The fine line between fiduciaries and employees

The employment relationship is not a fiduciary relationship. 

While there is the implied duty of fidelity, whereby an employee must have regard to his employer’s interests, it does not equate to the fiduciary duty to act in the interest of his employer. This was succinctly explained in Zaharen bin Hj Zakaria v Redmax Sdn Bhd and other appeals [2016] 5 MLJ 91: 

“A fiduciary duty requires an employee to act in the interests of his employer, whereas the duty of fidelity requires an employee to have regard to his employer’s interests.”

Instead, the employee-employer relationship is a contractual one and the scope of the employee’s duties and responsibilities are determined by the terms of his contract of employment. However, the fact that an employee-employer relationship is a contractual one does not preclude the existence of a fiduciary relationship. In fact, the existence of a basic contractual relationship is the foundation for the establishment of a fiduciary relationship. 

From the seminal English case of Bristol and West Building Society v. Mothew [1988] Ch. 1, a fiduciary relationship can be defined as follows:

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.” 

The Court of Appeal in Soh Chee Gee v Syn Tai Hung Trading Sdn Bhd [2019] 2 MLJ 379 explained that only employees who undertake specific duties and responsibilities shall be considered fiduciaries. As a general rule, these specific duties and responsibilities are those usually associated with senior employees and those who are in a special position of trust in relation to the management of the employer’s organisation and assets.

While directors and senior executives are obvious examples of instances where employees would be considered fiduciaries, the introduction of a fiduciary element into the employee-employer relationship is not dependent on the seniority of the employee concerned. 

As such, a fiduciary may very well be an employee, but an employee is not necessarily a fiduciary. The fiduciary element is more commonly introduced when an employee has attained a certain degree of trust from their employer and undertakes specific duties and responsibilities in relation to the management and control of the employer’s organisation and assets.