In PennWell Publishing (UK) Limited v Ornstein, Isles and others the High Court has found that a list of contacts created by an employee (made up of contacts compiled during his employment, during previous employment, and personal contacts) which were stored on an employer’s Outlook system, belonged to the employer. However, the Court also decided that, because in this case the employer’s email policy had not been adequately communicated to the employee, a term would be implied into the employee’s contract of employment allowing the employee to remove certain contacts from that list when his employment terminated.
PennWell Publishing (UK) Limited (“PennWell”) is a specialist media company providing publications, conferences, exhibitions, research and information products to strategic global markets relating to the power industry. Mr Isles was a journalist employed by PennWell, whose duties included acting as publisher and conference chairman. In 2005, Mr Isles and a colleague, decided to set up a business together in competition with PennWell, namely the Energy Business Group (“EBG”). A further employee of PennWell decided to join this business in 2006. The anticipated launch date for EBG was 1 September 2006. Before this date, Mr Isles’ two colleagues removed large amounts of confidential information from PennWell, in breach of their contracts of employment.
All three employees resigned in July 2006, and the other two employees left on 18 August 2006 and 1 September 2006. However, Mr Isles agreed to stay for an extra week until 8 September 2006 to chair a conference for PennWell. During this conference, one of the other employees approached and solicited PennWell’s customers. Before leaving PennWell, Mr Isles downloaded a list of approximately 1,650 contacts from his Outlook email account, made up of contacts compiled during his time at PennWell, during previous employment, and personal contacts.
PennWell applied for and obtained an interim injunction against all three former employees and against EBG for the return of various items of property. All claims, except that against Mr Isles, were compromised prior to the full hearing. The central issues in relation to Mr Isles were whether he had breached the terms of his contract in setting up EBG whilst still employed by PennWell, whether he was in breach of his implied duty of good faith or fiduciary obligations in failing to report his colleagues’ behaviour, whether he was entitled to remove the contacts list, and whether Mr Isles’ status as a journalist affected his right to the contacts list.
Breach of express term: There was no post-termination non-compete clause in Mr Isle’s contract of employment but the Court found he was in breach of Clause 4 of his contract which prohibited him from having any other job or being interested in any other “business” during his employment. It was accepted that Mr Isles was entitled whilst still in employment to carry out “preparatory steps” to compete with PennWell after he had left because of the absence of a post-termination non-compete clause. It was found that although he did not have any significant direct involvement in setting up EBG during this period, his colleagues (whose contract did contain a posttermination non-compete undertaking) had taken more than mere “preparatory steps” to compete, and EBG constituted a “business” within the meaning of Clause 4. As Mr Isles had taken a directorship and shareholding in EBG some time prior to leaving PennWell, he therefore had an interest in that business and was consequently in breach of Clause 4.
Breach of implied term of good faith: It was held that Mr Isles was not sufficiently senior enough himself to have a fiduciary duty to disclose the activities of his two colleagues. In addition, it was found that he was not sufficiently aware of their post-termination restrictions or their misuse of confidential information to be in breach of his duty of good faith and fidelity. However, allowing his colleague to attend the conference in September 2006 and to solicit PennWell’s customers did amount to such a breach, as he was in a position of clear conflict of interest and should have either prevented attendance or reported the matter.
Ownership of contacts list: Mr Isles’ contract required him to return “company property” on termination of employment. His contract provided that “company property” comprised “all documents, manuals, hardware and software” provided for the employee’s use by the company. In addition, PennWell had an email policy which provided that “employees may only use the e-mail system for business use…”. The Court was asked to consider whether the contacts list amounted to “company property” which should be returned on termination of employment. Mr Isles argued that the list should belong to him as he should be entitled to build up a list of journalistic contacts over his career and to take this with him when his employment ended.
The Court held that, where an address list is contained on a program such as Outlook that is part of the employer’s email system and backed up by the employer, this will belong to the employer. This applies regardless of whether the system is accessed remotely or otherwise. Therefore the list of contacts was the property of the employer and could not be copied or removed in its entirety. However, the Court found that, as many employees would not appreciate this fact, it is “highly desirable” for employers to have clear e-mail policies to this effect which are actively communicated to employees. Although PennWell had such a policy, the Court found that it had not been adequately communicated to Mr Isles. Consequently, it was reasonable to imply a term into his contract allowing him to take copies of personal information at the end of his employment, including contacts built up prior to joining PennWell. In addition, the Court stated that, where information stored on a work system included confidential personal information, such as details of an employee’s doctor, the employee was entitled not only to copy this but also to delete it from the system.
The Court also accepted that journalists would need to build up contacts for use in their career, and that they were therefore entitled to maintain a list of contacts for these purposes. However, this list would need to be kept separate from any list maintained by the employer, and the employee would need to go through some form of selection process in deciding which contacts should be placed on this separate list, rather than merely printing off the entire list of contacts built up during his employment as Mr Isles had done. In reaching the conclusion that it was possible for journalists to hold a list of contacts for career use, journalists were distinguished from salesmen, as removal of contact details by salesmen would be detrimental to the employer, whereas journalists need to build up contacts for use in obtaining information for articles.
PennWell was successful in obtaining an injunction against the use of the contact list by Mr Isles, but not in relation to individual parts of the list known to Mr Isles by other means.
How will this decision impact on employers?
This is generally a helpful decision for employers, as it clarifies that information stored in Outlook or a similar system will belong to the employer. However, in the absence of a clear e-mail policy which is adequately communicated to the employee, a term will be implied allowing the employee to copy or remove certain items of data.
So what should the employer do? The Court focussed on the fact that employees are unlikely to be aware, without being specifically informed as such, that data stored on work systems will belong to the employer. The mere existence of an e-mail policy setting this out will not in itself be sufficient to bring this adequately to the employee’s attention, and therefore it is vital that employers ensure that the policy is communicated to employees with each employee being given a copy of the policy and that the policy is incorporated into their contracts of employment. This is also important from a data protection perspective. This principle is not limited to e-mail usage but would be likely to apply equally to other sources of information such as company mobile phones.
Finally, one interesting and ironic point in this case is that PennWell had in fact deleted the entire contacts list in question during a routine clearance of Mr Isles’ computer following his departure. It was only because Mr Isles had taken a copy of the contacts list with him that the information had been preserved at all!
Click here to view High Court decision.