Breach of Fiduciary Duty

Breach of Fiduciary Duty

Disputes over breach of fiduciary duty and non-compete contracts are often tense and upsetting for both parties involved. Devry Smith Frank LLP (DSF) understands the complexity surrounding these matters and can help you achieve the best outcomes while also working to keep sensitive matters private to minimize reputational harm.

Determining if a Fiduciary Duty Exists and has Been Breached

Does your employee have a fiduciary duty to your company and are they potentially in breach of that duty? While all employees have some responsibility to be loyal to their companies, certain employees have a more strict and legal responsibility to act in the best interest of the company. Breaches of this duty can result in a variety of consequences, so it is important to establish if the duty exists.

Establishing whether fiduciary duty exists, depends on these factors:

  • An employee’s position in the company (the higher up an employee, the more likely they are to be responsible for how they represent the company).
  • How much power/authority the employee had is also a major factor in determining if a fiduciary duty exists.
  • How much trust and reliance the employer put in the employee also impacts the extent of the fiduciary duty.
  • The employee of a fiduciary must also be aware they are accepting this trust and that special reliance is being put upon them.

What Constitutes a Breach of Fiduciary Duty?

A breach can occur under three categories: care, loyalty and candor. In short, these three categories mean, respectively, that a fiduciary must act in a reasonable and prudent way, they must act in the best interests of their beneficiary (i.e. an employer, client, etc.) and they must be honest and open with their beneficiary about any circumstances that may do harm.

Examples of breaches can include stealing clients away from an employer, misappropriating funds, or working with or for the competition.

Non-Competition and Non-Solicitation

Employers can protect themselves by including non-compete and non-solicitation clauses in their employment contracts.

  • Non-Competition clauses prevent an employee from working for a competitor for a certain amount of time after their employment has been terminated. Two years is typical for these clauses and employers should be aware that a court may not uphold the clause if the duration is longer.
  • Non-Solicitation clauses prevent an employee from contacting an employer’s clients to attract their business away from the employer.

For Employers

To ensure your non-compete and non-solicitation clauses can be upheld and enforced, you need employment contracts that will meet the standards of the court and maximize your protection without overstepping the boundaries of the law. DSF has decades of experience drafting employment contracts and can help you create new contracts and ensure the enforceability of existing contracts.

For Employees

Employees must be aware of what an employment contract can mean for them during their employment and after. Both of these clauses can impact your employment opportunities after you leave an employer and should be considered carefully before signing. DSF lawyers can help determine your rights under a contract and pursue litigation for unfair contracts.