FORT LAUDERDALE BUSINESS LITIGATION: EMPLOYEES OWE THEIR CURRENT EMPLOYERS A FIDUCIARY DUTY OF LOYALTY

Employees owe their current employers a duty of loyalty under Florida law. This duty of loyalty is a specific fiduciary duty that requires employees to act in the best interest of their current employers. One example of such a breach is where an employee who starts a competing business while still working for the employer. Another example is where an employee uses its current employer’s confidential information for personal gain outside the scope of employment and without the employers’ knowledge. In these breach of loyalty scenarios, businesses may have viable causes of actions against the breaching employees and may be entitled to lost profits and other damages. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

“An employee owes a duty to her employer to exercise diligence and good faith in matters relating to the employment.” Brigham v. Brigham, 11 So. 3d 374 (Fla. 3d DCA 2009). Specifically, “an employee may not engage in disloyal acts in anticipation of his future competition, such as using confidential information acquired during the course of his employment or soliciting customers and other employees prior to the end of his employment.” Insurance Field Services, Inc. v. White & White Inspection & Audit Service, Inc., 384 So. 2d 303 (Fla. 5th DCA 1980). Notably, an employee does not need to be a manager or executive with the employer to have a duty of loyalty. Fish v. Adams, 401 So. 2d 843 (Fla. 5th DCA 1981). Indeed, a business has a right to expect that its employees “will not solicit fellow employees on the job to join the employee’s competing business venture.” Terry Roberts Site Work, Inc. v. Unemployment Appeals Com’n, 908 So. 2d 592 (Fla. 5th DCA 2005). However, it is important to note that an employee’s “[a]cts consisting of mere preparation to open a competing business, such as opening a bank account or obtaining office space or telephone service ordinarily do not breach a duty of loyalty” under Florida law. Furmanite Am., Inc. v. T.D. Williamson, Inc., 506 F. Supp. 2d 1134 (M.D. Fla. 2007).

It is a breach of fiduciary duty for a person to misuse confidential information to the detriment of the person who he owes a duty of loyalty. See NHB Advisors, Inc. v. Czyzyk, 95 So. 3d 444 (Fla. 4th DCA 2012). “The elements of a claim for breach of fiduciary duty are: the existence of a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff’s damages.” Gracey v. Eaker, 837 So. 2d 348 (Fla. 2002). In Audiology Distribution, LLC v. Simmons, 2014 WL 7672536 (M.D. Fla. May 27, 2014), the plaintiff’s claim for breach of fiduciary duty was based on allegations that the defendants sold hearing aids and other related services to its patients by misappropriating and wrongfully utilizing confidential patient information. Audiology held the breach of fiduciary duty claim could be based on the employee’s use confidential customer information. Namely, the employee used his employer’s customer information to drive hearing aid sales for his own personal gain while still employed. The employer was entitled to damages as a result.

A prudent employer should consider formal contractual arrangements with employees, including a reasonable non-compete covenant that prohibits post-termination unfair competition. Florida Statute § 542.335 governs the lawful use of restrictive covenants, i.e., non-compete agreements. Florida law permits reasonable post-employment restrictions to prevent competitive use of the employer’s confidential information, customer goodwill and relationships, and related proprietary interests.

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.