Putting the fair factor into firing

Anthony Drake, Senior Associate | Wednesday 28 June 2006

"Why can't I just fire him?!" is the frequent question asked by employers frustrated over what they perceive is the tortuous path they must follow to dismiss a staff member.

One quick answer: It could cost you money if you do. And another key one: Because it might not be fair to do so.

Fair's fair

Fairness is the key word in this area of employment law. Again and again employers are criticised for failing to act in a "fair" way.

The difficulty is that there is no definition or prescription of what amounts to "fair" treatment. An employer must necessarily exercise a measure of judgement and commonsense in establishing and following a process in dealing with employees – and hope that his or her measure of what is fair accords with that of the Employment Relations Authority and Employment Court.

It is all too easy to highlight what appear to be absurd results from cases decided in recent years by the authority and by the court, but today's approach is not new. For example, in 1974 the Employment Court ruled that the employer unjustifiably dismissed a chronically tardy employee because in a letter of warning the employer said the employee "could be dismissed", rather than "would be dismissed".

Whatever your view on the current system, the fact is that we have to work within it. An employer has to be keenly aware of the obligations it has with employees and the risks that exist if staff are not dealt with properly and fairly.

New test of justification

The Employment Relations Act was amended in 2004 to introduce a new statutory test of justification for personal grievances (section 103A).

The "new" test has recently been ruled on by the Employment Court which found on the face of it, s103A has widened its enquiry to enable the employer's decision to be examined against an objective test and in light of all the relevant circumstances. This means that court or authority will evaluate all of the employer's actions in all the circumstances – including the employer's decision that misconduct has occurred and the employer's decision to dismiss. Each of the stages are open to scrutiny. The court or authority will consider (by an objective standard) the employer's actions against what a fair and reasonable employer would have done.

Personal grievance procedure

The Employment Relations Act establishes the personal grievance of unjustifiable dismissal. It also outlines that where the authority or the court determines that an employee has been unjustifiably dismissed, the remedies available to the employee. These include:

• Reinstatement;
  
  
• Reimbursement of lost wages;
  
  
• Compensation for loss of other benefits; and
  
  
• Compensation for humiliation, loss of dignity and injury to an employee's feelings.

The burden of proof

The Employment Court has made it clear that the onus of proving a dismissal is justified rests with the employer.

Once the employee established that there was in fact a contract of employment and that he or she was dismissed, it is then up to the employer to establish substantive grounds for the dismissal and compliance with the rules of procedural fairness.

The new test of justification makes it clear that whether or not a dismissal was unfair is an objective standard taking into account whether the employer's actions were those of a fair and reasonable employer, in the circumstances existing at the time of the dismissal.

What is procedural fairness?

Despite the cynical observations that are frequently made that the court and authority indulge in "nit-picking" in trying to find procedural flaws in a dismissal, the Employment Court has stated that an employer's investigation should not be subjected to "minute or pedantic scrutiny". It is not entirely accurate to say that there are two types of unfairness – procedural unfairness and substantive unfairness:

"In considering such a question, it is often convenient to distinguish between procedural and substantive unfairness. But there is not sharp dichotomy. In the end the overall question is whether the employee has been treated fairly in all the circumstances," says the court.

Fairness principles

There is no checklist for procedural fairness. There are, however, some fairly well-worn and generally applied principles that provide guidance to employers and which the employer will need to establish have been broadly followed in attempting to justify dismissal. They are:

Warning

The employee must be told that his/her conduct is unacceptable and that a change in conduct is required "or else". The warning needs to make it clear that the person's job is on the line.

Investigation

Before dismissal, or any other type of disciplinary action, an employer must carry out a full investigation of all material facts and circumstances.

Reasons

The employee must be told why he or she is being dismissed before this step is taken.

Opportunity to be heard

The employee must have a real opportunity to put his or her side of the story and to explain what happened before being dismissed.

Scrutiny shifts

The new test means a new level of scrutiny of employers' actions. The emphasis has shifted from whether a fair and reasonable employer "could dismiss" to "would dismiss" taking into account of all the circumstances.

For further information,please contact your usual Bell Gully advisor or:

AUCKLAND

Rob Towner
Partner

WELLINGTON

Andrew Scott-Howman
Partner