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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
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Lord Osborne
Lord Philip
Lord MacLean
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[2006] CSIH 5
XA25/05
OPINION OF THE COURT
delivered by LORD PHILIP
in
APPEAL
against
an Order and Judgment of
the Employment Appeal Tribunal dated 13
December 2004 and issued on 31 January 2005
in the cause
DIOSYNTH LIMITED
Appellants;
against
MORRIS THOMSON
Respondent:
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Act: Truscott, Q.C.; Simpson & Marwick, WS
Alt: Napier, Q.C.; Allan McDougall & Co., SSC
1 February 2006
[1] This
is an appeal by Diosynth Limited, the appellants, from a decision of the
Employment Appeal Tribunal issued on 31 January 2005.
The respondent is Morris Thomson who was employed by the appellants from
January 1996 until he was dismissed on 21 December 2001.
He subsequently complained that his dismissal was unfair and applied to
the Employment Tribunal for a determination to that effect. After a lengthy hearing, in which the
respondent's case was heard along with those of two other employees who were
dismissed on the same day, the Employment Tribunal, by a majority decision,
dismissed his complaint. He then
appealed to the Employment Appeal Tribunal who sustained his appeal and granted
the appellants leave to appeal to this court.
[2] The
appellants are part of the Pharmaceutical Division of the Akzo Nobel group of
companies which is based in the Netherlands and
employs about 66,000 people worldwide.
At their factory at Buckhaven in Fife they
employ about 170 people producing chemicals for use by major companies in the
pharmaceutical industry. At the factory
around 70 raw chemicals, in liquid, solvent or powder form, are processed to
produce chemical compounds which in turn are made into drugs by the appellants'
customers. The processes are in fact
chemical reactions carried out on an industrial scale.
[3] The
production of any chemical product is highly regulated and controlled. Standards are imposed by various national and
international agencies which must be complied with by the appellants. They also follow a worldwide protocol aimed
at ensuring high standards in the manufacture of drugs and medical products
known as Good Manufacturing Practice (GMP).
The appellants' policies and practices, including those relating to
health and safety, are audited, and their production processes closely
monitored by their customers in order to ensure that they, the customers,
receive chemicals of the highest quality.
Since the processes take the form of chemical reactions there is a
constant risk of accidents, in the form of explosions or leakage of chemicals,
which could affect the health and safety of employees. The appellants have established a system of
safety, health and environmental rules of procedure, known as SHERPs rules,
which all employees are required to follow.
[4] In
the light of all these factors the appellants have a highly developed training
programme for their employees aimed at developing knowledge and skills with a
view to ensuring that each employee understands his role in the process, its
relationship to the roles of others, and its impact on quality. The programme, in which the respondent's
customers maintain a keen interest, includes training on health and safety
awareness, including the SHERPs rules. All employees also complete three GMP training
modules which emphasise the importance of completing production records fully
and accurately.
[5] The
training programme undergone by the respondent who was employed as an operator,
began with induction which included instruction on a process known as "inerting"
and its safety implications. This
process is explained in greater detail below.
After induction, employees were trained in every step of the processes
in which they were to be involved. There
was no dispute that the respondent was trained in, and understood, the
importance of the process which he was subsequently accused of failing to
follow.
[6] A
document known as a Standard Batch Process Record Sheet (SBPRS) was prepared
for each chemical process and included detailed information about each step of
the process and the equipment necessary to perform it. Throughout the training programme it was made
clear to all operators that there required to be 100% compliance with the
instructions on the SBPRS. Some of the
steps involved the operator who carried them out in signing the SBPRS to
confirm that the step had been performed.
In some instances specific information had to be inserted in connection
with the particular step. Sheets were
not to be completed in advance nor were they, generally, to be completed
retrospectively. Only where there was
certainty that the step in question had been carried out had a supervisor or
production manager the authority to agree to an operator signing the form retrospectively. Once a production process was complete the
SBPRS was scrutinised by a number of individuals at management level who checked
that the sheet was properly completed and that the measurements recorded (for
example, the temperature of the product at different times or the pressure
level achieved at certain stages) were within the limits allowable for the
production of a chemical of the required quality.
[7] The
appellants' disciplinary policy document provided that "serious breach of
safety rules, potentially involving loss of life or limb" and "flagrant failure
to follow company documentary procedures and regulations" would be treated as
acts of gross misconduct.
[8] Many
of the processes carried out at the factory involved putting chemicals into containers
known as vessels or dryers. This process
was known as charging. Some of the
processes involved charging dryers with chemicals through hatches. The process of charging vessels or dryers
frequently involved the step known as inerting.
Inerting was effected by the operator pumping air out of the container,
thus creating a vacuum inside the vessel or dryer and replacing it with
nitrogen, an inert gas, in order to prevent accidental combustion. The gas pressure in the vessel or dryer was
reduced below atmospheric pressure.
Operators were trained and instructed by SBPRS to evacuate the vessels
or dryers to minus 0.7 bar before introducing nitrogen. At minus 0.7 bar the amount of oxygen left in
the container was less than that required to support combustion. The process of inerting also provided a check
that all the valves on the container were closed so that the risk of chemical
spillage from the container was minimised.
It was not disputed by the respondent that failure to inert was a breach
of a safety rule which could lead to explosion and result in loss of life or
injury. The need to inert was strongly
emphasised by the appellants in their training programme and the respondent
accepted that he was well aware of the requirement to inert and that the
process was related to safety.
[9] Each
time an employee carried out the inerting process he was required to enter in
the SBPRS the start and finish times of the procedure and the level of vacuum
achieved, and to sign the entry. This
level of detail was required in order to maximise compliance on the view that a
requirement to record accurate measurements was more likely to ensure that the
operator performed the step properly.
The system of ensuring that all steps in the production of a particular
chemical were properly performed and accurately recorded operated largely on
the basis of trust in respect that the appellants trained their staff
thoroughly and impressed upon them the importance of carrying out their part in
the process to the required standard.
[10] In November 1998 an incident occurred in the factory which led
to a chemical spillage. The spillage was
caused by the failure of an employee to inert a vessel prior to loading
chemicals into it. The process of
inerting would have revealed that one of the valves on the vessel was open and
the incident would not have occurred.
The employee tried to cover up the spillage rather than report it to his
supervisor and falsified the process documentation. As a result he was dismissed. During the course of the investigation of the
incident other failures were discovered and the appellants' managing director
and site operations manager held joint briefings with all employees, including
the respondent, in December 1998. At
each briefing it was emphasised that the employee in question had failed to
follow the steps on the SBPRS, including those relating to inerting, that he
had thus endangered himself and others, and that he had also falsified entries
on the SBPRS. It was made clear that all
steps in the SBPRS and in the GMP protocols had to be followed, that
authorisation was required before a step could be missed out, and that no false
entries or entries made in anticipation of the relevant step being taken would
be tolerated. It was made clear that the
employee in question had been dismissed and the respondent, along with all
those who attended the briefings, gave an absolute commitment that in future he
would comply with the SBPRS steps and all other requirements.
[11] In July 2000 the respondent was disciplined for failing to
inert a vessel. He received a written
warning and was suspended without pay for 3 days. As a result of failing to inert, he failed to
close a valve in the vessel and a leakage of methanol occurred. After that failure had been discovered, the
respondent assured the site operations manager that it was an isolated incident
and that he would always inert in future.
He was told that any further failure to inert would result in disciplinary
action. The written warning was in the
following terms:
"This
letter confirms our discussion and the outcome of your disciplinary interview
with myself in the presence of Kevin Duncan and Damien Slorach on 14 July 2000.
During the
Incident Investigation, 13 July
2000, following a high methanol concentration found in the
Sentencing Tanks on 12 July
2000, it came to the attention of the Management Team that there
was a serious breach of a safety procedure that had the potential to lead to
loss of life.
This letter
is a written warning under our Disciplinary and Grievance Procedure. You failed to inert vessel VO86 in the early
morning of Tuesday 11
July 2000. The failure
to inert the vessel was identified when an investigation was initiated to
identify the root cause of a high methanol reading in the Sentencing Tank. Inerting of vessels prior to charging a
flammable liquid is a precaution to eliminate the likelihood of static induced
explosions. The requirement to inert is
clearly stated and well understood by yourself.
In addition
to this written warning, you are suspended without pay for 3 days starting on Tuesday 18 July 2000.
In future
it is expected that you will adhere in detail to all Safety, Health and
Environmental procedures. Your
performance in respect to this will be reviewed by your line manager on a
regular basis.
This letter
will stay on your record for a period of 12 months."
Despite the terms of the last
sentence the letter remained in the respondent's personnel file until the
events of November and December 2001.
[12] On 11 November
2001 an explosion occurred while an operator was carrying out a
routine operation of charging a dryer with a chemical through a hatch. As a result of the explosion the operator later
died. Immediately after the accident all
production work at the factory ceased and a joint investigation was launched by
the appellants and the Health and Safety Executive. The investigation showed that failure to
inert vessels and dryers was more widespread than the management had thought,
and it emerged that the respondent was one of 18 operators who had failed to
inert a vessel or dryer on one or more of the last three occasions for which
information was available. The 18
operators were told that the matter was to be treated as disciplinary and that
the allegations against them had been classified as potential gross
misconduct. They were advised of their
rights and disciplinary hearings were held.
The respondent accepted that he had failed to inert a vessel on three
separate occasions, on 26 and 27 October and 3 November 2001 and that he had made false entries
on the SBPRS in relation to those failures.
Specific start and finish times and levels of vacuum achieved had been
entered on each occasion, although no inerting had taken place.
[13] Following a disciplinary hearing in December 2001 the
appellants' Managing Director and Human Resources Director, in the light of the
warning issued to the respondent in July 2000, concluded that he was incapable
of following clear safety instructions even when they had been specifically
brought to his attention in a disciplinary context. They had lost confidence in his ability to
protect his own safety and that of others and considered that it was unlikely
that he would respond positively to a further warning, having failed to learn a
lesson from the previous warning. They
concluded further that additional training would not provide a suitable remedy
since the respondent had already been trained in the relevant procedures and
was not lacking in knowledge or skill. His
difficulty in understanding the need to follow safety procedures could lead to
injury to himself and to others. In
these circumstances it was concluded that the respondent should be summarily
dismissed. The appellants' position was
that the fact the respondent had been warned previously was a crucial factor in
the decision to dismiss him. They made it
clear that had he not received the previous warning he would not have been
dismissed. The respondent's letter of
dismissal stated:
"This
decision has been reached due to the seriousness of this matter and due to you
receiving a previous warning for the same issue. It is clear that you are well aware of the
serious nature of the failure to inert vessels, but that you are not able or
not willing to respond to a written warning on the failure to inert".
[14] An internal appeal hearing took place on 9 January 2002 before the
Health and Safety/Environmental Manager of the appellants' parent company Akzo
Nobel, but the respondent's appeal was unsuccessful.
[15] When he gave evidence to the Tribunal the site operations
manager said that with hindsight he found it difficult to justify not having
issued a warning to the respondent which was to remain on his record
forever. In evidence the respondent
accepted that the phase "In future" where it appeared in the penultimate
paragraph of the warning letter referred to all time coming rather than a
period of 12 months. At the disciplinary
hearing in December 2001 the respondent said that he had learnt his lesson from
his failure to inert in July 2000 and always inerted. It appeared, however, that, despite the
earlier warning, he had continued to fail to inert.
[16] The majority of the Employment Tribunal took the view that the
warning was part of the overall context in which management had come to a
conclusion about how to deal with the respondent. The appellants' business was one in which
safety risks were high. The respondent
was a well-trained and experienced employee.
He had previously failed to inert and had falsified the SBPRS and had
given an assurance that he would always inert in future. The warning had told him that he was expected
to adhere to all the safety, health and environmental procedures for the
remainder of his employment. He had
subsequently failed to inert a vessel and falsified the SBPRS on three
occasions. In these circumstances the
majority were of the view that it was reasonable to take account of the fact
that a warning had been issued in the past, even though it had expired, as part
of the relevant history of events, and concluded that the dismissal of the
respondent was within the band of reasonable responses.
[17] The minority of the Tribunal held that the appellants had not
been entitled to take account of the previous warning because it had expired. It was not stated to be a final written
warning. In these circumstances the
appellants had failed to communicate the seriousness with which they viewed
failure to inert. The minority therefore
took the view that a reasonable employer would not have dismissed the
respondent but would have given him the opportunity to show that he could learn
the message about the need to inert by giving him a final written warning, if
need by supplemented by enhanced supervision.
The appellants had not behaved in the way that a reasonable employer
would and the dismissal was therefore unfair.
[18] The respondent appealed to the Employment Appeal Tribunal who
agreed with the minority to the effect that the decision to dismiss the
respondent, which took into account the warning which had elapsed, was unfair
and that to hold otherwise would be perverse.
[19] Section 98(1) of the Employment Rights Act 1996 provides:
"(1) In determining for the purposes of this
Part whether the dismissal of an employee is fair or unfair, it is for the
employer to show -
(a) the reason (or, if more than one, the
principal reason) for the
dismissal,
and
(b) that it is either a reason falling
within subsection (2) or some other substantial reason of a kind such as to
justify the dismissal of an employee holding the position which the employee
held.
(2) A reason falls within this subsection if
it-
(a) relates to the capability or
qualifications of the employee for
performing
work of the kind which he was employed by the employer to do,
(b) relates to the conduct of the employee,
(c) is that the employee was redundant, or
(d) is that the employee could not continue
to work in the position
which he
held without contravention (either on his part or on that of his employer) of a
duty or restriction imposed by or under an enactment.
...
(4) Where the employer has fulfilled the
requirements of subsection (1), the determination of the question whether the
dismissal is fair or unfair (having regard to the reason shown by the
employer)-
(a) depends on whether in the circumstances
(including the size
and
administrative resources of the employer's undertaking) the employer acted
reasonably or unreasonably in treating it as a sufficient reason for dismissing
the employee, and
(b) shall be determined in accordance with
equity and the
substantial
merits of the case."
Mr. Truscott, Q.C. for the
appellants argued that the fairness or unfairness of the respondent's dismissal
depended upon whether the appellants had acted reasonably in all the
circumstances of the case. The
Employment Appeal Tribunal had treated the issue of the expired warning as one
of absolute principle. In doing so they
erred, since the determination of the reasonableness of the appellants' action
depended on all the circumstances, including the whole terms of the warning
letter and the previous undertaking given by the respondent in relation to the
same issue. When all these matters were
taken into account it could not be said that the appellants acted unreasonably
and it was not for the Employment Appeal Tribunal to substitute its own
decision for that of the Employment Tribunal.
There was no legal principle involved and the Employment Appeal Tribunal
ought to have confined itself to asking whether the Employment Tribunal's
decision was one to which no reasonable Tribunal could have come. He submitted that the Employment Tribunal's
response was within the band of reasonable responses and could not be said to
be perverse. Reference was made to Bailey v B.P. Oil (Kent Refinery) Limited [1980] I.C.R. 642; Anglian
Home Improvements Limited v Kelly
[2004] EWCA Civ 90 242; Aitken v Weatherford U.K. Limited 2005 CSIH 25; Kraft
Foods Limited v Fox [1978] I.C.R.
311; Charles
v Science Research Council [1977]
12 I.T.R. 208; U.K. Coal Mining Limited v Raby
E.A.T. 30 January 2003; William Grant & Sons Limited v Devlin E.A.T. 25 March 2004; Retarded
Children's Aid Society Limited v Day
[1978] I.C.R. 437; Dobie v Burns International
Security Services (U.K.) Limited [1984] ICR 812; McLaren
v N.C.B. [1988] I.C.R. 370.
[20] Mr. Truscott argued that the case of William Grant & Sons Ltd. was wrongly decided. The Employment Appeal Tribunal in that case
was wrong to find that the dismissal had been unfair on the ground that the
employer had taken into account an expired written warning. The Employment Appeal Tribunal had said, at
paragraph 10,
"In our
view, a final written warning, which is given a time limit, becomes null and
void at the expiry of that time limit and should not be used for any purpose."
That statement was too wide. It elevated one factor which fell to be taken
into account in considering the reasonableness of the employers decision to
dismiss into a legal principle. In the
present case the circumstances which required to be considered included the
whole terms of the warning letter and the undertakings as given by the
respondent, before and after the letter had been issued, to adhere to the
safety procedures in future. It was not
right to look at the last sentence of the warning letter in isolation. It had to be looked at in the context of all
the other factors.
[21] On behalf of the respondent Mr. Napier, Q.C. argued that as a
matter of principle an employer was not entitled to rely on a time-expired
warning as a determining factor in reaching a decision to dismiss for
misconduct. The Employment Appeal
Tribunal was right to reverse the determination of the Employment Tribunal on
the ground of perversity, and to substitute a finding of unfair dismissal
without remitting the matter back to the Employment Tribunal for
reconsideration. Reference was made to Salamis (Marine & Industrial) Limited v Forbes 2005 CSIH 57 at paragraph 7,
following Melon v Hector Powe Limited 1980 S.C. 188.
[22] The appellants had made it clear that the respondent would not
have been dismissed if he had not been the subject of a previous warning. The Employment Tribunal took the view that
the warning had not been used in the "traditional" sense of forming the basis for
taking disciplinary action of a more severe kind than might have been taken had
there been no warning. That was not right. By tipping the balance in favour of dismissal
the warning was used as a basis for
taking more severe disciplinary action than otherwise might have been taken. The minority member of the Tribunal was
right. The appellants should have issued
a warning without a time limit if they intended to rely on it.
[23] It was well established that written warnings would be strictly
construed contra proferentem. Bevan Ashford
v Malin [1995] I.R.L.R. 360. Accordingly, if an employer chose to put a
time limit on a warning he could not complain if he was unable to rely on it
after expiry. The ACAS Code of Practice
1: Disciplinary and Grievance Procedures
2000 made it clear that the principle that a warning should lapse after time
was fundamental to good industrial relations practice. Paragraph 15 of the Code provided that a final
written warning should normally be disregarded for disciplinary purposes after
a specified period.
[24] In any event, it was a contravention of the principle of
fairness for an employer to put a time limit on a warning and then take it into
account as a determining factor in a dismissal of an employee for a
misdemeanour after the expiry date. An
employee had a reasonable expectation that the employer meant what he
said. See McLaren v N.C.B.
[25] Section 123(6) of the Employment Rights Act provided for the
reduction of any compensation award on the ground of contributory fault on the
part of the employee. When the case went
back to the Employment Tribunal for the assessment of compensation it would be
open to the appellants to argue for the reduction of any award on the basis of
the existence of the previous warning.
[26] We consider that the submissions for the respondent should be
given effect to. Section 207 of the
Trade Union and Labour Relations (Consolidation) Act 1992 provides that if any
of the provisions of the ACAS Code of Practice are relevant to a question
arising in proceedings before an Employment Tribunal, those provisions should
be taken into account by the Tribunal in determining that question. In Lock
v Cardiff Railway Company Limited,
[1998] IRLR 358, Morison J., giving the judgment of the Employment Appeal
Tribunal, said that the Code formed the basis on which employers' conduct
should be judged, and should be used by employment tribunals as a guide to "good
sound industrial relations". Paragraph
15 of the Code provides that all warnings, including final written warnings,
should normally be disregarded for disciplinary purposes after a specified
period. Twelve months was given as an
example of an appropriate period for a final written warning to remain in
force. The clear inference from this
provision is that a warning which remains hanging over an employee's head for
an indefinite period would not normally be consistent with good industrial
relations practice. It would be contrary
to the spirit of paragraph 15.
[27] In this case the relevant warning was not stated to remain in
force for an indefinite period but, according to the letter of 20 July 2000, was to stay on the
respondent's record for 12 months, a period which had expired before the acts
of misconduct took place. Nevertheless, in
regarding the warning as tipping the balance in favour of dismissal, the
appellants acted as if it remained in force beyond the expiry of the 12 month
period. Their position was that the
other factors, taken together, would not have justified that course of
action. In these circumstances, the
majority of the Employment Tribunal were, in our view, wrong to say that the
warning was not used in the "traditional" sense of forming the basis of more
severe disciplinary action than might otherwise have been taken. It clearly was.
[28] The respondent was entitled to assume that the warning letter
meant what it said, and that it would cease to have effect after one year. In seeking to extend the effect of the
warning beyond that period the appellants, in our view, acted
unreasonably. We therefore agree with
the conclusion of the Employment Appeal Tribunal that the respondent was
unfairly dismissed.
[29] We do not consider that the Employment Appeal Tribunal erred in
failing to remit the matter back to the Employment Tribunal for reconsideration. The existence of the warning, although it had
expired, was crucial to the Employment Tribunal's decision. Without it the respondent would not have been
dismissed. It follows that, if the
warning is removed from consideration, the appellants would, on their own
admission, have acted unreasonably in dismissing the respondent. In these circumstances no purpose would have
been served by remitting the question of the fairness of the dismissal back to
the Employment Tribunal.
[30] We therefore refuse the appeal and remit the matter to the
Employment Tribunal to consider the question of remedy.
