Employees, in exchange for handsome compensation, are always expected to act in their employers’ best interests. Too often, however, employers discover that employees have surreptitiously indulged their own interests to the employer’s detriment by, for example, misappropriating confidential and proprietary information, running a competing business, embezzling, exploiting inside information, and otherwise usurping corporate opportunities. In these situations, employers have traditionally brought common-law or statutory claims, seeking injunctive relief or damages caused by the disloyal employee’s misconduct.
Several states, however, recognize the common-law “faithless servant” doctrine. Under this doctrine, employees who breach their duty of loyalty may be required to disgorge the compensation received during the period of disloyalty. While the New Jersey Supreme Court adopted the faithless servant doctrine roughly 16 years ago in Cameco v. Gedicke, 157 N.J. 504 (1999), lower courts frequently interpreted Cameco to permit disgorgement only where an employer experienced actual damages as a result of the employee’s disloyalty.
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