When Does Breach of Fiduciary Duty Require Litigation?
Injuries sustained in a serious breach of fiduciary duty can result in lasting or even permanent damage to a firm. In addition to direct financial losses stemming from theft or misappropriation of funds, other types of breaches of duty can involve benefitting competitors or robbing a company of its competitive advantages.
Breach of Fiduciary Duty Between Employees and Employers
Many breaches of fiduciary duty occur between employees and their employers. Employees have an innate fiduciary duty as an agent of the employing firm. The specific obligations of this relationship are sometimes expounded on in an employment agreement, but in practically every scenario, the act of being hired constitutes an establishment of fiduciary duty in the eyes of the law. Independent contractors and vendors that are formally hired by the firm are also considered agents and thus have legal fiduciary duties.
An employee can breach their fiduciary duties by:
- Misappropriating or failing to adequately hold company funds
- Stealing and disseminating trade secrets, intellectual property, and other proprietary information
- Failing to adequately complete job responsibilities
- Acting to benefit a competitor
- Abusing company time and resources to individually profit
Do Employers Have a Fiduciary Duty to Employees?
Employers do not typically have a fiduciary duty to employees, except in the case where the employee is also a shareholder in a closely held corporation or a partner in a partnership or if a claim is appropriate under the ERISA (Employee Retirement Income Security Act) statutes.
Breach of Fiduciary Duty Between Business Partners
Business partners in a firm have a fiduciary duty to each other and their company. Breaches of fiduciary duty can still occur between them if one or more partners behave in such a way that violates this obligation and harms the business. Some companies will run into trouble when a specific partner continuously fails to act in its best interest or actively exploits its resources.
A partner can breach their fiduciary duty by:
- Abusing, exploiting, siphoning, or mishandling company funds and resources
- Neglecting to disclose conflicts of interests or other pertinent information to other partners
- Engaging in self-dealing
- Damaging the business’s reputation through incompetence, inappropriate, or unlawful behavior
When a firm becomes incorporated, a board of directors is elected by shareholders to shepherd the company. These board members have a fiduciary duty to their shareholders and must act in the business’s best interest. When board members fail to live up to their responsibilities, shareholders can potentially pursue legal action to oust bad-faith actors.
A corporate director can breach their fiduciary duty by:
- Voting to unreasonably enrich the board
- Pursuing unlawful acts to purge minority, dissenting shareholders
- Restricting shareholders’ access to records and financial information
- Restricting shareholders’ voting rights
- Refusing to pay dividends when they are warranted
Contact Kenny Law Firm Today at (312) 647-2483
Each breach of fiduciary duty case is different and will require a unique, carefully considered approach. Whether you have been accused of breaching your duties or need to pursue legal action yourself, our Chicago breach of fiduciary duty attorney at the Kenny Law Firm can review the facts of your case, advise you on your rights, and recommend what legal steps to take.
Schedule a free initial consultation to explore your options with our team. Call (312) 647-2483 or contact us online to get started.