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What to do when an employee breaches their fiduciary duty

On Behalf of | Mar 3, 2023 | Executive Employment

Your employees have a fiduciary duty towards you. They should act in your best interest exhibiting good faith and loyalty when it comes to matters involving employment. An employee who acts in a way that doesn’t benefit the company may have breached their fiduciary duty.

Here is what you should do when this happens:

1. Get adequate information

When an employee breaches their fiduciary duty, the first thing that may come to mind is the termination of employment. However, before doing this, it will be best to get experienced legal guidance. They will assess the action to determine if it constitutes a breach of fiduciary duty. Further, they will go through the termination clause of the employment contract to ensure you don’t breach it.

A breach of fiduciary duty is a serious violation that can bring significant losses to a company. While acting sooner to manage the effects is necessary, you should not make moves that may contribute to a lawsuit, which can translate to more losses. 

2. Terminate the employment

Once evidence confirms the employee breached their fiduciary duty, you may fire them based on the termination clause. Make it clear to the employee that the termination is because of the breach, which is intolerable in your company. 

3. Can you prevent a breach of employee fiduciary duty?

Strict company policies can help prevent employees from breaching their fiduciary duty. You should encourage employees to ask questions before signing contracts.  Besides, termination of employment being the consequence of this violation can also prevent it. However, before the termination, investigate to confirm a breach has occurred, and the dismissal should follow laid procedures. 

A breach of employee fiduciary duty can significantly cost your business. It will be best to get legal guidance to avoid costly mistakes.