STADCO LTD v (1) MR A S PUGH (2) MR W D ROBERTS [2004] UKEAT 0373_03_0403

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2004] UKEAT 0373_03_0403Case No Appeal No. UKEAT/0373/03Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
STADCO LTDAPPELLANT(1) MR A S PUGH (2) MR W D ROBERTSRESPONDENT
Before
His Honour Judge J R ReidDate 4 March 2004
[1]APPEARANCES For the Appellant MR T LINDEN (of Counsel) Instructed by: EEF Broadway House Tothill Street London SW1H 9NQ For the Respondents MR B CARR (of Counsel) Instructed by: Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE HIS HONOUR JUDGE J R REID QC This is an appeal by Stadco Ltd against a decision of an Employment Tribunal held at Shrewsbury on 13 and 14 February 2003. The decision was promulgated on 5 March 2003. By that decision the Tribunal held that Mr Simon Pugh and Mr Frank Roberts had been unfairly dismissed, and that there was no contributory conduct "nor any other deduction".[2]Stadco is a large company with (amongst other assets) four plants in the UK manufacturing body panels for motor vehicles. The head office is in Harlescott, Shrewsbury which is also a manufacturing plant. There are some 280 employees at the Shrewsbury site. Mr Pugh was a despatch clerk within the warehouse side of the operation. He reported to Mr Frank Roberts, the supervisor of his shift. The respondent runs a 3-shift system. The operation runs 24 hours 7 days per week, with alternating shifts. Each team works for 2 weeks at a time on the day shift, the evening shift and the night shift. Both Mr Pugh and Mr Roberts were classed as "staff" and were salaried, but they were able to claim overtime for hours worked in excess of 37 per week. There was a shift allowance on the general salary, so it makes no pay difference whether employees work on nights or days. Mr Roberts had worked for the company for nearly 13 years, from September 1989 until 19 August. Mr Pugh had 6 years service from June 1996 until 19 August 2002. Both men were summarily dismissed for irregularities over Mr Pugh's time sheets.[3]The Tribunal described the reason for the dismissal in this way:
"The respondent's belief was that Mr Pugh was claiming overtime for breaks worked when he had not, in fact, worked those breaks. Therefore, he was claiming pay to which he was not entitled. The respondent is quite clear; they considered this a corrupt practice. Mr Roberts, they contend, in signing those pay claims for Mr Pugh, was involved in a corrupt practice, or was at best negligent in the way that he ran the team or department and was thus failing in his responsibilities to management."
[4]In July 2002 Mr Chris Fisher, who was the Group Supply Chain Manager, had to take over the running of the Shrewsbury function until a replacement could be found for the previous Supply Chain Manager, Mr Englehart, who had left. As Acting Supply Chain Manager within the Shrewsbury site it came to his attention that there appeared to be a pattern of overtime payment claims on Mr Pugh's behalf which seemed peculiar to Mr Pugh. Essentially Mr Pugh appeared to have a very large amount of overtime claimed during the working week. Mr Fisher's investigation included surveillance of Mr Pugh, as to what time he left the works. It was found that Mr Pugh would frequently leave, typically for example, at 3.05 p.m. or 3.10 p.m. while the subsequent time sheet would show that he had claimed pay until 3.30 p.m[5]On a time sheet were printed the times of the shift. That printed time sheet was given to the employee. There was no clocking system for staff so the system has to be run on trust. When there was an 8-hour shift handover times were allowed for in the timings i.e. the shift started five minutes before the hour and ended five minutes after the hour to allow some ten minutes handover with the incoming shift. But also (not shown) there were 40 minutes of breaks (1 x 20 minutes and 2 x 10-minute breaks) during the course of the 8-hour shift. The employees were paid for those breaks.[6]According to Mr Pugh at the Employment Tribunal, more often than not he worked his breaks because of the pressure that they were under. When he did that he would be working more than he was contracted to work, and would, therefore, add half an hour, not necessarily 40 minutes, to the end of the shift. He regularly put, for example, 3.30 p.m. as his leaving time.[7]During the investigation Mr Pugh was called back after the end of the nightshift to explain these apparent irregularities on his time sheets. He was called on his mobile phone when he was half way back to Oswestry and he apparently gave a very poor account of himself further compounding management's suspicions. He seemed to be saying that the hours were actually correct. They were not. At the Tribunal his case was that the overall hours worked were correct, even if the times were not. The Tribunal observed that it could see when the shift sheet was printed in the way it was, if one was to claim overtime relating to breaks it was very hard to do it in any other way than resorting to a device or fiction, by adding half an hour on the end of the shift which was not, in fact, worked.[8]In due course the disciplinary hearing was conducted by Mr Fisher and Miss Alison Carroll of the Human Resources department. The employees were separately represented at that hearing at the management's suggestion because the management perceived there was a potential conflict of interests between Mr Roberts and Mr Pugh. Indeed it seemed to management that some of Mr Roberts' evidence could have been seen as incriminating Mr Pugh. In the event it appears that both of them asserted that Mr Pugh had worked the number of hours overtime for which he claimed, though the timings given on the time sheets were wrong. It was said that as a matter of convention, because of the form of the time sheets, if Mr Pugh worked through his breaks he would claim overtime for that additional work by adjusting his time of leaving on the time sheet.[9]Mr Fisher evidently did not accept the existence of this convention and could find no reason for not dismissing both Mr Pugh and Mr Roberts for their part in what he perceived to be a serious irregularity. Both Mr Pugh and Mr Roberts appealed and the appeal was taken by Group Personnel: Mr Kelvin Morgan, the UK Operations Director, and Sarah Grainger, the Group H R Manager. The substance of both decisions was made by managers to the H R department. The employees were represented this time by a full-time regional officer of their union, Mr Stevens, who also represented them before the Employment Tribunal. In the event the appeals were dismissed, but not before Ms Grainger on behalf of Mr Morgan had interviewed several extra people to follow up allegations made by both employees in the course of their submissions to the appeal.[10]The majority of this was an investigation into the custom and practice of booking overtime for breaks when worked. The response was very mixed. Some statements were not at all supportive of Mr Pugh and Mr Roberts but some, notably those of Mr Bradley and Mr Hall (who apparently gave evidence before the Employment Tribunal) supported their contentions. This further evidence was not then put to Mr Pugh and Mr Roberts before the decision was taken to dismiss the appeals and to affirm the dismissals.[11]The Tribunal considered that had Mr Pugh and Mr Roberts had a chance to interview some of the people who gave statements by way of telephoning, a very different picture might have emerged from Stadco's point of view and would have had a radical effect on the decision that was made. In the view of the Tribunal people slip into these practices over the course of time which are then taken for granted and employees forget how bad they might look to a fresh pair of eyes.[12]As a result the Tribunal found that the respondent's investigation of Mr Pugh's and Mr Roberts' allegations that this was custom and practice was:
"definitely inadequate in the way it was carried out, including the process by which a lot of this information was not put fairly to the applicants before any final decisions were made as to whether they should be dismissed."
The Tribunal noted that Mr Pugh and Mr Roberts claimed that their long and unblemished work records were not taken into account sufficiently, and continued at paragraph 17:
"However, no employer is bound to use that as mitigation if they have solid evidence of dishonesty before them. The problem is we do not consider the respondent did have solid enough evidence of dishonesty. Thus we can see why the applicants might say that, in this case."
The Tribunal went on at paragraph 18 to assess Mr Pugh and Mr Roberts as witnesses:
"The applicants who gave evidence before us both impressed us as completely frank and reliable in their evidence. We can see how Mr Pugh that might have felt flustered and given a very poor account of himself as a witness, having seen him examined. This suggested that it might well have been how he conducted himself when challenged by management about this practice. He did not think particularly fast on his feet. He made apparent admissions without thinking them through carefully. We can see how his conduct when first challenged might have increased management's suspicions. We consider that if he had been more openly and sympathetically questioned about these practices a truer picture might have emerged."
At a later stage the Tribunal reverted to this point saying:
"The problem was the way this was investigated. The form of the hearing was not conducive to bringing out the truth, and they were, in our view, unreasonable, despite the fact that many man hours were devoted to this process. We consider that management jumped to conclusions and never overcame the extremely bad initial impression caused by the apparently incriminating time sheets."
[13]The Tribunal then went on:
"Both applicants took issue with the disciplinary notes. We understand that Mr Roberts in his admissions of being "lax, blase, negligent" did not put it quite as bluntly as this. It is a matter of interpretation rather than strict fact. Accordingly we have the gravest misgivings about the reasons for the decision to dismiss him, based upon the attribution of these words and this apparent sense of guilt to him. Looked at, as we stated, in the cold light of day, the practice is not a good one and should certainly stop. But we find that it was indeed the practice."
[14]The Tribunal stated at paragraphs 24 and 25:
"24. We are not overlooking the principle that it is not the function of this Tribunal to substitute its own view for that of the respondent. That said, however, we have to make some primary findings because the question of contributory conduct is, as always, at large. 25. We cannot find there is any contributory conduct in the circumstances of this case, nor in the circumstances do we consider it would be just and equitable to apply a deduction in respect of what was essentially a procedural error at the tail end of the appeal. That is because, in our view, had the applicants had an opportunity to cross-examine people who had been interviewed by management we think it would have made all the difference to the outcome. The applicants would not have been dismissed and this disreputable practice would have been stamped out. Some other way would have been found."
[15]At the hearing of the appeal Stadco challenged the decision on three grounds (abandoning the grounds in paragraphs 6.2 and 6.5 of the Notice of Appeal). Those grounds were:(1) that the Tribunal substituted its own view for that of a reasonable employer instead of applying the three stage test set out in British Home Stores v Burchall [1978] IRLR 379 ;(2) that the Tribunal was perverse or failed to consider relevant matters in concluding that it could not see any good reason why the management should have concluded Mr Pugh did not work the hours he claimed to have worked; and(3) that it erred in failing to make any reduction in the award on the grounds of contributory fault, having regard to its finding the employee's practice of falsifying timesheets was "disreputable".[16]As to the first point Mr Linden submitted that the form of the decision made it clear that the Tribunal had substituted its own decision for that of the Tribunal. He referred to the decision of the Court of Appeal in Morgan v Electrolux Ltd [1981] ICR 369 (esp at 373-4). Stadco's case was(1) that Mr Pugh had not worked during his breaks,(2) that if he had he was not entitled to overtime for doing so: he was paid for his breaks anyway and if he chose to work during is breaks, that was his business; and(3) in any event he falsely represented what his finishing times were. The case against Mr Roberts was that he was at best negligent in signing off Mr Pugh's inaccurate timesheets. Instead of looking at the evidence available to Stadco at the time of the disciplinary hearings the Tribunal had made up its own mind about the credibility of the employees and in effect second-guessed the correctness or otherwise of Stadco's decision in the disciplinary proceedings. The Tribunal's assertion in paragraph 24 of its decision that it had not overlooked the principle was, he suggested, no more than a conventional assertion, which did not bear scrutiny. He drew attention to a number of passages in the decision in particular those at paragraph 17 "The problem is we do not consider the respondent did have solid enough evidence of dishonesty" at paragraph 18:
"The applicants who gave evidence before us both impressed us as completely frank and reliable in their evidence" at paragraph 19: "
We cannot see any good reason why management should have concluded that Mr Pugh did not work the hours that he claimed to have worked" and a further passage at paragraph 20 where the Tribunal commented:
"That is credible to us "
. He submitted that the Tribunal had reasoned backwards, starting from the proposition that it found the employees not guilty and therefore something must have gone wrong with Stadco's procedures. He highlighted the fact that the Tribunal did not expressly address the question whether Stadco had reasonable grounds for its view, and suggested that the Tribunal had led itself into error by not considering the fairness of the dismissal separately from the question of contributory fault .[17]On behalf of Mr Pugh and Mr Roberts, Mr Carr submitted that there was no error in the approach of the Tribunal. The Employment Appeal Tribunal should be very slow to hold that an experienced Tribunal which expressly stated it was not its function to substitute its own view for that of the employer, had in fact done so. The Tribunal had rightly formed its own view (as it was required to do) in deciding the question of contributory conduct, but it had not substituted its own view in relation to the issue of the fairness of the dismissal. It had reached its conclusion on the basis of the Tribunal's perception that Stadco's investigation was inadequate, that Stadco had failed to put matters to the employees and that it had jumped to conclusions.[18]In our view Stadco has not shown that the Tribunal substituted its own view for that of the employer. The way in which the Tribunal set out its decision gave a certain spurious force to Mr Linden's submission. There could have been greater clarity in distinguishing its criticism of the way the employer conducted itself in dismissing the employees and the Tribunal's expression of its own views in relation to the issue of contribution as to the true factual position. However the Tribunal formed a view as to the adequacy of the investigation. It held that the employer erred in jumping to conclusions and their failure to overcome "the extremely bad initial impression" prevented the investigation being properly adequate. It was those views which informed the decision rather than the Tribunal's view as to the employees' innocence.[19]As to the second point, Mr Linden submitted that, quite apart from the fact that there was no logic to the practice alleged by Mr Pugh and Mr Roberts, it did not explain the evidence relating to 8 August 2002. This was that on this day Mr. Pugh had claimed that he left work at 4.30 pm, whereas it was quite clear that he had left at approximately 4.15 pm. Moreover, he had left the site for 25 minutes between approximately 3.05 pm and 3.30 pm. He had then claimed 1.5 hours overtime for the period from 3 pm to 4.30 pm when, on any view, he was off site for 40 minutes during this period. As his skeleton argument put it:
" it was not sufficient for the ET to "broad brush" the case or, indeed, air brush out this fundamental weakness in the Applicant's case. It was bound to deal with this point rather than express the somewhat Nelsonian view that it could not see any good reason why management should have concluded that Mr. Pugh did not work the hours that he claimed to have worked."
He submitted that either the finding of the Tribunal was perverse in taking account of the evidence relating to 8 August but nonetheless making the finding which it did or the decision could not stand because the Tribunal had failed to take account of the material relating to that day.[20]On behalf of Mr Pugh and Mr Roberts Mr Carr submitted that before the Tribunal the events of 8 August 2002 had not taken the prominent place to which Stadco had elevated them on the appeal. In relation to 8 August 2002 Mr Pugh's case was that he had been asked to do additional overtime in order to assist another Stadco manager. He said, we were told, that during his overtime he had permission to leave the site in order to take a fellow worker home, that whilst he was out he had bought a sandwich, and that it was accepted practice that when a worker went offsite with the consent of the employer he was entitled to do so without any loss of pay or breaktime. It was also his evidence that he understood that he was entitled to claim overtime as he did. Mr Carr submitted that in any event at its highest from Stadco's point of view the facts showed an overclaim for some 10 minutes. In the absence of the Chairman's notes of evidence the Employment Appeal Tribunal could not go form any view as to the validity of the Tribunal's findings, and the point was therefore bound to fail.[21]The difficulty that the majority of the members of the Employment Appeal Tribunal felt over this point was that they were unable to ascertain whether the Tribunal had considered the point and, if so, what it had made of it. The assertion that the Tribunal could not "see any good reason why management should have concluded that Mr Pugh did not work the hours that he claimed to have worked" required the Tribunal to have taken a view about a number of things none of which are expressed in the decision: What did it find happened on 8 August? What hours did it find Mr Pugh actually worked that day? What did it make of Mr Pugh's assertion that when a worker left site with the permission of his employer he was entitled to do so without any loss of pay or breaktime?[22]On the face of it the events of 8 August did require proper findings of fact if the Tribunal was to justify its central finding that Stadco had no good reason to conclude Mr Pugh had not worked the number of hours he claimed. To justify Mr Pugh's assertions the Tribunal needed not only to accept Mr Pugh's central assertions(1) that he regularly worked through his breaks, including on 8 August,(2) that there was a custom that if he worked through his break (for which he was in any event being paid as part of his 37 hour week) he was entitled to be paid overtime for so doing, and(3) that the method of making that claim was to enter a fictional later clocking off time on his worksheet but also(4) that he was permitted to leave site to take a fellow worker home on 8 August rather than simply to get himself a sandwich and(5) that when a worker left site with the permission of his employer he was entitled to do so without any loss of pay or breaktime. In the absence of findings as to (4) and (5) there was no proper basis for saying that Stadco had no good reason to conclude Mr Pugh had not worked the number of hours he claimed. Proper findings were necessary in relation to the events of 8 August for Stadco to know, as it was entitled to do, why it had lost on this point. The decision does not enable it to do so. In these circumstances the majority of the Employment Appeal Tribunal took the view that the appeal should be allowed and the case be remitted for rehearing before a differently constituted Tribunal. Both parties accepted, correctly, that the cases of Mr Pugh and Mr Roberts were so interlinked that if the appeal were allowed in the case of one, it should also be allowed in the case of the other.[23]In relation to the surviving grounds of appeal, the minority felt that the Employment Tribunal had made findings which were just sufficient to justify its unanimous conclusions on the balance of evidence presented to that Tribunal. In para 6(3) of the amended grounds of appeal, a weight is ascribed to the events of 8 August which is found in neither Stadco's written submission to the ET nor in the original version of the Notice of Appeal to the EAT. Indeed, one of the leading written submissions from Stadco to the ET referred to the period 29/07/02 to 08/08/02; while another referred to the whole period 2000-2002. As a result, and particularly in the absence of Chairman's Notes which Mr Linden had not requested, it is a matter for the ET and not the EAT to decide the weight to be given to the events of 8 August. In the minority's view, therefore, it would be inappropriate for the EAT now to base its judgment on what in effect was evidence on the matter by Mr Linden to the Appeal Tribunal; and it would be wrong to seek in relation to events on that specific day answers to questions which had been posed for the first time here on appeal. In the view of the minority, the appeal should not be allowed.[24]So far as the third ground of appeal is concerned, this does not require a decision in the light of the views of the majority on the second ground. For the sake of completeness, however, the view of this Tribunal was that the decision not to make any deduction because of the "disreputable" but (on the Employment Tribunal's findings) long-standing practice in which Mr Pugh indulged and which Mr Roberts sanctioned was one which it was within the discretion of the Employment Tribunal to reach. Had this been the only ground of appeal, the appeal would have been dismissed.[25]In the event the majority decision is that the appeal should be allowed and the cases remitted for hearing before a differently constituted Employment Tribunal.