Dismissing An Employee – When Is It Justified?

In 2004 Parliament amended the Employment Relations Act 2000 and introduced an objective test for determining whether a dismissal or other disciplinary action is justified. The recent decision in Air New Zealand v Hudson makes it clear that employers now, more than ever, need to act cautiously and be seen to be acting fairly when it comes to dismissing or taking disciplinary action against an employee.

Background

Ms Hudson was employed by Air New Zealand ('Air NZ') as a customer service agent at Auckland International Airport.  She was dismissed for “serious misconduct and repeated serious breaches of [her] obligations towards [Air NZ’s] customers”.  The most serious incident involved an allegation that she pushed another Air NZ boarding agent at the gate of one of its flights ('pushing incident'). Other allegations related to complaints by passengers about Ms Hudson’s dealings with them and there was evidence that some customer airlines were unwilling to work with her.

Employment Court’s Decision

Despite Air NZ conducting a lengthy disciplinary investigation, the Court held that there were “serious flaws” in its investigation.  The first flaw was its failure to interview another employee who was not present at the pushing incident, but who had 'relevant information' about it before making the decision to dismiss Ms Hudson.  The second flaw was Air NZ’s advice to Ms Hudson’s representative at the beginning of the investigation that her role was limited to ensuring that the process was correct and “supporting Ms Hudson rather than being a witness or perform any other function”.  The Court concluded that the investigation undertaken by Air NZ was not what a fair and reasonable employer would have done in the circumstances and, therefore, Air NZ's finding of serious misconduct could not be justified.  It followed that Air NZ’s decision to dismiss Ms Hudson was unjustified. 

In determining remedies, however, the Court held that Ms Hudson was only entitled to a “small monetary remedy” of $5,000 under section 123(1)(c)(i) of the ERA.  This was because the pushing incident, her previous history (a final written warning had been issued in October 2003) and the impracticability of her working with other airline operators would have justified Air NZ’s decision to dismiss her in any event.

Effect of the Decision

Justification for dismissal or other disciplinary action must be determined on an objective basis.  To determine whether an employer’s actions are what a fair and reasonable employer would have done in all the circumstances, the Authority or Court will objectively evaluate each of the employer's actions, for each part of the disciplinary process.  The new 'objective test' replaced the previous 'subjective test' which Parliament considered too wide and employer-focused.

In summary, employers need to be especially careful when making decisions and conducting dismissal investigations.  They must consider not what a fair and reasonable employer could do in the circumstances but what, objectively, a fair and reasonable employer would do.  They should ask themselves the question: What would a neutral observer view as being fair and reasonable

Implications for Employers:

• Keep "fairness" in mind throughout the entire process
• Set out each allegation in detail, such as date, time, and exactly what happened, so that the employee has enough information to respond to the allegation
• Obtain information from all relevant parties and provide this to the employee before any decisions are made
• In most cases, it is important to keep a complete “paper trail” of all stages of the investigation
• Ensure employees have the opportunity to have a representative and do not limit their role
• Ensure the employee understands that a potential outcome of the investigation could be disciplinary action, including dismissal
• If the investigation results in a finding of misconduct or serious misconduct, consider separately whether summary dismissal or some lesser form of disciplinary action is appropriate in the particular circumstances

Employers Can Sue Employees too…

Cases like Air New Zealand v Hudson may lead employers to believe the employee always has it their way.  However, a recent case shows how the Authority can crack down on errant former employees.  In Wallace Corporation Limited v Williams the employer took its former employee, Mr Williams, to the Authority to recover an overpayment of wages.  The wages were overpaid when an administrative clerk mistakenly entered Mr William's hourly rate as $201.08 per hour instead of his actual $13 per hour rate.  The mistake resulted in an overpayment of $3,619.79.  After the mistake had been discovered arrangements were made for Mr Williams to repay $75 per week out of his wages. However, Mr Williams subsequently abandoned his employment and so repayments stopped.  The employer went to the Authority and it directed Mr Williams to repay the full overpayment amount, together with a contribution to his employer for its costs in recovering the overpayment

For more information, please contact:

Erin Davies
Partner
t: +64 9 979 2177
m: +64 29 622 2300
e: Erin Davies

Last updated: 22 June 2006

This article is intended to be brief in nature and should be used for information only. It should not be relied on as legal advice.