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How to handle a breach of fiduciary duty

| May 24, 2021 | Blog, Business Litigation

Whether you are in a business partnership or you are a business owner building a team of faithful employees, fiduciary duty is most likely involved in your daily practices. This term is used to describe a person’s duty of care, loyalty and honesty entered into when entering a business contract, hiring employees, working for a company or working with clients, according to the Legal Information Institute at Cornell Law School.

As a business owner, fiduciary duty means looking out for your employees’ best interests and working with partners and clients in a transparent and honest manner. As an employee, it involves keeping trade secrets and having a work ethic that is loyal toward your employer and the company’s clients.

What is a breach of fiduciary care?

When someone fails to act in the best interests of another party, it is considered a breach of fiduciary duty. This occurs when a trusted relationship exists between two parties and one party compromises that trust. One party may put the other person’s best interests in danger by doing so. The breach may cause you or the other party to suffer a loss, causing you to lose money, future business or current clients. Examples of a breach of fiduciary duty include the following:

  • Divulging an employer’s trade secrets or acting on the side of a competitor
  • Using employer funds improperly or profiting at the expense of an employer
  • Mismanaging company funds or assets unbeknownst to a company partner

Hiding critical information from a partner or making important decisions without including your partner may also constitute a breach of duty.

How can you handle a breach?

If you feel as though a business partner, employee or representative has committed a breach of fiduciary duty, you want to gather evidence showing that the unfair transaction resulted in a loss. If someone claims that you have acted in a negligent manner, you must show that your actions were within the context of the agreement or contract.