Many California residents might not be familiar with the term “fiduciary duty,” but it may or may not apply to their everyday life. In short, fiduciary duty refers to the relationship between a fiduciary – such as an employer or lawyer – and the principal slash beneficiaries (an employee or client).
In general, someone acting as a fiduciary is required to take actions that are in the best interests of another person or entity. A lawyer is expected to act in the best interests of their client and an employer is required to meet certain criteria to keep their employee safe.
Other examples of fiduciary duty
There are a few different examples of someone acting as a fiduciary. Relationships where fiduciary duty will be in effect include:
- Attorney / client relationships
- Agent / Principal relationships, or fund managers/principal investors
- Guardian / Ward
- Controlling Stockholder / Company
In all of these relationships, the person acting as fiduciary – the attorney, agent, guardian, etc. – is expected to make decisions that are based in the best interest of the other party. That’s the baseline of fiduciary duty.
Types of fiduciary duty
There are several different responsibilities that fall under fiduciary duty. Generally, fiduciaries have the responsibility to inform themselves of all possible options before making a decision on behalf of their party, referred to as the duty of care. There are other things that fall under a fiduciary duty, including:
- Duty to disclose relevant information
- Duty of confidentiality
- Duty of good faith
- Duty of loyalty
All of these can look a little different depending on the circumstances. People found to be breaking fiduciary duty might find that it hurts their reputation, or they might even be served with a lawsuit.
It can be difficult to know what the right move is as a fiduciary. It’s important to get guidance when you need it in order to best fulfill these duties.