Does an employee have a responsibility to reveal their own misconduct to their employer?
The recent Court of Appeal decision in Item Software (UK) Limited v Fassihi and others  EWCA Civ 1244 has shed some light on this difficult issue.
Historically, case law has been unclear, leaving unanswered the tricky question of balancing the individual's right not to incriminate themselves on the one hand, with the employer's interests on the other. Item Software has now clarified certain aspects of the duty, although a definitive answer is still some way off.
Item Software was a supplier of reliability software. At the relevant time, a substantial part of its business involved distributing software products produced by another company, Isograph. Fassihi, the sales and marketing director of Item Software, secretly approached Isograph with a view to diverting Isograph's contract with Item Software to his own company, and he also encouraged Item Software to negotiate with Isograph for improved terms. These negotiations failed and Isograph terminated its contract with Item Software.
When Item Software discovered Fassihi's misconduct, he was summarily dismissed. Item Software brought proceedings against Fassihi and alleged that he had been in breach of duty in failing to disclose his own wrongdoing.
The Court of Appeal held that Fassihi's position as a director and his fiduciary relationship with his employer meant he had a duty to act in what he, in good faith, considered to be the best interests of the company. This duty included an obligation to disclose his misconduct to his employer.
In her leading judgment, the appeal court judge made the following comment: "One route by which it might be concluded that Fassihi had a duty to disclose his own wrongdoing is that no logical distinction can be drawn between a rule that an employee must disclose his own wrongdoing and a rule that he should disclose the wrongdoing of fellow employees even if that involves disclosing his own wrongdoing too." And in fact, more than 20 years ago the Court of Appeal in Sybron Corporation v Rochem Limited  2 All ER 707 established that in some circumstances, a senior employee may be under a duty to disclose the misconduct of other employees to their employer, even if this means revealing their own misconduct in the process.
In Sybron, Roques, a senior manager (but not a director) employed by Sybron, collude