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DISLOYAL OR FAITHLESS PERFORMANCE OF EMPLOYMENT DUTIES (FAITHLESS SERVANT DOCTRINE) ENTITLED EMPLOYER TO THE RETURN OF COMPENSATION PAID TO THE EMPLOYEE DURING THE PERIOD OF THE THEFT.

The Third Department, in a full-fledged opinion by Justice Peters, determined plaintiff-employer was entitled to summary judgment on both liability and damages in this “disloyal or faithless performance of employment duties” case. Defendant-employee stole $50,000 from his employer. The employer sought recovery of the compensation paid to the employee over the six-year period of the theft and relief from the obligation to provide health insurance. Supreme Court granted summary judgment on liability but ruled the employee's otherwise unblemished career raised a question of fact about damages. The Third Department held Supreme Court's damages ruling was error:

New York law with respect to the disloyal or faithless performance of employment duties has developed for well over a century. Firmly rooted in this state's jurisprudence is the principle that “an employee is to be loyal to his [or her] employer and is 'prohibited from acting in any manner inconsistent with his [or her] agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his [or her] duties'” … . Under what is commonly referred to as the faithless servant doctrine, “[o]ne who owes a duty of fidelity to a principal and who is faithless in the performance of his [or her] services is generally disentitled to recover his [or her] compensation, whether commissions or salary” … . Thus, where an employee “engage[s] in repeated acts of disloyalty, complete and permanent forfeiture of compensation, deferred or otherwise, is warranted” … . * * *

The Court of Appeals has made clear that forfeiture of compensation is required even when some or all of “the services were beneficial to the principal or [when] the principal suffered no provable damage as a result of the breach of fidelity by the agent” … . City of Binghamton v Whalen, 2016 NY Slip Op 04289, 3rd Dept 6-2-16

EMPLOYMENT LAW (DISLOYAL OR FAITHLESS PERFORMANCE OF EMPLOYMENT DUTIES ENTITLED EMPLOYER TO THE RETURN OF COMPENSATION PAID TO THE EMPLOYEE DURING THE PERIOD OF THE THEFT)/DISLOYAL OR FAITHLESS PERFORMANCE (EMPLOYMENT LAW, DISLOYAL OR FAITHLESS PERFORMANCE OF EMPLOYMENT DUTIES ENTITLED EMPLOYER TO THE RETURN OF COMPENSATION PAID TO THE EMPLOYEE DURING THE PERIOD OF THE THEFT)/FAITHLESS SERVANT DOCTRINE (DISLOYAL OR FAITHLESS PERFORMANCE OF EMPLOYMENT DUTIES ENTITLED EMPLOYER TO THE RETURN OF COMPENSATION PAID TO THE EMPLOYEE DURING THE PERIOD OF THE THEFT)

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