Letting people go is an inevitable part of being an employer in New Zealand. However, our laws provide robust protections for employees to ensure that employers act in a fair and reasonable manner when terminating employment.
An employer must act in good faith and in accordance with a fair procedure when dismissing an employee. In addition, an employer should only proceed with a dismissal if there exists a fair reason to do so. Failure in any of these elements by an employer may result in successful claims being awarded against them.
The Employment Relations Act 2000 (the Act) sets out the test to determine whether a dismissal is justified, namely: whether the employer’s actions, and how they acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred
Fair reasons for dismissal
There are various reasons that may justify a dismissal:
- Performance issues – unsatisfactory performance of the employee, which is outlined clearly to the employee with the opportunity for them to rectify their performance.
- Serious misconduct – where the conduct of the employee has the effect of destroying or undermining the relationship of trust between the employee and the employer
- Repeated misconduct – where dismissal is justified due to an escalation of warnings for the same misconduct
- Redundancy – part of restructuring a business can include making roles redundant, which means the role is no longer required. This can occur in situations such as a change in focus, sale of a business or due to financial constraints.
- Capabilities issues - If the employee has an illness or health issue that is keeping them from performing their job and the employer has considered all other alternatives, then dismissal may be justified.
Duty to follow a fair and reasonable process
In addition to having a fair reason for a dismissal, an employer is required to follow a fair process in terms of which they must comply with the following before proceeding with a dismissal:
- The employer must raise their concerns with the employee,
- Allow the employee a reasonable opportunity to respond.
- The employer must genuinely consider the employee’s responses before making a final decision.
At all times the employer should act in good faith and have an open mind when dealing with problems so that outcomes are not pre-determined.
Examples of a fair process would include:
- Performance management process
- Disciplinary process
- Consultation process
- Welfare process
Trial period termination
Subject to certain conditions, an employer may terminate an employee’s employment during their 90-day trial period and an employee will be prohibited from raising a personal grievance for an unjustified dismissal. (Such employee will not be prohibited from raising a personal grievance based on discrimination or unjustified disadvantage)
Summary dismissal
In situations of serious misconduct, an employer may be able to dismiss an employee without notice.
In this situation, the employee’s employment ends immediately, and the employer is not required to give notice. The employee is still entitled to any statutory payments such as annual holiday pay, with their final pay. But they will not receive payment in lieu of notice.
Even in cases of summary dismissal, the employer must follow a fair and reasonable process. Immediate dismissal occurs after the process has been completed.
Notice dismissals
Unless an employee is being dismissed for serious misconduct, the employer must give them the notice stated in their employment agreement.
Resignation vs constructive dismissal
An employee may resign for many reasons such as moving to a new job, to be a stay-at-home parent or any other personal reason. Usually, the employment agreement will set out the period of notice that the employee is required to give the employer of their resignation.
However, in some cases, an employee may feel that they had no alternative but to resign, owing to the actions or inaction of their employer. In such instance it may be considered a constructive dismissal and grounds for a personal grievance claim.
Personal grievance claim
Personal grievances are the primary manner that employees can raise legal complaints against their employers. If an employee feels that termination of their employment amounts to an unjustified dismissal, raising a personal grievance against their employer is their only course of action.
Unjustifiable dismissal covers instances where the employee can prove:
- The employer did not have a good reason to dismiss them and/or
- The dismissal process was unfair
The employee must raise a personal grievance for unfair dismissal within 90 days from the date of dismissal. (Personal grievances for sexual harassment must be raised within 12 months of the alleged incident).
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This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.
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