New Tests for Justification and Reinstatement - Will They Make a Difference?

Before it was repealed by the Government on 1 April 2011, section 125 of the Employment Relations Act 2000 made reinstatement (where sought) the "primary remedy" for a personal grievance.  Now the Authority and Employment Court may provide for reinstatement (where sought) "if it is practicable and reasonable to do so".

Section 103A was likewise introduced with effect from 1 April 2011.  Section 103A(2) requires that substantive justification for a dismissal or other disciplinary action be determined objectively (ie the word "could" has been substituted for the former "would" in an otherwise materially identical subsection). 

Angus v Ports of Auckland Ltd

In a recent decision, Angus v Ports of Auckland Ltd, the Court considered one of the first cases in which the new test for reinstatement and justification for dismissal had arisen.  Colgan CJ noted that this was an interlocutory judgment (Angus sought interim reinstatement pending determination of his personal grievance), and therefore this "cannot and does not determine (and certainly not authoritatively) what these new sections mean".  However, Colgan CJ's comments in this case are strongly indicative of how the Court will interpret these new legislative tests in future cases.

Background

Angus was dismissed by Ports of Auckland (POA) on the grounds of serious misconduct.  The allegations included offensive behavior and bullying towards his co-workers.  Angus sought interim reinstatement pending determination of his personal grievance for unjustified dismissal.  The proceedings were removed by the Authority to the Court as it considered that "the wider public interest in obtaining certainty in relation to the recent changes to employment law legislation makes it undesirable for the Court to have to wait for a challenge to an Authority determination involving the new section 103A and/or section 125 provisions in the Act.  Public interest will be served by ensuring the Court’s view on these provisions is publically available as soon as possible."

Angus had worked for POA for 19 years and held "a satisfactory work record".  POA had recently hired a number of employees from Tuvalu and the evidence suggested that there had been some ill will in the existing work force.  Angus had written a "joke" job application pretending to be of Tuvalu extract and signed the note "Billy T. James".  Following an investigation, POA dismissed Angus for breaching the company's code of ethics.

Tests for reinstatement and dismissal - Colgan CJ

Colgan CJ said that, in deciding whether to grant Angus interim reinstatement, the Court had to take account of the new state of the law.  He said "Parliament has changed the position and, in very general terms, has sought to make it easier for employers to justify dismissals and to make it more difficult for employees to be reinstated if they have been unjustifiably dismissed".

On reinstatement, Colgan CJ said that that the former section 125 "never operated in practice as a default remedy".  He said "Indeed it was granted relatively rarely" and noted that there is well and long established authority on what "practicality" means in such cases.  As to the inclusion of the word "reasonableness" in section 125, Colgan CJ said that, although this would require clarification and determination by the Court "as appropriate cases arise", the practice of the Authority and the Court pre-1 April 2011 was to give reasons supporting orders of reinstatement where these were made.  Colgan CJ said "So in this sense the new section 125 may stipulate expressly the previous practice of the Court and the Authority.  If that is so, section 125 joins a number of other new or amended sections that affirm practice rather than effect change".

As to the new justification test, Colgan CJ said that "...it appears that Parliament has intended the existing practices of the Authority and the Court to continue subject, of course, to the alteration of "would" to "could" that applies to both the substance and procedure of a dismissal".  He also considered the other changes to section 103A (ie the non-exhaustive list of procedural steps an employer must go through in any disciplinary action - 103A(3) and the prohibition on a dismissal being determined to be unjustified based on minor procedural defects in the process - 103A(5)) and noted that these changes "…reflect and express the longstanding approach to such matters taken by the Authority and the Court in judge-made law, developed and applied over the last 30 years or so". 

Angus reinstated

Colgan CJ decided to reinstate Angus pending determination of his personal grievance for unjustified dismissal.  He held that Angus had an arguable case for both unjustified dismissal and reinstatement, despite reinstatement no longer being the "primary remedy".  Colgan CJ found that reinstatement was both "practicable and reasonable as new section 125 requires".  Factors influencing this decision were Angus' length of service, his age, his inability to obtain alternative employment with similar remuneration.  He said it was very unlikely that a compensatory payment for lost remuneration could replicate the value of the loss of ongoing employment. 

Interestingly, Colgan CJ's order for reinstatement was made on the basis that Angus would continue to take long-term leave, which would allow for POA to "…address any issues about its Tuvaluan workforce with the assistance, if appropriate, of a body such as the Human Rights Commission…".

Comment

Some would likely question Colgan CJ's comments that nothing has really changed on the application of the new reinstatement test.  It certainly begs the question "so why change the law?".  However, Parliament's intention can probably be best summarised in its explanatory note to the amendment Act when it said "[t]his change reflects common practice as reinstatement is seldom awarded.  In the majority of personal grievance cases, the damage to the employment relationship is irreparable.  This change would reduce the effort required for employers to demonstrate that reinstatement is neither desirable nor feasible, while having little impact on personal grievance outcomes.  The intention is that the remedy remains as an option where practicable and reasonable".

As to the new justification test, Colgan CJ certainly appears to acknowledge that the change from "could" to "would" will allow the Authority or Court to find that there is likely to be more than one possible fair and reasonable course of action that can be taken by an employer and which will not oblige the Authority Member or Judge to substitute themselves for the employer in determining what a fair and reasonable employer would have done.

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Last updated: 16 November 2011

The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.