Employment Court makes important ruling on new test for dismissal
08 Aug 06In 2004 the Employment Relations Act was amended to include a new statutory test for determining whether a dismissal or other action taken by an employer was justified. The new test was "objective" and asked whether the action in question was "what a fair and reasonable employer would have done".
The Employment Court has considered this new test for the first time in a claim brought by Ms Hudson, a customer services agent, against Air New Zealand. The Court ruled that Ms Hudson's dismissal was unjustified and awarded her damages $5,000. However it is the Judge's comments on the new test for dismissal which are of most interest to employers.
The Court noted that previously an employer could justify a dismissal if its decision fell within the range of responses that a fair and reasonable employer could make. Under the old test the Court and Employment Relations Authority were reluctant to substitute their views for those of the employer, provided the employer's actions were not obviously unreasonable.
The Court said that under the new test, the Courts and Authority will need to determine on an objective basis what a fair and reasonable employer "would have done" and then evaluate the employer's actions against that standard. Judge Shaw stated that the new test redresses an imbalance of power that had been handed to employers "by requiring objective scrutiny of all the circumstances of a case".
The real significance of this decision is that the Employment Relations Authority will now feel less constrained about substituting its views about the fairness of a dismissal for those of the employer, and it will be harder for employers to justify dismissals. It makes it all the more important that employers adopt sound performance management and staff disciplinary processes.
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The Employment Court has considered this new test for the first time in a claim brought by Ms Hudson, a customer services agent, against Air New Zealand. The Court ruled that Ms Hudson's dismissal was unjustified and awarded her damages $5,000. However it is the Judge's comments on the new test for dismissal which are of most interest to employers.
The Court noted that previously an employer could justify a dismissal if its decision fell within the range of responses that a fair and reasonable employer could make. Under the old test the Court and Employment Relations Authority were reluctant to substitute their views for those of the employer, provided the employer's actions were not obviously unreasonable.
The Court said that under the new test, the Courts and Authority will need to determine on an objective basis what a fair and reasonable employer "would have done" and then evaluate the employer's actions against that standard. Judge Shaw stated that the new test redresses an imbalance of power that had been handed to employers "by requiring objective scrutiny of all the circumstances of a case".
The real significance of this decision is that the Employment Relations Authority will now feel less constrained about substituting its views about the fairness of a dismissal for those of the employer, and it will be harder for employers to justify dismissals. It makes it all the more important that employers adopt sound performance management and staff disciplinary processes.
HEADLINES
Hearings begin on Mapp's 90 day probationary bill
Health Ministry demands workers declare office romances or face disciplinary action
"Cultural employment" sector in NZ burgeoning
Feltex jobs remain after sale to Godfery Hirst
