Employees owe various duties to their employers, including a general duty of loyalty. This duty requires employees to act primarily for the benefit of their employer in all matters connected with their employment. Failure to do so may constitute a breach of fiduciary duty, or breach of the duty of loyalty.

Examples of Employee Fiduciary Duty in Texas

  • An employee must deal openly with her employer and fully disclose information about matters affecting the company’s business.
  • An employee cannot exploit for her own benefit an asset or opportunity that should belong to the employer. That is, the employee may not divert opportunities from the employer to the employee’s own benefit.
  • If an employee, while employed by his employer, uses his position to gain a business opportunity belonging to the employer, such conduct constitutes an actionable wrong. Indeed, an employer may succeed in a claim for diversion of a business opportunity without demonstrating that it would have availed itself of the business opportunity had the employee not diverted it.
  • While still employed, an employee may not actively compete with his employer without violating the duty of loyalty.

However, an at-will employee may plan to compete with his employer, and may take active steps to do so while still employed. The employee has no general duty to disclose his plans and may secretly join with other employees in the endeavor without violating any duty to the employer. Despite the employee’s general right to plan to compete, the employee cannot (while still employed) solicit his employer’s customers in preparation to complete with the employer.

Further, at least one Texas court has suggested that an employee’s preparation to compete may constitute a breach of the employee’s duty of loyalty if the preparation is “significant”–e.g., where a supervisor or manager acts as a “corporate pied piper” and lures all of his employer’s personnel away, thus destroying the business.

An employee may also violate the duty of loyalty to his employer by accepting a payment or benefit during the course of employment without reporting it to the employer.

An employee is required to give her employer a full accounting of anything of value received while on the job, including tips, gratuities, and gifts. Unreported receipt of a payment or benefit is a potential violation of the employee’s duty of loyalty, even if the employer suffers no economic harm as a result of the payment.

This general duty to report is intended to ensure that the employee’s loyalty to the employer is not diverted.

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