Exit, Choice and Employee Loyalty

Contract, Status, and Fiduciary Law, P. Miller & A. Gold, eds., (OUP, 2016)

Fordham Law Legal Studies Research Paper No. 2759401

19 Pages Posted: 8 Apr 2016

See all articles by Aditi Bagchi

Aditi Bagchi

Fordham University School of Law

Date Written: April 5, 2016

Abstract

This essay argues that we should understand the employee duty of loyalty as a contractual duty, not a fiduciary duty that attaches by virtue of employee status. The chapter considers several risks associated with a contract paradigm but concludes that those risks are less acute than they might at first appear. It then examines several possible contractual conceptions of the duty of loyalty, including those in which its obligations are imputed by public policy or implied as elements of party agreement.

Understanding the duty of loyalty as an instance of the general duty to perform in good faith makes the best sense of a historically suspect obligation. This understanding not only redeems the duty of loyalty as a reasonable obligation of employees but also generates guidance on how it can be construed in the most normatively satisfactory way. In particular, understanding the duty of loyalty as an instance of the duty of good faith suggests that its scope should hinge on other terms of an employment contract such as the scope of employer discretion and the terms of employee exit.

Keywords: employee loyalty, duties of loyalty, fiduciary duty, duty to perform in good faith

JEL Classification: K12, L14, M5

Suggested Citation

Bagchi, Aditi, Exit, Choice and Employee Loyalty (April 5, 2016). Contract, Status, and Fiduciary Law, P. Miller & A. Gold, eds., (OUP, 2016); Fordham Law Legal Studies Research Paper No. 2759401. Available at SSRN: https://ssrn.com/abstract=2759401

Aditi Bagchi (Contact Author)

Fordham University School of Law ( email )

140 West 62nd Street
New York, NY 10023
United States

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