Articles

March, 2017

March, 2017

 DOES AN EMPLOYEE HAVE A DUTY OF LOYALTY TO HER EMPLOYER?

            In a case to be officially released March 7, 2017, the Connecticut Supreme Court affirmed a trial court’s decision that an employee had breached his duty of loyalty to his employer by working simultaneously for a competitor and accepting kickbacks from a subcontractor in connection with his work for his employer.  Wall Systems, Inc. v. William Pompa, et al., SC 19734, March 7, 2017.

The company, Wall Systems, Inc., was a building contractor.  The employee, Pompa, was head of its exterior insulation finish systems division.  Because he was dissatisfied with his compensation and without the company’s knowledge or approval, Pompa began to work as an independent contractor doing estimating work for jobs for one of the subcontractors who worked regularly for Wall Systems and which Pompa supervised. When the company discovered this employment, it terminated his employment with the company and sued him, alleging a breach of the duty of loyalty, conversion, statutory theft and fraud.

In its decision, the Supreme Court recognized the viability of a claim by an employer against its employee for breach of the duty of loyalty, which is grounded in agency principles.  Town & Country House & Homes Service, Inc. v. Evans, 150 Conn. 314, 317-18 (1963).  It includes a duty not to compete and not to disclose confidential information, such as trade secrets.  It includes a duty to refrain from acquiring “material benefits” from third parties in connection with transactions taken on the employer’s behalf.

So, does this duty of loyalty apply to all employees, regardless of their position or status within the employer’s organization?

While this case does not specifically inform on that point, the Restatement of the Law Third, Employment Law, April 18, 2014, provides information that it applies only to those employees who have a fiduciary duty to protect their employer’s interests:  “As a general matter, the duty of loyalty … has little practical application to rank-and-file employees who are subject to continuous direct oversight or supervision, do not exercise substantial discretion in carrying out their day-to-day responsibilities, or do not have special access to their employer’s property or trade secrets.”

Pompa was a high-level employee within the company.  The Court found that the trial court acted within its discretion in awarding damages to the company in the amount of $43,200.

SECOND CIRCUIT RULES THAT EMPLOYER HAD AN OBLIGATION TO INQUIRE WHY EMPLOYEE WANTED FMLA FOR GRANDFATHER NOT COVERED UNDER THE LAW.

A recent Second Circuit Court of Appeals case sheds some new light upon the employer’s obligations when an employee requests leave under the Family and Medical Leave Act, (“FMLA”).  Frantz Coutard v. Municipal Credit Union, 848 F.3d 102 (Feb. 9, 2017).

Coutard’s employer, the credit union, denied him FMLA leave when he requested leave for his seriously ill grandfather.  The credit union informed him that his grandfather was not an eligible family member for him to care for under the FMLA.  When Coutard took the leave and was absent from his job for more than two consecutive days, the credit union terminated him.

The federal district court dismissed his complaint under summary judgment, finding that the FMLA did not apply to grandparents.

However, the Second Circuit reversed.  Key to its ruling was the evidence that Coutard’s grandfather had raised him as a child, i.e., in loco parentis.  “We conclude that the district court erred in ruling that Coutard was required, at the time of his request, to provide [the credit union] with all the information it needed to determine with certainty that his requested leave was within FMLA.”

The Second Circuit reasoned that under the FMLA, an employee seeking leave need not submit a medical certification unless and until one is specifically requested by her employer.  Similarly, an employee seeking leave is not required to provide her employer with all the information it needs to determine with certainty that the leave is allowable under the FMLA.  It is the employer’s obligation to determine under what circumstances the leave qualifies under the FMLA.  Here, the credit union failed to inquire further to establish that Courtard’s grandfather, in raising him as a child, acted as his father, an eligible FMLA family member.