New Jersey Supreme Court Establishes Test for Compensation Disgorgement When Employee Breaches Duty of Loyalty

The New Jersey Supreme Court has held that a court may order the disgorgement of an employee’s compensation when the employee has breached his or her duty of loyalty to the employer—even if the employer has not sustained economic loss as a consequence of that breach.

In Kaye v. Rosefielde, 223 N.J. 218 (2015), the court held that a trial court should consider the following factors in determining the extent of the repayment: (1) the employee’s degree of responsibility and level of compensation, (2) the number of acts of disloyalty, (3) the extent to which those acts placed the employer’s business in jeopardy, and (4) the degree of planning to undermine the employer undertaken by the employee. Actual economic loss by the employer is not a determinative factor in the analysis.