Meltzer, Lippe, Goldstein & Breitstone, LLP is proud to have secured a significant victory in the United States District Court for the Eastern District of New York. Culminating a legal battle of approximately 3.5 years, Mark A. Radi and Daniel F. Carrascal from Meltzer Lippe’s Labor & Employment practice group obtained a decision dismissing a former employee’s claims for unpaid wages and overtime due to the employee’s violation of New York’s “faithless servant” doctrine. For more than 100 years, the “faithless servant” doctrine has held employees accountable for acting disloyally or in bad faith towards their employers. An employee who violates the faithless servant doctrine may be required to forfeit his or her compensation during the period of disloyalty and disgorge any secret profits or kickbacks he or she received as a result of the disloyalty.
In October 2020, defendants discovered plaintiff engaged in several fraudulent schemes to embezzle defendants’ money and subsequently terminated her employment. In January 2021, plaintiff filed a lawsuit in the Eastern District of New York alleging unpaid wages and overtime. Defendants subsequently filed counterclaims against plaintiff for violations of New York’s faithless servant doctrine, fraud and breach of fiduciary duty in connection with plaintiff’s theft. In or about April 2024, our team filed a motion for summary judgment to dismiss the allegations in the complaint and seek damages for the money plaintiff misappropriated during her employment with defendants.
On July 29, 2024, the Court granted defendants’ motion and awarded liability and damages to defendants in the amount of $1.14 million dollars. This decision reaffirms the continued strength and validity of the “faithless servant” doctrine, underscoring its critical role in maintaining the integrity of the employer-employee relationship. By ordering the forfeiture of compensation and secret profits from an employee who breached her duty of loyalty and good faith to her employer, the ruling emphasizes that disloyalty and misconduct will not be tolerated.