Legal Question in Employment Law in California

First off, an employee does NOT have a fiduciary duty to an employer. The "duty of loyalty" is not a fiduciary duty. Furthermore, although the law is pretty vague, there may not be any right of action for breach of the duty of loyalty. It is more often a defense to claims asserted by an employee, e.g., for wrongful termination. What you have described, however, is actionable as a violation of the proprietary information and trade secrets rights of the employer.

As for the monitoring, under federal law the monitoring for the reason stated would be entirely legal. In California it probably, but not absolutely, would be illegal under more restrictive state law. That does not mean, however, that the employee gets a "Get Out of Jail Free Card." The employer might be subject to civil and even misdemeanor criminal charges for the illegal monitoring, and any recordings would not be admissible in court, but if there is admissible evidence other than the phone monitoring of what the employee was doing, the employer would still have a perfectly valid case. Look at it this way - if you clearly run a red light, slam into my new Mercedes and total it, and I jump out of the car and in a fit of rage punch you in the face, you don't get out of liability for totaling my car because I punched you.