Court Denies Employer Recovery of Wages Earned by Alleged Disloyal Employee

In Cerciello v. Admiral Ins. Brokerage Corp., plaintiff alleged sexual harassment, hostile work environment, and retaliation.  Defendants filed two counterclaims, respectively seeking (1) sanctions for frivolous litigation conduct and (2) “recovery of wages paid to the plaintiff during her last year of employment on the ground … that the plaintiff failed to perform the tasks of employment, but instead used the time and resources of her employer to pursue other employment opportunities unrelated to the business of the defendants” (read:  give us back our money, you disloyal punk).  The court held that both counterclaims should have been dismissed pursuant to CPLR 3211(a)(7) for failure to state a claim.

The first counterclaim should have been dismissed “[s]ince New York does not recognize an independent cause of action for the imposition of sanctions under either CPLR 8303-a or Rules of the Chief Administrator of the Courts (22 NYCRR) § 130-1.”

The court also held that the second counterclaim should have been dismissed, rejecting each of three theories upon which it may have been based, namely, fraud, breach of fiduciary duty, and breach of implied contract:

  • No fraud:  Defendants failed to allege any misrepresentation, and in any event “a cause of action alleging fraud does not arise merely because a party did not perform contractual duties”.
  • No breach of fiduciary duty:  “Certainly, employees owe a duty of loyalty and good faith to their employer in the performance of their duties[.] … However, the mere failure of an employee to perform assigned tasks does not give rise to a cause of action alleging breach of that duty. Rather, the employee’s misuse of the employer’s resources to compete with the employer is generally required[.] … Here, the defendants acknowledge that the plaintiff did not compete with their business.”
  • No breach of implied contract:  The court reasoned that “[i]n the absence of a special agreement, an employer may not recover back wages or equivalent drawings paid during a period of completed employment”.  Such was the case here.