duty of loyalty. An employee’s duty of loyalty applies to the solicitation of co-employees, as well as to the solicitation of customers, during the time the soliciting employee works for his employer. Generally, an employee breaches his duty of loyalty if prior to the termination of his own employment, he solicits his co-employees to join him in his new competing enterprise. Fish v. Adams, 401 So.2d 843, 845 (Fla.App.1981) (employee may not solicit other employees prior to end of her employment); Insurance Field Services, Inc. v. White & White Inspection & Audit Service, Inc., 384 So.2d 303, 308 (Fla.App.1980) (employees breached their duty of loyalty by pre-termination solicitation of co-employees); ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 62 Ill.App.3d 671, 20 Ill.Dec. 160, 169, 379 N.E.2d 1228, 1237 (1978) (dur
In the case now before us, the court of appeals affirmed the trial court’s conclusion that Mulei did not breach his duty of loyalty by meeting with other Jet employees prior to the termination of his own employment with Jet. Mulei v. Jet, 739 P.2d at 893. In concluding that there was no breach of Mulei’s duty of loyalty, the court of appeals relied on its previous decision in Electrolux Corp. v. Lawson, 654 P.2d 340 (Colo.App.1982). The court of appeals cited Electrolux for the proposition that an employee will not be liable for a breach of his duty of loyalty unless he causes co-employees to breach a contract. We disagree with this proposition, and we again conclude that the court of appeals and the trial court applied an unduly restrictive legal standard in determining whether Mulei’s pre-termination discussions with co-employees breached his duty of loyalty.
In Electrolux, an Electrolux branch manager solicited a number of his co-workers to join him in a new distributorship he was opening. Six of the co-workers then left Electrolux to join the new firm. The court of appeals read the Restatement (Second) of Agency § 393 comment e as imposing liability for breach of an employee’s duty not to compete only when “he causes his fellow employees to breach a contract.” 654 P.2d at 341. Because the Electrolux workers’ employment contracts were terminable at will, their resignations did not constitute a breach of their employment contracts. Thus, reasoned the court of appeals, since there was no breach of any employment contracts there was no breach of the manager’s duty not to compete. Id.
Comment e to section 393 of the Restatement notes that the “limits of proper conduct with reference to securing the services of fellow employees are not well marked.” The comment goes on to state that an “employee is subject to liability if, before or after leaving the employment, he causes fellow employees to break their contracts with the employer.” Rest. (2d) Agency § 393 comment e. However, the Restatement neither implies nor explicitly states, as did the court of appeals in Elec-trolux and Mulei, that causing co-employees to break their contracts is the only instance where an employee will be liable for breaching his duty of loyalty by soliciting co-employees. For instance, the Restatement notes that “a court may find that it is a breach of duty for a number of the key officers or employees to agree to leave their employment simultaneously and without giving the employer an opportunity to hire and train replacements.” Id.
To adopt the holding of the court of appeals would be to conclude that the scope of an employee’s duty of loyalty with respect to solicitation of co-employees is limited to his duty to refrain from tortious interference with his employer’s contractual relations with the co-employees. The court of appeals’ holding thus fails to apply applicable principles of agency law and finds liability only for a breach of duties imposed by tort law. This result is readily apparent in the court of appeals’ opinion in the present case, which applied the same terminable-at-will analysis to both Jet’s breach of duty of loyalty counterclaim and its counterclaim for tortious interference with contractual relations. Mulei, 739 P.2d at 893. Such an analytical approach is fundamentally inconsistent with the broad duty of loyalty imposed on an agent/employee by the principles of agency law as stated in the Restatement. By virtue of the agency relationship, the duty of loyalty and noncompetition placed on the agent is necessarily greater than the duty imposed on all persons by tort law to refrain from wrongful interference with contract relations. Cf. Frederick Chusid & Co. v. Marshall Leeman & Co., 326 F.Supp. 1043, 1060 (S.D.N.Y.1971) (employment relationship is one of confidence); ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 62 Ill.App.3d 671, 20 Ill.Dec. 160, 169, 379 N.E.2d 1228, 1237 (1978) (noting confidence and trust present in employment relationship); Las Luminarias of New Mexico Council of the Blind v. Isengard, 92 N.M. 297, 587 P.2d 444, 449 (App.1978) (it is well settled
Based on our review of the cases cited in this opinion and on the Restatement (Second) of Agency, we conclude that a court should focus on the following factors in determining whether an employee’s actions amount to impermissible solicitation of co-workers. A court should consider the nature of the employment relationship, the impact or potential impact of the employee’s actions on the employer’s operations, and the extent of any benefits promised or inducements made to co-workers to obtain their services for the new competing enterprise. No single factor is dispositive; instead, a court must examine the nature of an employee’s preparations to compete to determine if they amount to impermissible solicitation. See Bancroft-Whitney Co. v. Glen, 64 Cal.2d 327, 49 Cal.Rptr. 825, 839, 411 P.2d 921, 935 (1966); Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d 564, 570 (1978). Additionally, an employee’s solicitation of co-workers need not be successful in order to establish a breach of his duty of loyalty. See ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 90 Ill.App.3d 817, 46 Ill.Dec. 186, 200-01, 413 N.E.2d 1299, 1314-15 (1980) (it is misconduct itself that is wrongful; it makes no difference whether result of an employee’s conduct is injurious to employer); Rest. (2d) Agency § 469 comment a (agent breaches duty of loyalty by acting in competition with principal even though agent’s conduct does not harm principal).
In the case before us, the trial court found that:
During February and March, 1983, conversations were had among Jet employees with [Mulei] regarding their interest in joining American Check Transport.
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Upon [Mulei]’s being fired, members of the office staff resigned and joined ACT and Central Air [Towner’s air charter operation]. As of noon on March 10, 1983, the primary Western Zone staff had either been fired or had resigned and joined ACT.
The trial court apparently concluded that Mulei’s “conversations” and the resignations of his co-employees did not violate Mulei’s duty of loyalty to Jet. The basis for this conclusion apparently was at least in part the assumption that it is fully permissible for an employee to solicit co-employees whose employment contracts are terminable at will. On this point the trial court found and concluded that:
Employees other than [Mulei] who terminated their employment with Jet had jobs terminable at will. While [Mulei] formed ACT and participated in the in*498 corporation of ACT while employed by Jet, there was no violation of any duty of loyalty to Jet.
However, as outlined above, whether co-employees’ contracts are terminable at will is not dispositive of the breach of duty of loyalty analysis. Accordingly, we reverse the court of appeals’ judgment affirming the trial court’s conclusion that no breach of Mulei’s duty of loyalty occurred because his co-employees’ contracts were terminable at will.
Again, based on the trial court’s findings and the record before us, we are unable to determine whether Mulei’s pre-termination meetings with his Jet co-employees were permissible preparations for competition or whether these actions constituted solicitation of co-employees that amounted to a breach of his duty of loyalty. Accordingly, this case must be returned to the trial court for retrial for the additional purpose of determining whether under the standards of an employee’s duty of loyalty set forth in this opinion, Mulei's pre-termi-nation meetings with Jet co-employees amounted to impermissible solicitation in violation of his duty of loyalty.
C.
The trial court concluded that Mu-lei did not violate any duty of loyalty to Jet in part because he “continued to operate the Western Zone on a profitable, efficient and service-oriented basis.” Mulei now contends that this finding regarding his profitable operation of Jet’s Western Zone precludes a determination that he breached any duty of loyalty to Jet. We disagree.
In a breach of employee duty of loyalty case, the Tenth Circuit Court of Appeals held that the “fact that the [employer] may have made money does not prove that no breach took place nor does it excuse one any more than a failure to make money demonstrates a breach of duty.” Wilshire Oil Co. v. Riffe, 406 F.2d 1061, 1062-63 (10th Cir.1969), cert. denied, 396 U.S. 843, 90 S.Ct. 105, 24 L.Ed.2d 92 (1969). See also Chelsea Industries, Inc. v. Gaffney, 389 Mass. 1, 449 N.E.2d 320, 327 (1983) (denial of compensation to employees breaching duty of loyalty proper notwithstanding profitability of business during time breaches occurred).
We conclude that these same principles are applicable here. The key inquiry in determining whether Mulei breached his duty of loyalty is not whether Jet’s Western Zone was profitable. Instead, the focus is on whether Mulei acted solely for Jet's benefit in all matters connected with his employment, and whether Mulei competed with Jet during his employment, see Rest. (2d) Agency §§ 387, 393, giving due regard to Mulei’s right to make preparations to compete. Accordingly, the fact that Mulei operated Jet’s Western Zone efficiently and profitably does not preclude a determination that he breached his duty of loyalty to Jet by his pre-termination actions. See Wilshire Oil, 406 F.2d at 1062-63.
D.
Neither does the fact that Jet failed to make the agreed-upon quarterly bonus payments excuse Mulei from being subject to a duty of loyalty to Jet. The Restatement provides that
[t]he liability of the agent to the principal can be avoided, terminated, or reduced by a breach of contract by the principal, his contributory fault, or his failure to mitigate damages.
Rest. (2d) Agency § 415. The commentary to this section of the Restatement notes that
[u]pon a material breach of contract by the principal, unless it consists of a revocation of the agent’s authority, the agent can still exercise his authority. He has the option of renouncing it; if he does so renounce, his authority terminates.... If he does not renounce the relation, he has a duty to continue[.]14
Id. comment a (emphasis added).
In this case, the trial court found that “[d]uring his employment, ... Mulei did
Assuming, without deciding, that Jet’s nonpayment amounted to a material breach of Mulei’s employment agreement, then Mulei had the option of renouncing his authority and leaving Jet’s employ. See Rest. (2d) Agency § 415 comment a. However, there is no evidence in the record indicating that Mulei renounced his authority; instead, the record shows he continued to act for Jet and to operate the Western Zone despite Jet’s failure to make the quarterly bonus payments. If the trial court finds on retrial that Mulei did not renounce his agency/employment relation with Jet, then he had a duty to continue that relationship and a corresponding duty of loyalty. See id. §§ 387, 415. Thus, Jet’s breach of the employment agreement would not excuse Mulei from being subject to a continuing duty of loyalty to act solely for Jet’s benefit in all matters connected with his employment until the time his employment with Jet was terminated on March 10, 1983.
E.
In sum, we conclude that the court of appeals and the trial court applied unduly narrow standards in determining what actions constitute a breach of an employee’s duty of loyalty to his employer. We also conclude that despite Jet’s breach of the employment agreement, Mulei’s authority to act for Jet was not revoked if Mulei did not renounce this authority. On retrial, if the trial court finds that Mulei did not renounce this authority, then Mulei was subject to a continuing duty of loyalty to Jet until his employment was terminated. Lastly, the trial court’s findings of fact are insufficient to determine if Mulei’s preter-mination meetings with Jet’s customers and employees exceeded the scope of allowable preparations for competition and breached his duty of loyalty. Accordingly, we reverse the court of appeals’ judgment affirming the trial court’s conclusion that Mulei did not breach any duty of loyalty to Jet, and we direct that this case be returned to the trial court for retrial to consider whether, applying the standards adopted herein, Mulei breached his duty of loyalty to Jet. The trial court should also consider the appropriate relief to be awarded based on its new findings and conclusions.
III.
In order to provide guidance to the trial court on remand in the event it determines that Mulei breached his duty of loyalty to Jet, we consider the remaining issues on which we granted certiorari.
A.
Jet argues that Mulei would not be entitled to any compensation or bonus payments for the period in which he was. disloyal. We agree.
The general rule is that an employee is not entitled to any compensation for services performed during the period he engaged in activities constituting a breach of his duty of loyalty even though part of these services may have been properly performed. Wilshire Oil Co. v. Riffe, 406 F.2d 1061, 1061-62 (10th Cir.1969); ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 90 Ill.App.3d 817, 46 Ill.Dec. 186, 202, 413 N.E.2d 1299,
Mulei again argues that he is entitled to his full compensation because even if he breached a duty of loyalty, he properly performed his duties for Jet while he was preparing to make ACT operational. Mu-lei’s argument is inconsistent with the general rule regarding forfeiture of compensation for disloyal conduct. Moreover, other courts have rejected similar arguments and have denied compensation to an employee for services performed during any period in which the employee breached his duty of loyalty without regard to the employee’s proper performance of his other contractual duties during that period. Wilshire Oil, 406 F.2d at 1062-63; American Timber & Trading Co., 558 P.2d at 1223; ABC Trans National Transport, 46 Ill.Dec. at 202, 413 N.E.2d at 1315. Thus, regardless of Mu-lei’s performance of his contractual duties, he would still be subject to forfeiture of his compensation during the period of any disloyal acts.
However, if Mulei breached any duty of loyalty, he could still recover compensation for services properly rendered during periods in which no such breach occurred and for which compensation is apportioned in his employment agreement. Musico v. Champion Credit Corp., 764 F.2d 102, 112-14 (2d Cir.1985); Rest. (2d) Agency §§ 456, 469. Apportioned compensation is that paid to an agent or employee that is allocated to certain periods of time or to the completion of specified items of work. Musico, 764 F.2d at 112-14; Rest. (2d) Agency § 456 comment b.
Mulei’s employment contract provided that his salary was to be paid on a monthly basis, and that his bonus was to be calculated and paid on a quarterly basis. Applying the principles outlined above, if on retrial the trial court concludes that Mulei breached his duty of loyalty to Jet, then Mulei would be entitled to compensation for services properly performed during periods in which no such breach occurred and for which compensation is apportioned in the employment agreement. Moreover, under this apportionment approach, Mulei would not be entitled to any salary compensation for any month during which he engaged in acts breaching his duty of loyalty, nor would he be entitled to any bonus payments for any quarter during which he engaged in acts breaching his duty of loyalty. On retrial, the trial court should apply the principles outlined in this section to determine Jet’s liability for unpaid salary and bonus compensation if it concludes that Mulei breached any duty of loyalty to Jet.
B.
Next, Jet argues that Mulei is not entitled to a fifty-percent statutory penalty pursuant to section 8-4-104(3), 3B C.R.S. (1986), on any unpaid salary and bonus due him from Jet. Jet contends that the court of appeals erred in affirming the trial court’s award of the statutory penalty since Jet had a good faith legal justification for withholding the compensation. The issue presented is a substantial one and has received only limited briefing in this case. Under these circumstances, we think it best not to provide definitive guidance but to allow the trial court in the first instance to resolve the legal issues as well as the attendant factual ones on retrial. We pause only long enough to outline some of the relevant considerations.
Section 8-4-104(3) provides that if an employer refuses to pay wages or compensation due an employee after the employee’s termination by volition of the employer, then the employer is liable for a fifty-
Section 8-4-104 is part of an act governing the payment of wages by employers to employees. §§ 8-4-101 to -126, 3B C.R.S. (1986) (Wage Claim Act, or Act). The Wage Claim Act has its origin in legislation first adopted in 1901, see Ch. 55,1901 Colo. Sess.Laws 128, and its basic structure has remained the same through the years. In general, the Act requires an employer to pay an employee at regular intervals, § 8-4-105, and upon termination of the employment relationship by volition of the employer to pay the employee immediately for all earned and unpaid wages or compensation, § 8-4-104(1). An employer is permitted to set off “any lawful charges or indebtedness” owing by the employee to the employer against the unpaid wages or compensation to be paid to the employee at the time employment is severed. § 8-4-104(2). If the employer refuses to pay wages or compensation without a good faith legal justification when it terminates an employment relationship, the employer becomes liable for a penalty in the amount of fifty percent of the amount due. § 8-4-104(3). Thus, the Wage Claim Act requires regular, periodic payments to an employee throughout his employment and provides that the final payment of compensation be made immediately, absent a good faith legal justification for any withholding, if the employer discharges the employee.
In the present case, the trial court found that Jet became obligated to Mulei for periodic bonus payments and failed to make those payments as required by the employment contract even though they became due before Mulei engaged in the allegedly disloyal acts. This presents two basic issues to be resolved on retrial.
C.
Lastly, Jet contends that the court of appeals erred in affirming the trial court’s denial of its claims against Mulei and ACT based upon an alleged civil conspiracy to harm Jet’s business. Because we remand this case for retrial, permitting further consideration of whether Mulei breached any
There are five elements required to establish a civil conspiracy in Colorado.
[T]here must be: (1) two or more persons, and for this purpose a corporation is a person; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) one or more unlawful overt acts; and (5) damages as the proximate result thereof.
More v. Johnson, 193 Colo. 489, 493, 568 P.2d 437, 439-40 (1977) (quoting Lockwood Grader Corp. v. Bockhaus, 129 Colo. 339, 345-46, 270 P.2d 193, 196 (1954)). The essence of a civil conspiracy claim is not the conspiracy itself, but the actual damages resulting from it. More, 193 Colo. at 494, 568 P.2d at 440; Contract Maintenance Co. v. Local 105, 160 Colo. 190, 194, 415 P.2d 855, 856 (1966).
The court of appeals affirmed the trial court’s conclusion that neither Mulei nor ACT had engaged in a civil conspiracy to harm Jet’s business. Both courts based this conclusion on the absence of any unlawful act.
We have concluded above, however, that the lower courts’ conclusions that Mulei did not breach his duty of loyalty were based on the application of improper legal standards. Thus, on retrial, the trial court may find that Mulei breached his duty of loyalty. If so, this finding would satisfy the unlawful act element of the civil conspiracy definition. However, the record must still contain evidence sufficient to establish the other elements in order for the court to find the existence of a civil conspiracy. The trial court made no findings concerning the other elements in this case. Because such findings are necessary in order to resolve the civil conspiracy claims, the trial court on retrial must make findings concerning the claims of Jet against Mulei and ACT for civil conspiracy and must resolve those claims on the basis of its findings-.
ÍV.
In sum, we reverse that portion of the court of appeals’ judgment affirming the trial court’s conclusion that Mulei did not breach his duty of loyalty to Jet. Additionally, we reverse the court of appeals’ af-firmance of the district court’s assessment of a fifty percent statutory penalty against Jet on the unpaid wages and compensation. Finally, we reverse the court of appeals’ holding that the district court properly denied Jet’s civil conspiracy claims against Mulei and ACT. We remand the case to the court of appeals for further remand to the district court with directions to reinstate and retry Jet’s counterclaim for breach of duty of loyalty and Jet’s claims against Mulei and ACT for civil conspiracy, to determine the appropriate relief to be awarded if these claims are established, and to retry Mulei’s statutory penalty claim,
. The judgment of the court of appeals remains in effect as to issues not reviewed in this certio-rari proceeding. See note 9, below.
. The trial judge is no longer serving on the district court. Therefore, retrial will be necessary rather than new findings and conclusions based on the evidence presented at the original trial.
. Jet also transports small items of freight, consisting of documents and parcels that require very prompt delivery, but this is not a major component of its business.
. The trial court’s findings indicate that it considered the Jet pilots and ground couriers to be independent contractors and not employees of Jet. However, the trial court did not focus on this distinction in reaching its conclusion. The court of appeals also did not discuss any employee/independent contractor distinction; it simply referred to all these personnel as "Jet’s employees.” Mulei, 739 P.2d at 891. We agree that any distinction as to whether the personnel, other than Mulei, engaged in Jet’s air courier operations were employees or independent contractors is not pertinent to the disposition of the issues presented by this case. The record indicates that the Jet pilots and ground couriers were an integral and necessary part of Jet's operation. Therefore, the various personnel are simply referred to as "employees” for purposes of this opinion.
. Although it is not entirely clear from the court of appeals’ opinion that Mulei discussed his new air courier business with Jet's customers and employees before Mulei was fired by Jet, this fact is established by the trial court’s findings and fully corroborated and elaborated upon by Mulei’s own testimony.
. Mulei had intended to make ACT operational on March 14 at the beginning of a business week. Mulei advanced the date to March 10 when Wright'"prematurely” learned of Mulei’s activities in setting up a competing business and discharged him from his employment with Jet. Activity on March 10 was frenzied. Mulei ran ACT from a Denver hotel room and attempted to obtain the business of Jet’s bank customers and to assure them that ACT could provide uninterrupted quality service. At the same time, Wright brought in personnel from Cincinnati and other cities and attempted to keep the Denver office operational and to persuade Jet’s customers to continue to obtain air courier service from Jet.
. Jet also sought to enjoin Mulei from unlawfully competing with Jet, but this request for relief was predicated solely on Mulei’s noncompetition covenant which the trial court ultimately ruled invalid, a ruling not at issue on appellate review.
. Towner and Towner’s air charter company reached a compromise settlement with Jet and were dismissed as parties to Jet’s civil conspiracy suit.
. Originally, we did not grant certiorari on the conspiracy issue, but we implicitly agreed to consider it by orders issued during the briefing period. We did not grant certiorari to review the trial court’s holding that the noncompetition covenant was invalid, the court of appeals’ holding that Mulei did not breach his employment contract by failing to devote his full time and best efforts to Jet’s business or by disclosing confidential information, the court of appeals’ holding that Mulei did not engage in tortious interference with Jet’s contractual relations, or the court of appeals’ determination that the trial court did not err in quantifying Mulei’s bonus.
. The Restatement (Second) of Agency § 387 comment b states that an agent's "duties of loyalty to the interests of his principal are the same as those of a trustee to his beneficiaries." Furthermore, some cases from other jurisdictions, as well as the court of appeals’ opinion in this case, characterize the duty of loyalty an employee owes to his or her employer as a "fiduciary” duty or a “fiduciary" duty of loyalty. See, e.g., AGA Aktiebolag v. ABA Optical Corp., 441 F.Supp. 747, 754 (E.D.N.Y.1977); Mulei v. Jet, 739 P.2d 889, 893 (Colo.App.1987); Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d 564, 569 (1978). In their pleadings and briefs, the parties in this case have also characterized the duty of loyalty as a "fiduciary” duty. For the purposes of this opinion, however, we need not attempt to delineate the precise scope of an employee’s duty of loyalty as applied to all factual situations. Neither must we determine whether the Restatement’s trustee-beneficiary analogy is fully applicable to employer-employee relations. Accordingly, we choose to describe the duty at issue here simply as a “duty of loyalty” arising out of the employer-employee relationship.
Additionally, we need not determine whether the duty of loyalty discussed in this opinion applies in all its rigor to every employment relationship regardless of the nature of the work performed by the employee. Because an employee’s duty of loyalty is based in part on agency law, some cases suggest that the higher standard of the duty of loyalty may only be appropriate where an employee has sufficient authority to act for the employer or access to confidential information to make apt the principal/agent analogy. See Bancroft-Whitney Co. v. Glen, 64 Cal.2d 327, 49 Cal.Rptr. 825, 838-39, 411 P.2d 921, 934-35 (1966) (duty of loyalty applies to corporate officer); Chelsea Industries, Inc. v. Gaffney, 389 Mass. 1, 449 N.E.2d 320, 326 (1983) (duty of loyalty applies to “corporate officer, director, or trusted agent or employee”); Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d 564, 568 (1978) (duty of loyalty applies to "corporate officer or other high-echelon employee”). In any event, we need not determine the full scope of applicability of the duty of loyalty here since this duty is clearly applicable to Mulei because his position was one of sufficient authority that the principal/agent analogy is apt beyond question.
. Other courts have recognized potential liability for soliciting co-employees even where their contracts were terminable at will. In ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 90 Ill.App.3d 817, 46 Ill.Dec. 186, 413 N.E.2d 1299 (1980), the Appellate Court of Illinois held that "the fact that the contract of employment is terminable at will does not bar recovery” for soliciting an employee to terminate an existing employment relationship to enter the employ of another. Id., 46 Ill.Dec. at 192-93, 413 N.E.2d at 1305-06. The Third Circuit Court of Appeals in United Aircraft Corp. v. Boreen, 413 F.2d 694 (3d Cir.1969), noted that the setting and purpose of an offer to employees
The systematic inducing of employees to leave their present employment and take work with another is unlawful when the purpose of such enticement is to compete and destroy an integral part of a competitive business organization rather than obtain the services of particularly gifted or skilled employees.
Id. at 699 (quoting Morgan’s Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957)).
Finally, in Frederick Chusid & Co. v. Marshall Leeman & Co., 326 F.Supp. 1043, 1060-61 (S.D.N.Y.1971), the court found that the defendants were liable for persuading co-employees to leave for a competing business even though the employees' contracts were terminable at will. The court reasoned that the solicitation of co-employees is actionable when there is a relation of confidence between the soliciting employees and the employer. Because such a relationship existed while the soliciting employees were in the plaintiffs employ, their solicitations breached their duty of loyalty. Id. See also Annotation, 24 A.L.R.3d 821 (1969 & 1988 Supp.).
. This court has not specifically adopted the Restatement (Second) of Torts § 768 as the law of this state. Memorial Gardens, 690 P.2d at 211 n. 8. Previously, we have "held that even a contract terminable at will is entitled to some protection from tortious unwarranted interference." Id., citing Watson v. Settlemeyer, 150 Colo. 326, 372 P.2d 453 (1962).
. Application of this approach should be flexible so that actions traditionally taken by departing employees with regard to co-workers leaving simultaneously will not amount to a breach of the duty of loyalty unless other factors, such as the extent of the solicitations or nature of the offers of employment, dictate a finding of a breach of the duty of loyalty. This type of flexible approach is outlined in the commentary to the Restatement (Second) of Agency § 393:
[I]t is normally permissible for employees of a firm, or for some of its partners, to agree among themselves, while still employed, that they will engage in competition with the firm.... However, a court may find that it is a breach of duty for a number of the key officers or employees to agree to leave their employment simultaneously and without giving the employer an opportunity to hire and train replacements.
Rest. (2d) Agency § 393 comment e.
Under this flexible approach, traditional actions by departing employees, such as the executive who leaves with her secretary, the mechanic who leaves with his apprentice, or the firm partner who leaves with associates from her department, would not give rise to a breach of the duty of loyalty unless other factors, such as an intent to injure the employer in the continuation of his business, were present. See Frederick Chusid & Co. v. Marshall Leeman & Co., 326 F.Supp. 1043, 1060 (S.D.N.Y.1971) (malicious conspiracy by disloyal employees gives rise to breach of duty for soliciting co-workers); Bancroft-Whitney Co. v. Glen, 64 Cal.2d 327, 49 Cal.Rptr. 825, 840-41, 411 P.2d 921, 936-37 (1966) (consistent course of conduct to obtain co-workers for competing business contributes to conclusion that employee breached his duty of loyalty); ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 90 Ill.App.3d 817, 46 Ill.Dec. 186, 192, 413 N.E.2d 1299, 1305-06 (1980) (well-organized plan by key management employees to leave employer simultaneously gives rise to breach of duty for soliciting co-workers).
. Illustration 1 to comment a is as follows:
1. P employs A to sell his goods, A to*499 receive a monthly compensation of $50. A works for P for six months during which time P refuses to pay him any salary. A is privileged to renounce his agency. He also is privileged to continue to act for P unless P’s refusal to pay the salary is accompanied by conduct indicating that A has been dismissed.
. However, because we remand this case for retrial, this conclusion is binding on retrial only absent presentation of different evidence.
. The Colorado Court of Appeals, however, has addressed facets of the issue on several occasions. See, e.g., Rohr v. Ted Neiters Motor Co., 758 P.2d 186, 189 (Colo.App.1988) (good faith legal justification supported employer’s offset, against employee’s wage claim, of a claim for losses incurred due to employee’s actions exceeding scope of his authority); Coffee v. Inman, 728 P.2d 376, 383-84 (Colo.App.1986) (a good faith legal justification for withholding wages or compensation may arise from a litigable issue on which the right to compensation depends); Kennedy v. Leo Payne Broadcasting, 648 P.2d 673, 675 (Colo.App.1982) (statutory penalty provision is applicable in any case where compensation is willfully withheld without good cause).
We decided a related matter in Finance Acceptance Co. v. Breaux, 160 Colo. 510, 419 P.2d 955 (1966). There an employer attempted to set off an employee’s obligations on promissory notes owed to the employer against wages owed to the employee on discharge. We upheld the setoff only as to the amount of the wages not exempt from levy under section 77-2-4, 4 C.R.S. (1963) (now codified at § 13-54-104, 6A C.R.S. (1987)).
. We do not intend by this statement to limit the issues that may be raised on retrial bearing on Mulei’s claim for a statutory fifty-percent penalty.
. The trial court’s original calculation of the bonus amount owed Mulei was upheld by the court of appeals, and we have not reviewed that ruling here. See note 9, above. On retrial, this amount need be recalculated only as to any apportioned period within which it is found that Mulei breached his duty of loyalty. Finally, we remand for retrial only on Jet’s civil conspiracy claims, Jet’s breach of duty of loyalty counterclaim, and Mulei’s statutory penalty claim. The original findings of the trial court and the judgment of the court of appeals on claims and issues not considered in this certiorari proceeding remain in effect for the purpose of those claims and issues and are not to be retried.