Disloyal Employee May be Liable to Employer Even Absent Injury

Defendant, employee, worked as a manager for a residential building. During the course of an eviction, the building learned that its employee allowed a tenant to remain in his rent-stabilized despite his potential ineligibility, because the employee felt that the tenant had a legal right to do so. The building sued its employee for fraud and breach of her employment contract, among other things. When the tenant was later allowed by the court to stay in the rent-stabilized apartment, the employee sought the dismissal of the action against her claiming that because her conduct was correct, and the employer would have been compelled to allow the tenant to remain, she caused the employer no injury and could not be held accountable. The court disagreed and held that under the faithless servant doctrine, the employee’s disloyalty was relevant, and not the consequences of her disloyalty. Thus, because the employee committed a wrong, she may be liable to her employer.