Employers must act in good faith

In today’s ever-changing employment landscape, employers face a myriad of challenges. A single misstep can lead to (amongst other things) personal grievance claims, a fractured workplace culture and tainted reputations. Understanding the risk of making a blunder is essential.

If one of your employees has a complaint about their employment, they can raise a personal grievance claim against you. The grounds for a grievance are almost limitless, but common grounds include complaints about being unfairly fired, discriminated against, bullied or disadvantaged in some way.

Employees have 90 days (or 12 months in the case of sexual harassment) to bring a grievance. This begins on the date that the action allegedly occurred or came to the notice of your employee, whichever is later.

As an employer, you can agree to a grievance being raised late or you may inadvertently do so by responding to it (i.e.: it has been raised out of time, but you mistakenly legitimised it by responding to it). The Employment Relations Authority (ERA) can allow a longer period, but only in exceptional circumstances and if it is just to do so.

Good faith

As an employer, you can reduce the risk of grievances by having a sound understanding of your responsibilities. The key is to always act in good faith. This means acting reasonably and honestly, and communicating well with your employees about anything that may affect their employment.

It is not always obvious, however, what good faith requires in practice. It often goes wrong if you want to end your employee’s employment. You must be able to point to good reasons for their dismissal and demonstrate that a fair process has been followed. If you trip up on either part, a successful grievance for unjustified dismissal can result.

All employers also have a range of statutory duties that must be followed, such as:

• Providing safe work and a safe workplace
• Paying the agreed wages or salary, and paying at least the minimum wage
• Providing rest and meal breaks, and
• Ensuring you provide minimum leave entitlements.

Consequences

The consequences of getting it wrong can be severe for a business. These include:

• Legal costs
• Time and cost of taking part in mediation and/or a hearing in the ERA (and a potential appeal)
• Cost of settling a grievance, including being ordered to pay compensation, lost wages, legal costs or other monetary penalties by the ERA
• Negative publicity and reputational damage, and
• Disruption in your workplace, and negative impacts on your workplace culture.

Compensation awards have been trending upwards in recent years. In June 2023,^[1] for example, the Employment Court awarded an employee $25,000 in compensation as well as three months’ lost wages following a successful unjustified dismissal claim.

An issue in that case was their employer had included Tikanga practices and values into its employment framework but failed to comply with them when undertaking its dismissal process. The court found the failure to do so was a breach of their employer’s good faith obligations.

However, it’s not just mistakes in dismissal processes that can lead to successful grievances. In a very recent case,^[2] the ERA ordered an employer to pay $13,720 to their employee; they had failed to keep accurate leave records, pay proper holiday pay and a dispute had arisen over bereavement and other leave. Their employee was unjustifiably disadvantaged.

In another recent case,^[3] an employee was awarded $105,000 in compensation for bullying, unjustified suspension and unjustified dismissal. Their employer was also ordered to pay more than $32,000 for lost wages and to pay a $1,000 penalty. Although this was at the high end of the compensation awards range, this case not only shows us what can happen when an employer gets it wrong, but also the range of potential awards the ERA can make and punishments that can be imposed on an employer.

Be proactive

All employers should navigate the risks of grievances by being proactive. If you are unsure about your workplace processes and/or have a potential personal grievance claim on the horizon, do talk with us early on. That is always better than the ambulance at the bottom of the cliff.

^[1] GF v Comptroller of the New Zealand Customs Service [2023] NZEmpC 101 EMPC 317/2021.

^[2] Stringer v McBride [2024] NZERA 59.

^[3] Parker v Magnum Hire Ltd [2024] NZERA 85.

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Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650