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Contractor made a hash of handling misdeed on rail job

To what extent should employers carry the can for the misdeeds of their employees? This legal chestnut was considered afresh when three men were caught smoking marijuana in their early morning tea-break, and as a consequence the contracting company that employed them was thrown off site without payment.

Was this an over-reaction, out of all proportion to an everyday occurrence, or was it the least they deserved? The question would, no doubt, promote topical pre-election debate among the parliamentary candidates. But their views were, of course, neither here nor there to the Court of Appeal, which analysed the problem in purely contractual terms.

The company concerned, IJS Contractors, was engaged by Dew Construction to refurbish 10 railway stations in Gloucester. Dew was subcontractor to Bovis which, in turn, was working for Railtrack. The work was governed by stringent safety requirements.Operatives had to attend a personal track safety training course and comply with the Railtrack personal safety handbook. In effect, the handbook forbade operatives to turn up unfit for work, to consume alcohol or take drugs or to be in possession of drugs at work.

IJS's three employees were found by a Bovis supervisor, who reported the incident to Dew. Dew telephoned IJS's Mr Rooker who, acting swiftly, dismissed the three, another member of their crew and their supervisor. That might have been an end to the matter had not Mr Rooker then written to Dew a rather emotive letter describing the 'serious incident', recording the dismissals and the fact that the police had been notified.

He went on to say: 'This is a matter of persons choosing between the right or the wrong thing. . . and we have to accept the consequences and any subsequent action by yourselves in respect of this matter.We have to accept full responsibility for their behaviour whilst employed by IJS. . . I personally have been deeply distressed and saddened that IJS have been party to this very serious incident and as a consequence caused some considerable embarrassment to yourselves.'

After that, it should have come as no surprise to anyone that Dew terminated IJS's contract, asked the company to leave the site and refused to pay it £150,000 for the work already done.

The Court of Appeal considered two questions:

Was it an implied term of their contract with Dew that IJS would ensure that their employees complied with Railtrack's Safety Handbook?

If so, was the breach such as to go to the root of the contract and entitle Dew to determine the contract?

The court pointed out the difficulties in IJS ensuring that its employees complied with all the instructions in the handbook since they would have to search everyone every day and check that they were not turning up for work drunk. Further, if someone did turn up unfit for work, it would not be enough for IJS to send them home or dismiss them. On the other hand, the court recognised that IJS had to ensure that its workforce complied with the safety precautions. For the sake of argument, therefore, the court was prepared to accept that compliance with Railtrack's handbook was a term of IJS's contract and that they were in breach.

What then?

Was smoking marijuana on site so fundamental a breach of contract that it entitled Dew to terminate the contract forthwith? The court considered Mr Rooker's letter and felt that he had thought that the incident went to the root of the agreement between the parties. The judge had in fact found four statements in IJS's letter which supported Dew's actions. Nevertheless, the Court of Appeal concluded that a breach of a safety regulation which had not led to any risk to the public should not enable a building contract to be terminated.

If you are an employer and you do not want IJS's fate visited upon you, the sensible course seems to be to act swiftly to deal with the transgression internally, but not to make too much fuss about it to the world at large.

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