This is an extract of our Remedies document, which we sell as part of our LAWS 363 Employment Law Notes collection written by the top tier of University Of Canterbury students.
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1) this is an objective test 2) it is the ER's obligation to show that their behaviour was justified 3) it was fair and reasonable in all the circumstances prevailing at the time (not reasons for a dismissal that may arise later on). The word 'would' imposed an obligation on the court to consider the action by the ER against the standard of the fair and reasonable ER. Section 4 GF applies to behaviour too. NOW the test has changed: section 103A: (1) For the purposes of section 103(1)(a) and (b), the question of whether a dismissal or an action was justifiable must determined, on an objective basis, by applying the test in subs (2). (2) The test is whether the employer's actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred. (3) In applying the test in subs (2), the Authority or the court must consider
a. Whether having regard to the resources available to the employer, the employer sufficiently investigated the allegations against the employee before dismissing or taking action against the employee; and b. Whether the employer raised the concerns that the employer had with the employee before dismissing or taking action against the employee; and c. Whether the employer gave the employee a reasonable opportunity to respond to the employer's concerns before dismissing or taking action against the employee; and d. Whether the employer genuinely considered the employee's explanation (if any) in relation to the allegations against the employee before dismissing or taking action against the employee. (4) In addition to the factors described in subsection (3), the Authority or the court may consider any other factors it thinks appropriate. (5) The Authority or the court must not determine a dismissal or an action to be unjustifiable under this section solely because of defects in the process followed by the employer if the defects were - a. Minor; and b. Did not result in the employee being treated unfairly. So, the test is still objective. Look at what the ER knew at the time. Subs(3) guides on procedure.
Angus v Ports of Auckland Ltd  - noted that previously ERAuth was required to effectively determine a single outcome - what a fair and reasonable EE would have done in the circumstances. Now there is more than a single standard: if the French had tried a bit harder they 'would' have won the RWC versus if the French had tried a bit harder they 'could' have won the RWC. Also noted that the new test goes beyond Oram because now GF is needed too. Sigglekow v Waikato DHB - test applies as follows: 1) test reasons objectively; stand back as a neutral observer looking at reasons and procedure. 2) Focus the enquiry on the ER's conduct. Only afterwards look at the EE. 3) Look at the substantive reason for then decision then at procedural fairness. 4) Apply the standard of a fair and reasonable ER, assess the justification at the time then look at the circumstances. 5) Work through all the matters under s 103A(3) Other considerations include: GF requirements, employment agreement for relevant procedure or policies, whether expectations were known to EE, conduct of the parties, history of employment, nature of the industry, nature of resources available to HR, social attitudes in community, public interest obligations, size of workplace and number of EE's involved, communication and time to respond given to EEs, look at objects of ERA, look for similar decisions, look for mitigating factors. Also held that checklist should not apply mechanically. After a full and fair investigation look into whether the ER had a fair and honest belief - GF taking on substantive consideration? Not clear. Finally look at s 103A(5) and decide whether the defects were minor and effectively forgivable. B) Unjustifiable Dismissal: Meaning of 'Dismissal' 23
Can be unclear if there was a dismissal e.g. if it is constructive or fixed term. i) Fixed term agreements: section 66 - need to be time or task completion defined, then they terminate. If someone is terminated because of a FTA then there is no issue of dismissal because the contract has ended. Difficulty is where EE didn't think it was fixed term (FT). Summary: unjustified dismissal may arise in context of FTA if:
If there is no genuine reason for FTA at beginning or EE was not informed of reason, or there is no written clause reflecting agreement to a FT.
If ER is in breach of an express or implied promise of renewal, or there has been some legitimate expectation of renewal created by the ER.
If FTA is a sham
If EE is bound by a CEA that is inconsistent with the FT
If ER's behaviour is in breach of general GF. BEFORE s 66: Actors IUW v Auckland Theatre Trust Inc - A theatre manager was employed under a FTA. Fine until there was a clash of personalities with other staff. ER purported to end FTA. CA held that failure to renew or operate under FTA would only be unjustified dismissal if there was some promise to continue the contract. ER could let the FTA run out even if the true reason was dissatisfaction. NZ Food Processing etc Union v ICI (NZ) Ltd - court made 4 key findings: 1) fixed contracts are valid unless prohibited by CEA. 2) Only allowed a FT contract if it was genuinely needed for the ER's operational requirements. 3) Those requirements of the ER must exist throughout the term of the FTA; 4) Burden is on ER to show that the FTA was genuine and not to deprive EE's rights. Principal of the Auckland College of Education v Hagg - (CA) a lecturer at the COE was under a FTA, renewed twice. The 3rd agreement expired ending the relationship. EC agreed with ER that there was no reason to renew BUT CA disagreed, revisited the ICI principles and found that an expired contract could only give rise to an unjustified dismissal if: 1) EE can show that the contract was a sham, for not just the ER but where both parties entered the FTA to hide the true nature of the relationship. 2) The contract was genuinely for a fixed term at its inception but the nature of the relationship had changed because of an express or implied promise to renew. POST S 66 Duty to advise of FTA reasons and have reasonable grounds: Varney v Tasman Regional Sports Trust - Failure to enter into clear agreement as to the FT at the start of employment will likely lead to finding that the agreement was of indefinite term. Reasons based on reasonable grounds for a FT AND you must "advise" the EE of them (s66(2)). Canterbury Westland Free Kindergarten Assn - Existing EEs with indefinite contracts, could work as practice managers by entering into FTA for 3 years. Possibility of renew for another 3 yr term. HELD that although the reasons were sincere they were not based on reasonable grounds: using a FTA for a training/continuing education exercise. FTAs should only be used for "discrete projects of limited duration" BUT the position was "ongoing and the need for [practice managers was] constant." Not a valid reason that the EE's role might eventually change, which could be dealt with by variation of IEA or restructuring (Terson Industries Ltd v Loder)
24 Maritime Union v Ports of Auckland Ltd - Distinguished Canterbury Westland Free Kindergarten. FTA was negotiated when the work of stevedoring was ongoing but it was possible that ER would restructure and use IC for labour. HELD that the possibility of restructuring was the 'antithesis' of ongoing employment. Kath disagrees and prefers Kindergarten reasoning. Norske Skog Tasman Ltd v Clarke - EE was told that FT was to maintain fixed staffing levels. CA found a further reason was a contestable selection process that was used after the staffing levels were agreed with union. HELD ER had not given sufficient advice. Also NOTED that all the ER has to do is bring the reasons to EE's attention; if EE ignores written advice then that "does not mean that the ER has failed to comply with s 66(2)(b)." Section 66(3) - Reasons that are not genuine:
FT to write out holidays or other benefits
Used to assess suitability for permanent employment. Section 66(4) if ER and EE agree for EE to end in a specific way then it must be stated in writing: (a) the way in which the employment will end; and (b) the reasons for ending the employment in that way. Failure to comply with this section does not affect the validity of the employment agreement. Shortland v Alexander Construction Co Ltd - EE was under a FTA as a site administrator. FT was to expire when "Elephant Hill" project finished. Dispute = whether the project was finished. ER decided it was finished. The only reason given for the end of the FTA was "the end of the Elephant Hill project." HELD that this was not a sufficient ground for a FTA and that it must also be included that "the company had no other work in prospect" BUT court would not imply this into the agreement (to avoid undermining certainty). HELD EE was unjustifiably dismissed. Section 66(6) - if ER doesn't comply with subs(4) then ER may not rely on any term to end employment if EE elects the term to be ineffective. If FTA expires then EE begins an indefinite contract unless renegotiated: Varney v Tasman Regional Sports Trust - EE was on a FTA that was contingent on continued funding for the position. Employment continued past the end of the FT by 10 weeks when ER purported to terminate the employment. HELD that after FTA expired the EE was under a contract of indeterminate duration. The ER had waived the FT when it didn't renegotiate. HELD EE was unjustifiably dismissed. Electrotech Controls Ltd v Rarere - ER tried to keep EE on as a casual after expiry of FTA. HELD that the same terms as were in the FTA applied. Problem with casual work: should only ring and use for finite periods of time BUT it can tip into an on going basis. Barnes v Whangarei RSA - initially EE was 'casual' - working when needed. EE was then placed on a weekly roster with minimum hours and had to apply for time off. HELD true nature of employment had moved from casual state to one of regularity of performance. Found position to be permanent. Jinkinson v Oceana Gold Ltd - EE worked continuously over 6 months and held to have a legitimate expectation of continuing employment. Court used section 6 to look at the "real nature" of the relationship. Payment is important for casuals too. If there is no on going employment then holiday pay must be paid: 8%. Inconsistent terms: 25
Varney v Tasman Regional Sports Trust - If contract provides for restructuring or continuation then it conflicts with its nature as a FTA. Court suggested that s 66 was arguably not complied with if there were conflicting provisions, as this would make it unclear whether reasonable grounds were given. C.f. Williams v AG recognised that a FTA could be a hybrid agreement containing provisions allowing both parties to end early. Redundancy Clauses: Irwin v Massey - EE had a FTA for 5 years which also contained a clause for termination on notice for cause, bankruptcy, bringing university into disrepute or illness effecting ability to do job. It also provided for damages if ER terminated for other reasons and a right to elect taking redundancy payment under a CEA. EE was made redundant and argued that the FTA could not be ended outside of the termination clause. ER relied on compensation for redundancy clause to imply a right to make redundancy. HELD that the compensation clause could not imply the right to make redundancies and that it was simply a cap on compensation in the event that ER made a breach. ii) Constructive Dismissal Auckland Shop Employees IUW v Woolworths - guidelines for constructive dismissal (CD): 1) ER giving a choice between resigning or being dismissed. Nelson Polytechnic v NZ Assn of Teachers
- ER attempting to give a compromise, to save the ER from a grievance while saving the EE's reputation, amounts to CD. 2) ER follows a course of conduct with the dominant purpose of coercing resignation. E.g. a. RMS Shopfitters v Baldwin - ER unilaterally changed agreement to make work harder and force a resignation. Held to be a CD. b. NCR (NZ) Ltd v Jones - ER just increased the performance targets for EE to an unrealistic level with the aim of prompting resignation = CD. c. Weir v Fuji Xerox NZ Ltd - ER had performance concerns, but mismanaged them, forcing resignation = CD. 3) If ER seriously breaches a duty to the EE this may force resignation. Here CD is not reliant on ER trying to bring employment to an end (no intent required). Also, here the CD may be found to be reasonable accounting for all the circumstances. a. Court quoted with approval: Wood v WM Car Services Ltd - ER's conduct breached TC and judged objectively the EE could not be expected to put up with it. b. Boyne Co Ltd v Hwang - a threat of dismissal after the EE raised a HS issue, prompted her to reign = CD c. FACTS in Woolworths: EE was detained and interviewed by a security officer after there were till discrepancies. EE was forced to resign because of oppressive process. Court noted implied duty to conduct a fair and reasonable investigation. Breach of this = CD. Degree of breach is significant to inquiry. Nature of the Test Auckland Electric Power Board v Auckland Provincial IUW - Involved dog attacks. 2 questions:
"whether the resignation has been caused by a breach of duty on the part of the ER, which required an examination of all the circumstances. Then if there had been a breach ..."
"whether the breach of duty by the ER was of sufficient seriousness to make it reasonably foreseeable by the ER that the EE would not be prepared to work under the conditions" i.e. whether a "substantial risk of resignation was reasonably foreseeable" given seriousness of the breach. It is not clear why there is a requirement of "reasonable foreseeability" other than to ensure that CD does not occur when the ER acts reasonably. The foreseeability requirement has been criticised on the basis that it is inconsistent with contractual principles (Taranaki Healthcare Ltd v Lloyd). Nevertheless the requirement stands. 26
One issue with requiring reasonable foreseeability is if there is a series of events over time and none is sufficient to show RF on its own: NZ Institute of Fashion v Aitken - EE resigned due to nonpayment of a bonus, failure to answer her letters, appraisal meeting where she was criticised and threats of disciplinary action. Court found that some but not all of the actions were unreasonable. None of the breaches found to be enough to make resignation reasonably foreseeable. Abdalla v Southern Institute of Technology - Court adopted analysis of whether the behaviour was so egregious that it was the "final straw" for the EE?
Business Distributors v Patel - P worked as a sales person. Contract allowed for changes in job description following consultation. BD wanted to give him a lower salary which P resisted. P got performance related warnings and restrictions were placed on his ability to work (e.g. couldn't enter store room or contact suppliers). BD offered to protect income for 6 months if P accepted change. Was told to accept plan, offer an alternative or accept dismissal. P resigned. CA HELD not to be a CD. Emphasised that P didn't express his concerns or put grounds for resignation in letter: "[P] resigned because of the ER's insistence on the territory system, not because of the unfair way in which he had been treated." They emphasised that BD didn't want to dismiss P which contrasts with Auckland Electric Power Board which emphasised the ER's ignorance of EE's worries for the future despite no intent to dismiss the EE (concerning dog attacks when checking electricity meters). Court recognised the petty course of disadvantages amounted to an 'unfair disadvantage' but not CD. Patel was criticised in Taranki Healthcare Ltd v Lloyd for not considering issue of reasonable foreseeability of resignation. It seems odd to recognise unfair disadvantage but not unfair resignation. Formal Resignation doesn't necessarily mean situation is justified: Marshall Cordner v Canterbury Clerical Workers Union - breach of TC found when a staff member in a law firm was unaware about complaints about her work then suddenly told to find another job - forcing resignation. Auckland Electric Power Board - EE was attacked by dogs when checking power meters. AEPB was not concerned. Found that this was a safety term that should have been addressed = CD. Probationary officer CD'd when facing extreme stress that he had told ER about (AG v Gilbert). CD when ER had no strategies for dealing with workplace bullying (McGowan v Nutype Accessories Ltd). Staying on job (e.g. giving 3 months notice) is normally evidence that there was not CD - CocaCola Amatil v Kaczorowski. But length of notice is not definitive although relevant (Para Franchising Ltd v Whyte). NO CD where the parties have mutually agreed to terminate the employment relationship without any pressure (COMPASS Union of NZ Inc v Direct Mail Processors Ltd).
Abandoning employment can be a normal dismissal or CD. EN Ramsbottom Ltd v Chambers - CA held that abandonment simply meant relinquishment of employment by the EE. Further ER's failure to make further inquiries does not turn abandonment into dismissal. TEST =
would an objective bystander reasonably conclude the EE abandoned their employment? Noted that abandonment can be a form of misconduct - withholding what is expected for an unreasonable amount of time. 27
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