Just wanted to know what legalities are involved in using IM sniffers at work. Is it perfectly ok to use them to "listen" into someone else's IM conversation and/or sniff their passwords and then use them to read their email ?
That depends on what country you live on and what laws applies.
I assume that almost everywhere it is ilegal to listen to conversations, let alone use their passwords for reading their email.
So unless you are a sysadmin with a reason to capture traffic -and let everyone involved that you are doing it-, just don't.