New York is known for having many protections for its employees in the workplace, but a long-standing legal doctrine can furnish a remedy to employers with regard to employees who engage in repeated acts of disloyalty during their employment. The “faithless servant doctrine” permits an employer to “claw back” an employee’s compensation when an employee is found to be disloyal to the employer. While the doctrine may seem antiquated, it continues to have vitality. For example, in March 2018, a New York appellate court confirmed an arbitration award that directed, based on the faithless servant doctrine, a former employee to pay Major, Lindsey & Africa, LLC nearly $2 million as disgorgement of her past salary and commissions on claims that she had stolen and divulged confidential information to competitors.
On August 17, 2019, Canal Productions, Inc. (the “Company”), a company headed by Robert De Niro, filed a lawsuit in New York State court which seeks to make use of the faithless servant doctrine to recover millions of dollars from a former employee. Among other allegations, the complaint alleges the employee breached her fiduciary duty and duty of loyalty by enriching herself through improper use of the Company’s credit card, expense reporting and petty cash, and engaged in further disloyal conduct by “binge-watching” Netflix for “astounding” and “astronomical” amounts of hours while she was ostensibly working. Canal Productions claims that, among other shows, the defendant binged-watched 55 episodes of the television show “Friends” over four days. Pursuant to the faithless servant doctrine, the Company seeks the return of wages, bonuses and other compensation paid to the defendant. While this lawsuit is just beginning, it demonstrates that, where appropriate, employers may make use of the doctrine against employees who have engaged in disloyal conduct during their employment.
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