The Employee's Contractual Duty of Fidelity

Abstract

This article aims to demonstrate that the current position which seems to prevail in the common law systems of the Commonwealth, that employees are not necessarily fiduciaries, is supported by analysis of the historical and recent decisions. The employee’s well-established implied contractual duty of fidelity and good faith, while sharing the language and some of the hallmarks of fiduciary duty, is separate from it, although the two will often overlap. It is not necessary or sound to posit the existence of this implied duty in equitable terms. The implied contractual duty of fidelity was recognised from at least the late eighteenth century, and was developed separately from equitable principles. While it was formulated by some later decisions in ways that allowed its confusion with fiduciary duty, the common law and equitable duties have remained distinct. Explanations of the employee’s duty as deriving exclusively from equity ignore the important doctrinal and policy reasons for the contractual foundations of the employment relationship in law. While many, if not most, employees nowadays undoubtedly owe fiduciary obligations to their employer, this is not because their contractual duty of fidelity is an inherently fiduciary one.

Keywords: employment contract, employee duties, fidelity, good faith, fiduciary duties