Employment Update: Fiduciary duties/company property



What is the status of a contacts list created by an employee in Outlook on the employer’s server? An employee’s fiduciary duty to his employer may make it company property.

In PennWell Publishing (UK) Ltd v Ornstein and Isles the High Court considered the case of a senior employee who, with two colleagues, had decided to set up their own business, providing very similar services to those provided by their employer. They formed a company, of which he was a director and shareholder.

His colleagues then resigned but he agreed to stay on in employment for two months until after a business conference, which he was chairing and which he had been instrumental in planning. One of his colleagues attended the conference and solicited business for the new company from the employer’s customers. The employer then issued legal proceedings against all three employees and in the course of those proceedings the employee disclosed a contacts list that he had created on the employer’s computer system during his employment.

There were many other issues between the parties which had been compromised but the High Court had to decide:

  1. Whether he was in breach of an express term of his employment contract that he should not during his contract and without the company’s written consent have any job or be interested in any other business – the High Court decided that he was. His involvement as a director and shareholder of the new company and his limited involvement in the creation of its Business Plan amounted to the carrying on of a business while still employed.

  2. Whether he was in breach of an employee’s implied duty of fidelity for failing to report the misdeeds of his colleague at the conference that he was chairing – again the High Court decided that he was. There is no general duty on an employee to report the misdeeds of others. It depends on his contract and his terms of employment. In this case, the Court accepted that the employee did not know that one of his colleagues had removed and misused confidential information from the employer’s premises. However, the position was different with regard to his colleague’s attendance at the business conference. As conference chair, the employee had a duty either to prevent his colleague from attending or to report the matter to his superiors. He was in a clear position of conflict of interest.

  3. Whether the company owned a database of contact details that he had taken with him when he left – this was the most difficult issue that the Court had to decide. The information was not company-confidential. The information was on the other hand not simply a personal list of journalistic contacts belonging to the employee. It was an email list maintained by the employee for the purposes of his role within the business. The Court was satisfied that such a list belongs to the employer.

Points to note:

  • There were no restrictive covenants in the employee’s contract to prevent post-termination competition. This was why the employer had to bring the claim in the way that it did – relying on acts committed by him before he had left his employment. The Courts continue to show themselves more willing to enforce restrictive covenants to protect genuine business interests (see the Beckett Investment Managers case here). We shall be happy to advise on the wording of covenants that might be commercially very useful.

  • The employer had an e-mail policy but it had not been adequately communicated to the employee. The Judge commented that he thought it ‘highly desirable’ that employers should devise and publish an email policy. In the absence of any laid-down guidance from the employer, it would be reasonable to imply that the employee might take copies of their own personal information with them. Employees might otherwise not appreciate that, when using company mobile phones and computers to record their own personal contacts, they were keeping them in a form where the list might belong to their employer. We can advise on the wording of an employee email policy that is appropriate for your business. (Note that, in PennWell, however, the list belonged to the employer not only because it was created on the employer’s computer system but because the employee was seeking to take a list that included business contacts of the company that would be useful for the purposes of his new business)