In the first few months of 2013 we have seen numerous articles in the media reporting on cases where employees have been dismissed, including a swearing and speeding nanny and a drunk employee at a Christmas party. One dismissal in particular was picked up by John Banks, Leader of the ACT Party, to propose changes to New Zealand’s law concerning dismissals.
Friedriech Gostmann was dismissed after his employer, Independent Refrigeration and Electrical Limited, gave Mr Gostmann the option of resignation or dismissal.
The company argued that the dismissal, whilst lacking in process, was justified due to Mr Gostmann’s sub-standard performance and due to Mr Gostmann misrepresenting his experience and qualifications. Whilst Mr Gostmann claimed he was a refrigeration technician with 15 years experience, he appeared to lack knowledge of the basics.
One incident that was highlighted to Authority Member Rachel Larmer involved Mr Gostmann informing a colleague that certain cables had been isolated when they had not. When the colleague started moving the cables, the cables short-circuited. This could have potentially caused the electrocution of Mr Gostmann’s colleague.
The Authority found that Independent Refrigeration was unable to substantively justify Mr Gostmann’s dismissal under the Employment Relations Act 2000.
The Authority held that a fair and reasonable employer could not dismiss an employee for poor performance unless:
- it had first attempted to improve the employee’s performance by way of a performance management or monitoring process; and
- the employee had been subject to a graduated warning process, which had clearly put an employee on notice that their ongoing employment was in jeopardy.
As a consequence, Mr Gostmann received $5,000 as compensation for the humiliation, loss of dignity, and injury to feelings the unjustified dismissal had caused him.
Mr Gostmann was also awarded $10,608 for loss of remuneration. This component was then reduced by 50% to reflect his contribution towards the situation which gave rise to his dismissal, namely his number of quite basic but serious and costly errors.
The ACT Solution
ACT Leader John Banks drew on this case to call for changes to New Zealand’s employment laws.
Shortly after the Authority’s determination, Mr Banks issued a press release that said: “there is something very wrong with the laws in this country if an employee can fake their references, lie about their qualifications and experience and be so incompetent that they almost kill someone and still be awarded $10,000 compensation for distress. What about the distress of the person who almost lost his life?”.
Mr Banks believes New Zealand’s employment laws are “complex and confusing” and proffered solutions “that we could make to remedy this situation”. One suggestion was to reform the law dealing with dismissals by making the laws clearer and more certain, which could be achieved by a standardised dismissal process.
In our view
From being at the coalface, we think that most employers in New Zealand are aware that they must act in good faith. We also think that most employers know that they cannot dismiss an employee without a good reason.
What we do see, however, are employers not meeting the procedural requirements before issuing a warning or dismissing an employee. This appears to have happened with Independent Refrigeration’s dismissal of Mr Gostmann.
Although Mr Gostmann only worked for Independent Refrigeration for one month before being dismissed, it is more likely is that there were a series of incidents that the employer did nothing (or very little) about during that time, and that it then decided to take the more serious incident and run that through to dismissal. Had the employer dealt with earlier incidents formally then it would have been able to dismiss for the incident that it relied upon.
Unfortunately, it is relatively common for performance issues to be left until an employer has decided that it cannot tolerate the employee anymore. The answer is very simple; if performance issues arise, deal with those early. If they continue, then escalate the process to warnings. Leaving them until an employee has a more significant incident and then deciding to dismiss will always place that decision at risk of being unjustified.
Mr Banks’ proposed solution would apparently involve clarity around process and create a standardised dismissal process.
The test for whether a warning or dismissal is justified 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. Therefore, the process is dependent on the circumstances at the time. We are not sure a standardised dismissal process, as suggested by Mr Banks, would work, as one process does not fit all in employment law.
Further, it should be noted that the minimum requirements for a fair process were actually clarified and codified in an amendment to the Employment Relations Act in 2011. The Authority or Court must consider whether:
- having regard to the employer’s resources, sufficient investigation has been undertaken;
- the employer has raised its concerns with the employee;
- the employee was provided with a reasonable opportunity to respond; and
- the employer genuinely considered the employee’s explanations.
Our best advice: double check your reason and your process before you take any steps or make any decisions that could affect an employee’s employment. A quick phone call to us at the beginning could save you $10,000 in the end. We can be reached via email at email@example.com; or by telephone on (09) 375 8699.