Question

It's pretty clear that if you can get a Kardashian sister to advertise your product, you're pretty much guaranteed a sales increase. Imagine that Lerner started developing a fashion line outside of her Urban Decay business hours and used her Urban Decay connections to get introduced to Khloe Kardashian. Rather than asking Khloe to show off that she wears Urban Decay, Lerner asks her to show off that she wears Lerner's new fashion line. When the rest of the board finds out, what possible legal consequences might Lerner face? Is there anything that we learned about in the chapter that could help her avoid negative consequences?

Answer 1

Lerner could be sued by the company for breach of her fiduciary duty of loyalty. All employees are agents of the company and as agents, they have the duty to act in ways that benefit the company (principal). It is possible that Lerner's fashion line conflicts directly with Urban Decay's business. In such cases, it is examined if the duty of loyalty were followed or not:

• Not to compete directly with the employer while still being employed
• Not to solicit company's customers for the advancement of own business
• Not to as other employees to leave and join you
• Not to use working hours for own work

In Lerner's case, she did her personal work outside of business hours which was in line with the fiduciary duty of loyalty. However, we will need to examine if the fashion line was in direct conflict with Urban Decay's business, if not then Lerner can avoid negative consequences.

Further, Khole Kardashian is not a customer who was solicited, rather a celebrity who could advertise for anyone. it is okay for Lerner to use Urban decay connections and advertise her fashion line by paying Khole as long as fashion line did not compete with Urban Decay.