Thursday, June 09, 2016

If an employee engaged in repeated acts constituting disloyalty to the employer, forfeiture of compensation and benefits is warranted under the Faithless Servant Doctrine


If an employee engaged in repeated acts constituting disloyalty to the employer, forfeiture of compensation and benefits is warranted under the Faithless Servant Doctrine
City of Binghamton v Whalen, 2016 NY Slip Op 04289, Appellate Division, Third Department

John C. Whalen had been employed by the City of Binghamton[City] as its Director of Parks and Recreation and, in that capacity, was entrusted with the collection of various fees and funds on behalf of the City. In April 2014, Whalen pleaded guilty to grand larceny in the third degree, admitting that he stole more than $50,000 from the City between January 2007 and November 2012.

The City subsequently sued Whalen seeking [1] to recover all compensation it had paid to him during the period of the theft and [2] a judicial declaration that it is under no obligation to furnish him with health insurance earned through his employment. The City moved for summary judgment in its favor.

Supreme Court granted the City’s summary judgment on the issue of liability. However Supreme Court concluded that in view of Whalen’s “otherwise ‘unblemished’ 35 years of service to [the City]" and notwithstanding his over a half a "decade of thievery," there were issues of fact raised as to whether forfeiture of compensation was warranted under the faithless servant doctrine. The City appealed.

The Appellate Division said the Supreme Court’s ruling that there were issues of fact to be considered with respect to the faithless servant doctrine was error and ruled that the City was entitled to summary judgment on the issue of damages and a declaration that it is relieved of its obligation to provide Whalen with health insurance benefits.

The court explained that New York law with respect to the disloyal or faithless performance of employment duties has developed for well over a century and, citing Western Elec. Co. v Brenner, 41 NY2d 291, said that "an employee is to be loyal to his [or her] employer and is 'prohibited from acting in any manner inconsistent with his [or her] agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his [or her] duties.'" 

In the words of the Appellate Division, “[u]nder what is commonly referred to as the faithless servant doctrine, ‘[o]ne who owes a duty of fidelity to a principal and who is faithless in the performance of his [or her] services is generally disentitled to recover his [or her] compensation, whether commissions or salary.’ Thus, where an employee ‘engage[s] in repeated acts of disloyalty, complete and permanent forfeiture of compensation, deferred or otherwise, is warranted.’"*

Clearly there was no dispute that Whalen’s admission to stealing more than $50,000 from the City over the course of a nearly six-year period constitutes conclusive proof of such facts and established the City's entitlement to judgment as a matter of law on the issue of Whalen's liability. Further, said the Appellate Division, “[t]he Court of Appeals has made clear that forfeiture of compensation is required even when some or all of ‘the services were beneficial to the principal or [when] the principal suffered no provable damage as a result of the breach of fidelity by the agent.’"

Thus, said the Appellate Division, what Supreme Court characterized as Whalen's “exemplary performance of his duties when he was not stealing from [the City] does not insulate him from the application of the faithless servant doctrine” with respect to his  persistent pattern of disloyalty over the six-year period during which he stole from the City.

As to the damages claimed by the City, it submitted documentary evidence establishing that it paid Whalen $316,535.54 in compensation between January 2007 and November 2012, and Whalen failed to submit any competent proof to dispute that figure. Accordingly, the Appellate Division awarded the City damages in the amount of $316,535.54 and declared that the City was relieved of its obligation to provide Whalen health insurance benefits earned through his employment.

* See William Floyd Union Free School Dist. v Wright, 61 AD3d 856.

The decision is posted on the Internet at:

Handbooks focusing on State and Municipal Public Personnel Law continue to be available for purchase via the links provided below:

The Discipline Book at http://thedisciplinebook.blogspot.com/

A Reasonable Penalty Under The Circumstances at http://nypplarchives.blogspot.com

The Disability Benefits E-book: at http://section207.blogspot.com/

Layoff, Preferred Lists at http://nylayoff.blogspot.com/

Caution:

Subsequent court and administrative rulings, or changes to laws, rules and regulations may have modified or clarified or vacated or reversed the decisions summarized here. Accordingly, these summaries should be Shepardized® or otherwise checked to make certain that the most recent information is being considered by the reader.

THE MATERIAL ON THIS WEBSITE IS FOR INFORMATION ONLY. CHANGES IN LAWS, RULES, REGULATIONS AND NEW COURT AND ADMINISTRATIVE DECISIONS MAY AFFECT THE ACCURACY OF THE INFORMATION PROVIDED IN THIS LAWBLOG. THE MATERIAL PRESENTED IS NOT LEGAL ADVICE AND THE USE OF ANY MATERIAL POSTED ON THIS WEBSITE DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP.

Consistent with the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations, the material in this blog is presented with the understanding that the publisher is not providing legal advice to the reader and in the event legal or other expert assistance is needed, the reader should seek such advice from a competent professional.

Items published in NYPPL may not be used for commercial purposes without prior written permission to copy and distribute such material. Send your request via e-mail to publications@nycap.rr.com

Copyright© 1987 - 2017 by the Public Employment Law Press.



___________________



N.B. From time to time a political ad or endorsement may appear in the sidebar of this Blog. NYPPL does not have any control over such posting.

_____________________

.