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Sources of regulation
Statute and the judicial interpretations
of the relevant statutes comprise the major source of the modern law of
dismissal at the initiative of the employer in New Zealand. The main legislation is Part 9 of the Employment Relations Act,
2000 (ERA), which allows an employee to bring a personal grievance claim[1] against an employer. The statutory
right to bring a personal grievance dismissal claim may not be abrogated
by agreement. It should be noted that
while the statute allows an employee to challenge an “unjustifiable dismissal”,
the substantive content of the law has been developed largely by the courts
interpreting this basic provision.
The Parental Leave and Employment Protection
Act, 1987 (PLEP), provides statutory entitlement for maternity and parental
leave after a qualifying period of employment. Dismissals in breach of
the provisions of that Act may be challenged under the personal grievance
procedures in the ERA.[2]
The right to bring a common law action
for wrongful dismissal was abolished by the ERA so that the only remedy
available for unfair dismissal is the personal grievance procedure set
out in the ERA. There are no statutory provisions setting minimum redundancy
payments or severance payments and any entitlement to such payments derives
from either an individual employment contract or a collective agreement.
The Human Rights Act, 1993, provides remedies
for discrimination and sexual harassment, generally including within employment,
but these remedies are separate from those for unjustifiable dismissal.[3]
Scope of legislation
All employees, regardless of their category
or sphere of work, are entitled to challenge a dismissal as unjustifiable
using the procedures in Part 9 of the ERA (sec 102 ERA). There is
no qualifying period of employment that must be served before a dismissal
may be challenged so that both part-time and casual employees are entitled
to challenge a dismissal. The core definition of employee (sec 6 ERA)
is “a person employed by an employer to do any work for hire or reward
under a contract of service”. In addition the ERA specifically defines
“home workers” as employees regardless of their formal legal status. Members
of the armed forces are not employees.
Contracts of employment
Persons employed under a contract of employment
(or contract of service) may be employed for an indefinite duration, for
a fixed-term (either for a specific time or until the completion of a specified
task). Employment may be permanent, part-time or casual.
The ERA contains specific provisions applying
to fixed-term employment. These require that such employment must be based
on reasonable grounds that exist at the time of employment and which are
made known to the employee at the time of employment (sec 66 ERA).
If the provisions of the statute are not complied with, the employment
remains valid but to be fixed term ceases to be enforceable.
The ERA (sec 67 ERA) permits probationary
employment but such employment remains subject to the standard law on unfair
dismissal.
Termination of employment
The contract of employment can terminate,
not at the initiative of the employer, in certain circumstances, including
by:
- the
expiry of a fixed-term contract when either the fixed time expires or
the task specified is completed;
- the
resignation or retirement of the employee or by mutual agreement of the
employer and employee; and
- frustration
or force majeure.
Dismissal
The ERA provides a remedy where an employee
has been “unjustifiably dismissed” (sec 103 ERA). The courts
have interpreted this requirement to mean that there must be both a substantive
reason for an employee to be dismissed at the employer’s initiative and
that the dismissal must have been carried out in a manner that is procedurally
fair. The ERA (sec 103A) states that whether a dismissal is
justifiable “must be determined on an objective basis, by considering whether
the employer’s actions and how the employer
acted, were what a fair and reasonable employer would have done
in all the circumstances at the time the dismissal occurred.”
The substantive reasons that may justify
a dismissal are normally restricted to:
- redundancy
for genuine commercial reasons;
- reasons
connected to the employee’s lack of capacity for the work or performance
on the job; or
- serious
misconduct by the employee.
Certain categories of dismissal are presumed
to be unjustified by statute. These include dismissals:
- on
the grounds of trade union membership or participation in trade union
activity (secs 103 and 107, ERA). The statutory definition of union activity
also
includes a number of grounds such as filing a complaint or participation
in proceedings against an employer, submitting a personal grievance against
an employer, or acting as a health and safety representative under the
Health and Safety in Employment Act, 1992;
- on
grounds of race, colour, sex, marital status, religious or ethical belief
or ethnic or national origins, disability, age, political opinion, employment
status, family status or sexual orientation (sec 105 ERA). Discrimination
on such grounds is also prohibited under the Human Rights Act, 1993.
- on
grounds of pregnancy, maternity or parental leave (sec 49, PLEP).[4]
In addition to the prohibited grounds
specified in the ERA, decisions of the courts have restricted the ability
to dismiss employees in some other situations by requiring clear justification
including a reasonable degree of accommodation. Such grounds include temporary
absence from work because of illness or injury. However, there is no requirement
on employers to keep positions open indefinitely when an employee is absent
due to illness or injury. The question as to what is reasonable in such
circumstances will be judged on a case-by-case basis.
Dismissal for reasons of redundancy, meaning
dismissal for economic, organizational or technological reasons, are justified.
The courts have strongly supported the view that an employer has the ultimate
discretion to determine whether the operational requirements of the undertaking
necessitate any redundancy. The ERA (sec 4) imposes specific consultation
obligations in cases of potential redundancy. Any dismissal for redundancy
must also meet the requirements of procedural fairness including in such
matters as the selection for redundancy and the manner in which the dismissals
are implemented. If an employee challenges a redundancy dismissal, adjudicatory
bodies will examine the dismissal to determine whether genuine reasons
in fact existed at the time of the termination, but such bodies are reluctant
to question the commercial reasonableness of the decision.
Notice and prior procedural safeguards
An employer is required to adhere to the
requirements of procedural fairness and reasonableness and the principles
of natural justice in order for a dismissal to be justified. This means
that before the employee is dismissed for misconduct or incompetence, he
or she must be given the opportunity to defend himself or herself against
any allegations that have been made. The concept of procedural fairness
in employment is defined broadly by the New
Zealand courts, also incorporating
elements which are within the traditional boundaries of natural justice
principles, such as the right to a fair hearing and freedom from bias.
Consequently, before dismissing an employee for misconduct, the employer
will generally be required to take the following measures:
- inform
the employee about the complaint against him or her;[5]
- conduct
a fair and reasonable inquiry into the grounds for dismissal;
- give
the employee a genuine opportunity to explain his or her conduct;[6]
- give
credit to the employee’s past good behaviour or length of service;
- ensure
that the employee is treated equally to other employees in similar circumstances;
and,
- in
the event that the complaint is a breach of a rule, ensure that the rule
has been brought to the employee’s attention.
Before dismissing an employee on performance grounds, an employer will
generally need to give advance warning to the employee that his or her
performance could lead to dismissal and present him or her with an opportunity
to improve his or her performance.[7] Each case will be adjudicated on its own facts to ascertain whether
there was a valid reason for the dismissal and whether fair procedure was
observed.
In certain exceptional cases, such as serious
misconduct, summary dismissal (dismissal without notice) may be justified.
However, even in this situation the normal rules of procedural fairness
and natural justice continue to apply; however, the employer would also
be expected to consider whether the degree of misconduct justifies summary
dismissal or some lesser sanction such as a final warning.
No specific period of notice is required
by statute. Rather, such notice requirement is a matter for contract. Where
notice is specified under the contract of employment or under a collective
agreement, failure to provide such notice will be treated as a factor evidencing
an unjustified dismissal. Moreover, failure to give the requisite notice
is also a breach of contract which is actionable by a claim for breach
of contract or by an arrears of wages claim. Where notice is not specified
in the contract, the adjudicatory bodies will determine what constitutes
reasonable notice in the circumstances.
Where the employer contemplates termination
for reasons of economic, technological, structural or other similar reason,
the ERA (sec 4) requires that the decision be carried out in good
faith, including that the employer must discuss the proposed decision that
may result in redundancy with the affected employees (and any relevant
union representative) before the final decision is made. There must
be true consultation which includes giving the employees and their representatives
a real opportunity for making an input and considering any constructive
suggestions they may submit. In addition, adequate information about the
nature of the proposed redundancy must be afforded to the employees in
advance of such consultation.
The employer is also required to consider
alternative options to redundancy before such redundancy will be deemed
fair. Alternate measures may include retraining, redeployment, transfer,
relocation, voluntary redundancy and early retirement. If, after considering
alternatives, redundancy is to occur, the employer must give the employee
notice of termination in accordance with any applicable contract, or if
no contractual notice provisions exist, a reasonable period of notice.
Severance pay
Severance pay is not governed by statutory
regulation but is a subject for negotiation between the parties. Redundancy
compensation is only payable if it is stipulated in the contract of employment
or collective agreement.
Avenues for redress
The ERA (secs 54 and 65) requires
that all collective agreements and contracts of employment must contain
a plain language explanation of the services available to resolve “employment
relationship problems”, which include unjustifiable dismissals. Such explanations
would normally cover both internal and external measures including information
on accessing the bodies responsible for providing mediation and adjudication
of disputes. Employees would be expected to utilise internal procedures
before resorting to those in the ERA although there is no specific statutory
obligation to do so.
The ERA provides a three-stage process
for resolving dismissal disputes, although the dispute may be resolved
at any one of those stages.
First, other than in limited circumstances,
a dispute must be referred to the Mediation Service of the Department of
Labour. The role of mediation is to encourage and aid the employer and
employee to resolve their dispute by mutual agreement. Any agreement, once
signed by the Mediator, will be final and binding. Mediators are employees
of the Department of Labour but are obliged to act independently when providing
mediation services.
The second, and first adjudicative, stage
is for the dispute to be referred to the Employment Relations Authority
for a determination of the dispute. The Authority is an investigative body
and is obliged to observe the principles of natural justice in carrying
out its functions; it is instructed to resolve problems “by establishing
the facts and making a determination according to the substantial merits
of the case, without regard to technicalities.” (sec 157 ERA). The
Authority therefore controls the nature of its own investigation including
which issues it determines as relevant and which witnesses it wishes to
hear.
Either the employer or employee may challenge
a determination of the Authority in the Employment Court. A challenge may be confined to some limited aspect of a determination
but more commonly the challenge will result in the matter being heard de
novo (from the beginning). For this reason it is not accurate to describe
a challenge as an appeal as the whole matter is re-litigated through a
normal common law adversarial process. Appeals on points of law only may,
with leave, be made to the Court of Appeal and Supreme Court.
If an employee pursues a claim under the
Human Rights Act, 1993, the matter will be adjudicated by the Complaints
Review Tribunal established under that Act. Although employees are entitled
to pursue claims either under the ERA or the Human Rights Act, 1993, they
may not pursue both avenues for redress in relation to the same complaint.
The burden of proof to establish that a
dismissal was both substantively and procedurally justifiable rests with
the employer, once the employee has shown there was a “dismissal”. Employees
are given 60 days in which to request written particulars of the dismissal,
to which the employer must respond within 14 days. Moreover, an employee
must pursue any claim alleging unjustified dismissal within 90 days of
the dismissal.[8]
Where the Employment Authority or Court
determines that a dismissal was unjustified, it may award to the employee
any of the following remedies as it sees fit: compensation in the form
of damages for lost wages; damages for humiliation; injury to feelings
or loss of dignity; damages for the loss of any benefit the employee might
reasonably have expected to have obtained had he or she not been dismissed;
and reinstatement (sec 123, ERA). Reinstatement is the primary remedy
if sought but is unusual in practice. The minimum award, subject to reduction
for contributory conduct, is the lesser of three months lost remuneration
or the actual amount lost. The Authority or Court must consider whether
the employee contributed to the facts giving rise to the dismissal, and
if those actions so require, reduce the remedies awarded (sec 124 ERA).
Where a claim is pursued under the Human
Rights Act, 1993, on the grounds of discrimination in employment, the remedies
available are declarations, orders, damages and any other relief in the
discretion of the Complaints Review.
Employees whose contracts have been terminated
may benefit from the Social Security Act, 1964, under which they may be
entitled to unemployment benefits.
Further information
- Mazengarb's Employment Law, Part
9 Personal Grievances (Wellington, LexisNexis), 4 volumes,
loose-leaf and electronic text.
- Hughes, J.; Roth, P.; Anderson, G. Personal Grievances (Wellington,
LexisNexis), loose-leaf and electronic text.
- Employment Agreements: Bargaining Trends and Employment Law Update (Wellington,
Victoria University of Wellington, Industrial Relations Centre), annual.
- New Zealand Department of Labour Web-site: www.dol.govt.nz
- New Zealand legislation on-line: http://www.legislation.govt.nz/
- New
Zealand Journal
of Employment Relations: http://proquest.umi.com/pqdweb?RQT=318&pmid=10665&cfc=1
Further information
[1] A “personal grievance” includes an unjustified
dismissal as well as a range of other grievances such as the employer unjustifiably
disadvantaging an employee, sexual or racial harassment, and discrimination.
[2] The major legislation in New Zealand over the last few decades has
been the Industrial Relations Act, 1973 (which first introduced a statutory
procedure to challenge unfair dismissals), the Labour Relations Act, 1987,
the Employment Contracts Act, 1991 and the Employment Contracts Act 2000.
Each Act repealed its predecessor. The Maternity Leave and Employment Protection
Act, 1980, was repealed in 1987 and replaced by the Parental Leave and
Employment Protection Act, 1987.
[3] An employee who has been subject to discrimination
must elect whether to proceed under this Act or the ERA.
[4] Note that this would include male employees. Sec. 49 of the
PLEP gives the right of up to 12 months’ unpaid leave (to be shared between
both parents) to employees who are having a child or who are adopting a
child under five years of age. Where the employee takes four or more weeks
of such leave, employment must be kept open unless the employer proves
that the position cannot be kept open because a temporary replacement is
not reasonably practicable due to the key nature of the position. The meaning
of a “key” position will be interpreted strictly by the courts. If a position
cannot be kept open, the employee is entitled to a preference period of
six months after the end of parental leave, in which the employer must
offer to the employee any available job substantially similar to the employee’s
previous position.
[5] This includes sharing with the employee
the results of any investigation (see Airlines Stewards and Hostesses
(NZ) IUW v. Air New Zealand Ltd. [1990] 3 NZLR 549).
[6] The right to be heard is considered a
fundamental pillar of just termination procedures. Irvines Freightlines
Ltd. v. Cross [1993] 1 ERNZ 424.
[7] The opportunity to improve must be a
reasonable one. In certain circumstances this may require the provision
of additional training (see Downes v. Northern Distribution Union [1989] 2 NZLR 842).
[8] Subject to obtaining leave for claims outside the 90-day limit in
“exceptional circumstances”. ERA (sec 114).
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