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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: August 5, 2020

Typically, At Will Employees Do Not Have a Fiduciary Duty to Their Employer

On July 22, 2020, Justice Borrok of the New York County Commercial Division issued a decision in United Staffing Solutions, Inc. v. Humanedge, Inc., 2020 NY Slip Op. 32404(U), holding that at-will employees do not have a fiduciary duty to their employer, explaining:

A fiduciary relationship arises between two persons when one of them is under a duty to act for, or to give advice for the benefit of the other upon matters within the scope of the relation. Stated differently, a fiduciary relation exists when confidence is reposed on one side and there is resulting superiority and influence on the other. While it is not mandatory that a fiduciary relationship be formalized in writing, when the parties have made contractual agreements, courts look to those agreements to discover the nexus of their relationship.

Where an agreement does not indicate a bargained for a fiduciary relationship, courts generally do not impute one. Alleging that an employee’s work entailed accessing or managing confidential information is insufficient on its own to create a fiduciary relationship. Indeed, generally, a fiduciary relationship does not arise between an employer and an at-will employee incidental to their employment relationship. With at will employees, the cause of action for breach of fiduciary duty is only available when it is alleged that the employee acted directly against the employer’s interests.

Critically, in the case at bar, the Employment Agreement provides that Ms. McLeish was an at will employee, who could be terminated at any time, for any reason. Under these circumstances, to survive dismissal, the Complaint must sufficiently allege that Ms. McLeish had acted directly against USS’s interests while in its employ – i.e., by embezzling, improperly competing, or usurping business opportunities. This, the Complaint fails to do. All that is alleged is that Ms. McLeish owed a fiduciary duty to USS, USS was entitled to and did place their trust and confidence in Ms. McLeish to act with the utmost good faith toward USS in the course of her employment and that, instead, she sabotaged the relationship with USS for her own financial gain by using USS resources, time, and facilities, and that during Ms. McLeigh’s employment she improperly disclosed confidential unidentified client information and after her employment ended that she solicited three former co-workers and certain unnamed clients to come to her new employer. This, as alleged, is insufficient, and, at most, pleads a claim for breach of the Employment Agreement and the Separation Agreement only.

(Internal quotations and citations omitted).

Fiduciaries have special duties and complex commercial litigation often involves allegations of a breach of those duties. We both bring and defend breach of fiduciary duty and professional malpractice claims and other claims relating to the duties of trustees and professionals such as lawyers, accountants and architects to their clients. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding such claims or appeals of such claims.

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