Navigating Fiduciary Duties in Employment: What You Need to Know
Understanding Fiduciary Duties in Employment CasesIn the realm of employment, the relationship between employers and employees is often considered at-will, allowing either party to terminate the association for legitimate reasons. However, there are scenarios in which both employers and employees are bound by a heightened duty known as a fiduciary duty or duty of loyalty. It's essential for both parties to grasp the nature and scope of this responsibility.
An Employee's Duty to the EmployerEmployees bear certain responsibilities toward their employers, such as safeguarding trade secrets and exercising reasonable care in job-related matters. Negligence causing harm to an employer's property may result in civil liability.
While employees can plan to work for a competitor during their current job, unless a non-compete agreement is in place, those in positions of trust and confidence may have a duty of loyalty or fiduciary duty. This limits their actions on their employer's time and premises before giving notice and may prevent them from enticing coworkers to leave. Determining which employees have this heightened duty isn't straightforward. Generally, lower-level workers without access to decision-making and high-level information don't have this duty, while executives likely do. If you fall in between, consulting an employment attorney when considering competing business ventures or working for a competitor is advisable. An Employer's Duty to EmployeesIn most employment scenarios, employers don't owe a fiduciary duty to employees. However, an exception exists when an employee is also a shareholder in a closely held corporation or a partner in a partnership.
In such cases, the fiduciary duty arises not from the employment relationship but from the duties shared by all partners and shareholders in closely held entities. Termination of an employee-shareholder's employment or management decisions affecting their compensation could constitute a breach of fiduciary duty. For businesses with employee-owners, extra care must be taken when disciplining or terminating such employees. Similarly, altering an employee-shareholder's compensation structure requires caution if it doesn't benefit the employee. Common Law Duties and Employment ContractsMassachusetts courts have ruled that common law fiduciary duties can be shaped and narrowed by contracts. An employment contract outlining how and when the company can repurchase an employee's shares typically precludes fiduciary duty claims if the company complies with the agreement.
However, if a contract lacks specific provisions for certain actions, fiduciary duty claims may still arise based on the fiduciary relationship. For instance, if an employment contract allows termination for specified causes and the employer terminates a shareholder-employee for one of these reasons, the employee may not maintain a fiduciary duty claim. Conversely, when an employment agreement lacks a termination provision, and a shareholder-employee is terminated without just cause, the absence of contractual terms may not bar a fiduciary duty claim. |
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Meet Our Employment Lawyers
Emily Smith-Lee is the owner and founder of slnlaw. She is a 1996 graduate of Boston College Law School. She was previously a partner at the Boston office of a large international firm, where she worked for thirteen years before starting the firm that became slnlaw in 2009. She has been recognized as Massachusetts Superlawyer each year since 2013, and in 2018 earned recognition as one of Massachusetts Lawyers Weekly's Lawyers of the Year. She has written a book on employment law: Rules of the Road, What You Need to Know About Employment Laws in Massachusetts, and helped thousands of clients on both the employee and employer side with severance and non compete review and negotiation, wage and hour, discrimination and retaliation disputes, workplace sexual harassment situations, and advice about employment law generally.
Rebecca Rogers: Rebecca is a 2006 graduate of Boston College Law School, and has worked with slnlaw since 2013. She previously worked as an intellectual property litigation attorney for Fish & Richardson in Boston, Massachusetts, and clerked for the Massachusetts Supreme Judicial Court. Rebecca has helped clients with wage and hour disputes, employment discrimination, harassment and retaliation claims, review and negotiation of severance and non compete agreements, and advice to both employees and employers about navigating complex employment situations.
Jenna Ordway: Jenna is a 2013 graduate of Quinnipiac Law School, and also earned an LLM in Taxation from Boston University in 2015. She has been affiliated with slnlaw since 2011, first as a law clerk and then as an attorney. Jenna has been recognized since 2019 as a "Rising Star" by Massachusetts Superlawyers. Jenna has helped clients with review and negotiation of severance and non compete agreements, wage and hour disputes, discrimination, harassment and retaliation claims, and advice to small business owners about employment law and other business matters.
Elijah Bresley: Eli is a 2014 graduate of Seton Hall Law school, and has worked with slnlaw since 2020. He previously worked for a boutique employment law firm outside of Boston, and then for the Labor and Employment department of a large Boston firm. He also spent a year clerking for the judges of the Superior Court in Hartford, Connecticut. Eli has helped clients on the employee and employer side with all varieties of employment law issues, including employment discrimination, harassment, retaliation, and wage and hour issues, litigation in MCAD and state and federal courts, and advising employers about employment policies and practices.
Sharleen Tinnin: Sharleen is a 2010 graduate of Northeastern University School of Law, and has been with slnlaw since 2023. Prior to joining slnlaw, she worked with King, Tilden, McEttrick & Brink, P.C. on complex civil litigation matters. She previously worked for the United States Department of Justice, and received an "Excellence in Justice" award in 2017. Sharleen has helped clients with wage and hour, discrimination, harassment and retaliation disputes, review and negotiation of severance agreements, and litigation in MCAD and state and federal courts on employment related issues.
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Our experienced legal team is here to assist you in navigating the intricate landscape of fiduciary duties in employment. Whether you're an employer seeking to make informed decisions or an employee facing complex issues, we offer tailored advice and representation to protect your interests. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.