elements of employment agreements

The Faithless Servant Doctrine - Usually an Empty Threat to Discourage Viable Claims

Who or What is a Faithless Servant?

As an employee in New York, you are required to be loyal to your employer and not act in a way that is inconsistent with the trust your employer placed in you.[1]   This means if you work as a security guard, you cannot just look the other way so customers can steal.  Or if you work in sales, you cannot take the job just to reveal secret information to a competitor so you can get a better job with the competitor.  If you fail to be loyal to your employer, you can be liable for breaching this duty (called a fiduciary duty) to your employer under the “faithless servant” doctrine and your employer can seek to recover the salary, commissions, or other compensation the employer previously paid to you throughout your time of disloyalty.[2]

Pro Tip: When in doubt, call an employment lawyer. We can help you evaluate whether your employer is making an empty threat.
— Alex Granovsky

In order to be a “faithless servant,” however, your conduct has to be really bad. Most employees who are truly faithless servants are acting in such bad faith that a lawsuit by their employer will come as no surprise.

Unfortunately, what we have seen more and more of is employers threatening to sue under the faithless servant doctrine in order to discourage employees from bringing viable discrimination or unpaid wage claims. It is a cheap, but effective, bullying tactic.

When Does the Faithless Servant Doctrine Come Up?

Though it can arise in other situations, recently, employers who have been sued by an employee for employment discrimination or for failing to pay overtime due sometimes allege wrongdoing by the employee during his or her employment as a basis to argue the employee needs to pay salary (or other wages) back to the employer.[3]  Often, this is just a bullying tactic by an employer since an employer’s success with this claim turns on the severity of the employee wrongdoing alleged and is not usually based on a single disloyal act, but rather a pattern of behavior by the employee.[4] 

What Types of Wrongdoing Do Not Violate the Faithless Servant Doctrine?

To give some examples,[5] courts have told employers that the below conduct is not sufficient for liability under the faithless servant doctrine:

·       Improperly using the employer’s credit card on two occasions for unauthorized personal purchases totaling $224.20.[6]

·       Reviewing employee personnel files without authorization.[7]

·       Forwarding employee medical information to personal e-mail address.[8]

·       Forwarding confidential company information to personal e-mail address.[9]

·       Performing unauthorized work for third party clients, lying about possessing documents belonging to third party clients, and preparing to take employer’s clients when employee left firm.[10]

·       Participating in sexual harassment of a co-worker.[11]

·       Engaging in “garden-variety, petty pilfering.”[12]

·       Posting false reviews of business on internet.[13]

·       Disparaging senior members of firm and engaging in other dishonest behavior.[14]

·       Saying embarrassing things and leaking confidential company documents.[15]

 What Types of Behavior Violate the Faithless Servant Doctrine?

 But some wrongdoing—particularly the type that is more of a pattern of behavior that directly interferes with the work the employee does for the employer and which occurs over a lengthy period of time (especially when it adds up to a large sum of money)—can be found to be a violation of the faithless servant doctrine:

 ·       Altering or falsifying tip amounts of customers.[16]

·       Stealing $50,000 from employer over the course of six (6) years.[17]

·       Engaging in multiple acts of disloyalty over many years and acting in a bold manner in doing so.[18]

·       Manipulating about $100,000 in invoices in violation of employment contract.[19]

·       Embezzling not less than $100,000 from employer over two years.[20]

·       Stealing from a school district over the course of three years.[21]

The type of wrongdoing identified above inherently interferes with the employee’s job duties and casts a shadow over all of the work the employee performed for the employer.[22]

If you would like to discuss your situation with us, please feel free to call or email us at any time. You will be on the phone with an attorney within 24 hours.

[1] Doe v. Solera Capital LLC, 18 Civ. 1769, 2019 U.S. Dist. LEXIS 55860 at *23, 2019 WL 1437520 (S.D.N.Y. Mar. 31, 2019).

[2] Doe, 2019 U.S. Dist. LEXIS 55860 at *23-24.

[3] Id. at *26 et seq. (collecting cases).

[4] Id. at *24.

[5] Not all of these examples necessarily arise in the counterclaim context, but all inherently involve an employer alleging a faithless servant claim against an employee.

[6] Id. at *5-6, 29 (finding employee’s wrongful behavior did not rise to avoid dismissal of faithless servant doctrine).

[7] Id.

[8] Id.

[9] Id.

[10] Id. at 27 (citing Schwartz v. Leonard, 138 A.D.2d 692 (2d Dept. 1988).

[11] Id. at 28 (citing Torres v. Gristede’s Operating Corp., 628 F. Supp. 2d 447, 466 (S.D.N.Y. 2008).

[12] Id.

[13] Primiani v. Vintage 185, Inc., 2:18-cv-2237 (ADS)(AYS) and 2:18-cv-2893 (ADS)(AKT), 2019 U.S. Dist. LEXIS 20079 at *3-4, 12, 2019 WL 486087 (E.D.N.Y. Feb. 6, 2019)

[14] Primiani, 2019 U.S. Dist. LEXIS 20079 at *12.

[15] Id.

[16] Stefanovic v. Old Heidelberg Corp., No. 18 CV 2093-LTS-KNF, 2019 U.S. Dist. LEXIS 133397 at *6, 2019 WL 3745657, (S.D.N.Y. Aug. 8, 2019)(preserving employers faithless servant counterclaim in wage and hour action).

[17] Doe, 2019 U.S. Dist. LEXIS 55860 at *28 (citing Binghamton v. Whelan, 141 A.D.3d 145, 146 (3d Dept. 2016).

[18] Id. at *28 (citing Khaldei v. Kaspiev, 135 F. Supp. 3d 70, 85-86 (S.D.N.Y. 2015).

[19] Id. at *29 (citing Salus Capital Partners, LLC v. Moser, 289 F. Supp. 3d 468, 481 (S.D.N.Y. 2019).

[20] Id. (citing Sansum v. Fioratti, 128 A.D.3d 420, 421 (1st Dept. 2015).

[21] Id. (citing William Floyd Union Free Sc. Dist. V. Wright, 61 A.D.3d 856 (2d Dept. 2009).

[22] In “legalese” this behavior would be described as either “violat[ing] the contract of service such that it permeates the employee’s service in its most material and substantial part” or where the employee “acts adversely to [her] employer in any part of the transaction, or omits to disclose any interest which would naturally influence [her] conduct in dealing with the subject of [her] employment.” Id. at *24-25 (internal quotes and punctation omitted); see also Primiani, 2019 U.S. Dist. LEXIS 20079 at *12.

Common Employment Agreement Provisions

Common Employment Agreement Provisions

Every employment agreement is different. Most contain the start date, salary, and benefits, but most have many more provisions. Eight common employment agreement provisions that often appear in employment agreements are explained below:

  • Arbitration. An arbitration clause is an agreement that if a dispute between the employer and employee should arise (about any aspect of the employment relationship), the dispute will be submitted to arbitration rather than a court of law.
  • At-Will Employment / Termination. Most employment agreements state that either party may terminate the employment for any reason. The termination provision may set forth a certain amount of notice (often two weeks).  For more on at will employment, see this article.
  • Best Efforts. While it is assumed that the employee will work hard, sometimes employers add a best-efforts clause. This states exactly what it seems – that the employee will make his or her “best efforts” at work. This provision is almost always meaningless.
  • Confidentiality. A confidentiality provision forbids an employee from sharing certain information about the employer's business, such as secret processes, plans, formulas, data, or client lists. Usually a confidentiality agreement continues after the employee no longer works for the employer. For a more detailed analysis on confidentiality agreements, you can read this article.
  • Exclusive Employment. An exclusive employment provision prohibits an employee from “moonlighting,” i.e. working for another employer. With an exclusive employment provision, the employee may only work for the employer, and nobody else.
  • No Additional Compensation. This provision requires that the employee is not entitled to any additional compensation even if that employee becomes a director or officer, or serves on a committee.
  • Non-Competition. A non-competition clause prohibits an employee from “competing” against the employer for a certain period of time (in a certain geographic area) after he or she stops working for the employer. For a more detailed analysis on non-compete agreements, you can read this article.
  • Ownership of Inventions. These provisions are to ensure that anything an employee invents during his/her employment with the employer is property of the employer (i.e. NOT the employee). For most employees, this provision is not important, but in the rare cases it comes up, it is critical. Imagine that you come up with “the next big thing” while tinkering around at home … by the express language of this common employment law contract provision, that “next big thing” would be property of the employer.  These agreements also require an employee to disclose any pre-existing inventions.

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