Court decision demonstrates vitality of New York’s faithless servant doctrine

A recent decision by the New York State Supreme Court, County of Monroe (Rochester, New York), is a strong reminder of the continuing vitality of New York’s faithless servant doctrine.

Background

Under the faithless servant doctrine, which applies when employees breach the duty of loyalty all employees owe to their employer, it’s well settled by New York’s courts that such employees who owe the duty of fidelity to their employer and who have been faithless in the performance of their services generally must give up, or disgorge, their compensation, whether commissions or salary.

Accordingly, New York’s courts have repeatedly ruled that when an employee engages in repeated acts of disloyalty, complete and permanent forfeiture of compensation, deferred or otherwise, is warranted.

Indeed, New York’s strict application of the faithless servant doctrine mandates the forfeiture of all compensation when employees who owe a duty of fidelity to their employer are faithless in the performance of their services. Moreover, because the faithless servant doctrine is an equitable doctrine requiring disloyal employees to disgorge all compensation earned during the period of their disloyalty, such forfeiture is required even if the employer experienced no discernable damages from the employees’ disloyalty.

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