What does it mean to have a fiduciary obligation?

What does it mean to have a fiduciary obligation?

Fiduciary means requiring trust between two parties. The two parties involved in this relationship are the fiduciary and the beneficiary. The fiduciary, usually the employee, is the party who holds information that can adversely impact the other party. The beneficiary, commonly the employer, is the party who relies on the fiduciary to maintain their commitment to privacy.

Having a fiduciary obligation can, at times, be inferred when an employer signs an Employment Contract. This inference can develop when the employer relies heavily on the trust of the employee. It is important to understand that not every employee automatically enters a fiduciary obligation upon signing an Employment Contract.

In the court of law, there is a method to test whether the employer and employee have entered into a fiduciary relationship. The fiduciary must be able to employ a level of decision-making power, or simultaneously possess this power and be capable of impacting the beneficiary’s legal or functional practices. In terms of the beneficiary, they must be undefended by the power the fiduciary holds.

In more simple terms, a fiduciary obligation commonly derives from an employee holding a level of power that can have a negative impact on the company or employer. For example, a fiduciary obligation can be important for an employer when an employee works closely with important clients. If the employee ever left the company, the employer would trust that none of those clients would be poached by their former employee.

When an employer and employee enter into a fiduciary relationship, this obligation does not just end when the employment contract expires. The fiduciary relationship continues even after the employee begins working for a new employer. There is always an implied loyalty between the original parties that the trust and confidentiality will continue.

If you have questions about your employment relationship or need legal counsel to revise your Employment Contract, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.