Duty of loyalty is one of the main categories of fiduciary duties. Most of these fiduciary relationships exist in a variety of legal contexts, e.g., attorney-clients, agent-principals, trusts, wills, and contracts. If your employee did not adhere to their contract and breach their duty of loyalty, you may file a claim against them. In such cases, it is important that you work with experienced employment law attorneys.
Under employment law, aspects of the duty of loyalty include an employee’s duty to avoid competing with their employer, as well as soliciting the latter’s other employees and clients prior to leaving the company. Additionally, employees may not pursue their personal interests during normal working hours.
It is important to note that all employees owe a certain degree of loyalty to their employers. It typically depends on the level of trust and responsibility that an employer grants an employee. In some cases, employees have access to confidential information or extensive independent responsibility. This means that their duties have risen to a fiduciary level. After taking hold of this fiduciary responsibility, employees must handle their employer’s matters with the highest degree of fidelity and integrity. Simply put, their actions and decisions at work must benefit the employer.
Certain actions constitute active steps to compete against one’s employer. Fiduciary duties, however, vary from state to state and this topic is constantly evolving. That’s why you should contact an experienced attorney to accurately determine if an employee has taken active steps.
Fiduciaries must always act in the best interests of the beneficiary. For example, an employee should make decisions that do not put the beneficiary at a disadvantage.
You can file a claim if an employee takes active steps to compete with you prior to their resignation. For example, an employee may divert clients to a competing business; take a current employer’s customer lists for their own use; solicit fellow co-workers to join new employer; or utilize trade secrets for the benefit of their new employer and themselves.
Depending on applicable laws and an employer’s unique circumstances, they may recover paid bonuses, collect profits received by an employee via a constructive trust, get employee to forfeit wrongful gains, seek injunctive relief (employee stops a specified act via a court order), withhold employee’s unpaid commissions, and more.
Yes, individuals can be held personally liable for breaching their duty of loyalty. This can result in personal financial liability for damages, loss of employment, or removal from a position of authority.
If a breach is suspected, an organization should:
Organizations can protect themselves by:
In representing both small businesses and employees, our philosophy is to provide employers with the necessary information and training to ensure a safe and productive workplace. In regard to employees whether dealing with discrimination, sexual harassment, hostile workplace, medical leave or other workplace issues we can provide guidance and peace of mind.
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