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When Do Employees Have a Fiduciary Duty?

What is a fiduciary?

A person who is required to act for the benefit of another person is considered a fiduciary. Among other things, fiduciary employees owe their employers a duty of loyalty, a duty of good faith and a duty of honesty. Even after the termination of their employment, they may be required to still follow their fiduciaries duties.

What are Fiduciary duties and when do they exist?

Generally, employees in management or executive positions, such as senior managers or directors, are most likely to be found to owe a fiduciary duty to their employer. This is partly because these positions hold a high amount of control and decision-making power within the company and over other stakeholders. In some scenarios, lower-level managers and non-managerial employees may be found to owe their employer a fiduciary duty, especially if they are found to be “key employees”.

Fiduciary duties include, but are not limited to, acting in the best interest for their employer, exhibiting good faith and loyalty. There is also a duty to not use any of the insider or confidential knowledge obtained during the course of the employment against their employer. For example, as a fiduciary employee, you cannot leave and compete with the employer’s business. This could include competing for certain contract within the same industry or implementing business plans similar to your previous employer who you owed a duty to. These duties continue even after the employee’s employment ends.

Factors defining a Fiduciary relationship

Not all employees are considered to be fiduciaries or owe fiduciary duties. Any general position between employer and employee does not automatically amount to a fiduciary relationship. The Courts have held in various cases that fiduciary relationship can be found between the employer and employees in scenarios such as:

  • Whether the fiduciary is able to exercise some discretionary powers.
  • Whether the fiduciary can unilaterally use their discretion or power to affect the beneficiary’s legal or practical interest.
  • The beneficiary is specifically vulnerable to the fiduciary holding the discretion or power.

What are the remedies for breach of Fiduciary Duties?

If an employee is found to have breached their fiduciary obligations, equitable relief can be granted to the employer. For example, the Courts can issue compensation to the employer for any profits gained through the breach. Additionally, the Courts can also grant an injunction to the employer and prohibit the employee in continuing their practice.

How long does a fiduciary duty last?

A fiduciary duty is expected to continue during the employment tenure and in some cases continues after the employment relationship is terminated. In the event of a resignation, a fiduciary employee is still held to their duty to provide loyalty and confidentiality to their previous employer.

Contact Us

The relationship between the employer and employee are best outlined through well drafted contracts between them. Whether you are an employer or an employee looking for assistance with your disputes or employment relationships, our team of experienced human rights lawyers at Achkar Law can help. Contact us by phone toll-free at +1 (800) 771-7882 or email us at [email protected] and we would be happy to assist.

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