Woulda coulda shouda – “Could” it now be easier to discipline/dismiss employees?

Since the ‘new’ justification test in s103A of the Employment Relations Act 2000 came into force on 1 April 2011, those who are interested have been watching the Employment Relations Authority (Authority) and Employment Court (Court) case determinations with bated breath.

The question on everyone’s lips: has the change in semantics (from “would” to “could”), along with the additional considerations the Authority is required to consider, caused employment relationship problems about dismissals or disciplinary steps to be decided differently?

Case updates

First came a case about a sleeping psychiatric nurse, Sigglekow v Waikato District Health Board [2011].  Mr Sigglekow had recently returned to work following health concerns, but not long after he returned to full time hours there were a number of concerns about him falling asleep at work and leaving early without telling anyone.  The Authority used the new test of justification to determine whether a dismissal was justified, and in doing so set out a long list of requirements for its consideration under the new test.  This has now been overtaken by the case we next discuss.

The full Court in Angus v Ports of Auckland Limited [2011] looked into the interpretation and application of the new amendments on 7 November 2011. Following on from its interlocutory decision (where it noted that Parliament changed the test from “would” to “could” in an effort to make it easier for employers to justify dismissals) this judgment related to amendments to two new sections of the Employment Relations Act 2000 that change the previous test about the law of justification (s 103A) and the test for reinstatement (s 125).  The judges in this case deal solely with the interpretation and application of the amendments to the law, as set out in Air New Zealand Ltd v V.  They noted that:

-                            Former s 103A has been split into two subsections:

-                            Section 103A(1) retains the opening words of former s 103A.  Continued use of the phrase “on an objective basis” requires the Authority or Court to act impartially.

-                            New s103A(2) substitutes the word “could” for the previous “would”.  This means that the Authority or Court can no longer determine justification by simply asking what a notional fair and reasonable employer in the circumstances would have done.  There might be more than one response that a fair and reasonable employer might justifiably apply.  So long as what happened is one of the outcomes that a fair and reasonable employer in all the circumstances could have decided upon, the Authority or court will find the action justified.  The test remains objective.

-                            The new s103A has added a number of considerations that the Authority or court must consider when determining the test of justification.  These are mandatory considerations that must be taken into account in determining whether the test of justification is established in any case.  These include whether notice of the allegation was given to the worker; whether an opportunity was given to the worker to refute the allegation; and whether there was an unbiased consideration of the worker’s explanation.  Other appropriate factors may also be taken into account.

-                            The Authority or Court is prohibited from determining that a dismissal or disadvantage is unjustified solely because of procedural defects if these were minor and did not result in the employee being treated unfairly.

-                            Nevertheless there is a continued emphasis on substantial fairness and reasonableness, but not a pedantic scrutiny of minor procedural failings.

-                            In practice, the Authority or Court must follow a format for determining whether the employee was unfairly dismissed or unfairly disadvantaged.  They must determine: the facts; what a fair and reasonable employer could have done in all the circumstances, including the circumstances of the employer, employee and the nature of the work; and whether what the employer did was what a fair and reasonable employer in the circumstances could have done.

Chief Judge Colgan noted that while “under the former s103A, the Court and the Authority were required to determine a single outcome (what a fair and reasonable employer in all the circumstances would have done and how such an employer would have done it), the new test allows for more than one possible justifiable outcome and more than one possible justifiable methodology.”

Rusling v B R and S L Porter Limited [2011] provides a further illustration of how the new test will be applied.

Rusling claimed that he was unjustifiably dismissed and that his employer failed to deal with him in good faith.  The respondent said that Rusling was not dismissed but that he resigned or abandoned his employment after failing a drugs test.  Rusling was subjected to a drugs test and was informed by the nurse of a positive test.  He subsequently attended a meeting with the General Manager and a director of the company.  Although there was some dispute over exactly what was said in that meeting the Authority determined that Mr Rusling was told that he did not have a job as a result of a failed drugs test.

The Authority considered the new test in section 103A of the Act and whether or not the actions of the company were those of a fair and reasonable employer in all the circumstances.  The Authority recognised that it was required to objectively review ‘all of the actions of the employer up to and including the decision to dismiss’.  The circumstances the ERA considered included the employer’s code of behaviour, the employee’s failure to observe the code of behaviour, and the positive drug test that revealed that Rusling was not free from drugs while at work (as required by the code).  The Authority held that given the failed drug test the company was entitled to implement a disciplinary process but it was not obligatory for the employer to dismiss.  The Authority held that the actions of the company were not those of a fair and reasonable employer in all the circumstances as they failed to observe any of the established principles that apply to fair and just procedure when dismissing an employee.  The employer had decided to dismiss without advising Rusling of the allegations and giving him an opportunity to take advice and respond.  The departure from a fair and reasonable process in this case was held to be substantial.  Nevertheless, remedies were reduced by 80% for contribution.

Take home point:

When analysing whether a dismissal/disciplinary action is justified (paraphrasing the Chief Judge) use the present tense of “would” and “could”.  It is no longer what a fair and reasonable employer will do in all the circumstances but what can be done.

Lauren Simpson is a Solicitor at DLA Phillips Fox and can be contacted on +64 9 916 3758.