Publications
FYI
Employment Law
09 Feb 2009
Update on Recent Employment Law Cases
As stated in our December 2008 FYI, the Government is amending the Employment Relations Act to introduce a new law on trial periods which will come into effect on 1 March 2009. From that date, employers of fewer than 20 staff will be able to take on new employees for trial periods of up to 90 days. During a trial period, where an employee is dismissed, he/she will not be able to bring a personal grievance or other legal proceeding relating to that dismissal.
To take advantage of this provision for trial periods, employers will need to:
- agree with the employee that his/her employment agreement will include a trial period; and
- include a trial period clause in the written employment agreement.
If you would like assistance with the appropriate wording for a trial period clause, or any other advice on this new legislation, please contact the Simpson Grierson Employment Law Group.
Dismissals and the Employee's Duty of Good Faith
When the Employment Relations Act 2000 was passed and the statutory duty of good faith first came into effect, the case law tended to focus on the employer's actions (ie, considering whether the employer had acted in good faith in its dealings with employees).
However, in recent cases, the Employment Court has had to consider claims that employees have breached their duty of good faith to their employer. One such recent case, Craig v Carter Holt Harvey, is considered below.
Craig v Carter Holt Harvey
Ms Craig was employed as a receptionist/administrator at Carter Holt Harvey's Tasman Mill in Kawerau. One of her responsibilities was the management and administration of company mobile phones. On one occasion, Ms Craig discovered a fault with a phone which had been returned to her by a manager. Although the loudspeaker was working, calls could not be listened to privately, through the ear piece.
Ms Craig believed that the phone was out of warranty and that it would cost Carter Holt Harvey money to repair it. Based on this, and without reference to a manager, Ms Craig organised for her personal mobile number to be transferred to the faulty phone. She used the phone for the next three months.
A supervisor later discovered this and an investigation was initiated - the concern being misuse of company property. Eventually, Ms Craig was dismissed. The issue for the Employment Court was whether the dismissal was justified.
Court's Findings
The Employment Court found that Ms Craig had taken advantage of her responsibility for company mobile phones, to obtain a benefit to which she would not otherwise have been entitled (ie to have her personal number transferred to the company phone). Taking this into account, along with Ms Craig's knowledge of the company mobile phone policy, the Court held that a fair and reasonable employer would have dismissed Ms Craig for serious misconduct (as Carter Holt Harvey had done).
In making its decision, the Court held that the duty of good faith put a positive onus on Ms Craig to conduct herself in a way that would not deceive or mislead Carter Holt Harvey. This obligation had been breached in the circumstances.
Additionally, the Court found that Ms Craig's albeit honest belief that the phone was the property of the supplier (Telecom) and only the supplier's consent was required to transfer Ms Craig's personal number, was not a reasonable belief in all the circumstances. The Court concluded that Carter Holt Harvey could not continue to have trust and confidence in Ms Craig, even after her long and essentially unblemished period of service.
Implications for employers
The Craig v Carter Holt Harvey decision is a useful one, as it confirms that employers have a right to expect that their employees will act in good faith at all times. Specifically, it confirms that where an employee has not been "up-front" with his or her employer and has failed to disclose an issue of importance (in this case, the fact that Ms Craig had transferred her personal number to the company mobile phone), this may give the employer grounds for taking disciplinary action against the employee, including, in appropriate cases, dismissal.
Inappropriate Use of Email - The “Eleven Most Hot People”
Many may recall the 2007 case of an employee who was dismissed for forwarding an email titled "Eleven Most Hot People", as it attracted substantial publicity. In a decision which concerned and surprised some employers, the Employment Relations Authority held that Ms Wood's dismissal was unjustified.
The employer appealed that decision to the Employment Court which has now issued its decision. The Court's decision is of significance for employers because the Court has emphasised that the section 103A test (for justifying dismissals) is about measuring the employer's conduct against what a reasonable employer would do in their specific context and work environment.
Arthur D Riley v Wood - Facts
Ms Wood was employed by Arthur D Riley & Co as an administrative assistant. She had received prior warnings about "questionable content" in emails. She was summarily dismissed from her employment after she distributed the email entitled "Eleven Most Hot People".
Ms Wood's employer considered this email was offensive, indecent and inappropriate and that it breached company policy, therefore amounting to serious misconduct. The issue for the Employment Court was whether Arthur D Riley was justified in dismissing Ms Wood for serious misconduct in light of its email policy.
Court's Findings
The Court held that the employer's internet/email policy was a relevant consideration when assessing whether the dismissal was justified, as was the employer's evidence that the workplace was a conservative one. The Court concluded that this employer had acted as a fair and reasonable employer would have.
An important aspect of the judgment for employers is the finding that the "employment environment" is a factor to be considered (ie the fact that this employer could show it had a conservative workplace). However, the Court cautioned this does not mean employers have an "unbridled license to impose their personal prejudices or values on employees". Employers must take an open-minded, rational approach.
Implications for Employers
This recent Employment Court decision provides some good news for employers in relation to the Court's scrutiny of dismissals. Employers' actions will not be considered in a vacuum, but in light of the particular workplace culture. However, it will still be important for employers to ensure that there are good reasons for the dismissal and that a fair process had been followed before any decision is reached.
Business Sales and Non-Vulnerable Employees
Olsen v Carter Holt Harvey
This decision from the Full Employment Court is key when it comes to considering the application of Part 6A of the Employment Relations Act (ERA) to employees who are not categorised as "vulnerable" (ie, not employed in cleaning, catering etc within specified sectors).
The Facts
Ms Olsen was originally employed by Distribution Management Systems (DMS). In 2005 DMS sold its business to a new company, DMS 2005 (which later changed its name to Carter Holt Harvey IT Limited (CHH)).
The sale and purchase agreement between DMS and CHH included the following obligations regarding employees:
- DMS was required to consult with employees about the sale prior to giving notice of termination;
- following consultation, CHH was required to offer all employees of DMS employment on "overall no less favourable terms" and recognising service with DMS;
- both DMS and CHH were required to use "reasonable endeavours" to persuade all of the employees to accept employment with CHH.
In her role with DMS, Ms Olsen assisted with the sale process. In particular, she was asked to prepare new individual employment agreements for CHH. She knew that agreements were being prepared for all existing DMS employees (including her), and that the DMS employment agreements were being used as a base. Therefore, as far as Ms Olsen was concerned all DMS employees would be transferring to CHH - it would be "business as usual".
Some time later, however, and unbeknown to Ms Olsen, representatives of DMS and CHH agreed that finance and HR functions would not be required (as another part of CHH could provide these). This decision meant that Ms Olsen and one other DMS employee would not be needed moving forward.
However, Ms Olsen was not advised of this, even when she spoke to her managers the day before CHH took over and advised that she would be coming in to work the following day.
Ms Olsen duly came into work on the day on which CHH took over the business. She worked through the morning, but at 12.30pm (in a meeting which lasted only 5 minutes) she was advised that her position was not needed by CHH and that there was no alternative role for her.
Court's Findings
Ms Olsen brought a personal grievance claim against CHH. She was successful, with the Employment Court finding that she had been unjustifiably dismissed.
While this is perhaps not surprising given CHH's apparent lack of consultation with Ms Olsen (both regarding decision that her position would not be required, and in respect of considering alternatives), the Employment Court also considered Ms Olsen's claim that CHH had breached section 69O of the ERA, which provides that an affected employee may choose to transfer to a new employer upon a restructuring (the definition of which includes the sale of the business).
This case marks the first occasion on which the Employment Court has considered this section. The argument for CHH was that section 69O simply means that an employee in Ms Olsen's position can choose not to transfer to a purchaser, but that it does not impose any obligations on the existing, or the new, employer beyond this. However, the Full Employment Court did not agree.
The Court held that Subpart 2 of Part 6A of the ERA (which deals with non-vulnerable employees) provides "protection for the employment of the affected employees" through employment protection provisions (EPPs). EPPs were held to be "machinery… clearly aimed at encouraging employers to negotiate arrangements with new employers for the transfer of affected employees".
The Court then considered whether there was an "arrangement" in terms of the ERA in this case. On the basis of the Sale and Purchase Agreement between CHH and DMS, the Court said that there was an arrangement here between DMS and CHH. Further, it found that CHH had breached that arrangement when it purported to withdraw its offer of employment to Ms Olsen, and when it did not offer her an alternative position.
CHH had argued that Ms Olsen could not rely on the Sale and Purchase Agreement to found her claim under section 69O, as the Agreement was not a contract with her, but rather an agreement strictly between CHH and DMS. However, the Employment Court rejected this argument and found that Ms Olsen was relying on the ERA, not the Agreement, and that she was entitled to rely on "the infringement of the statutory right conferred on her by section 69O of the ERA…".
Implications for Employers
In light of this case, employers who are preparing to sell or purchase a business will need to consider carefully the wording to be included in sale and purchase documentation as it could have a significant impact on the parties' obligations towards potentially affected employees. Claims by employees based on such documentation are certainly a possibility.
Authors
Carl Blake
Senior Associate - Dispute Resolution
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Katherine Burson
Senior Associate - Employment
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Lucy Jenkins
Senior Associate - Employment
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The Government is amending the Employment Relations Act to introduce a new law on trial periods which will come into effect on 1 March 2009.
