Personal Grievances: the proposed new s103A

The Minister’s Explanatory Note to the ER Bill states that it will “help restore the confidence of all parties in the personal grievance system”. This seems unlikely as the reforms do little to improve things that need reform, such as issues arising from triangular employment, and a lot to change things that don’t. However it has been clear since the Department of Labour issued its execrable Discussion Paper that these reforms have little to do with improving the personal grievance process and more to do with providing a response to the campaign of disinformation and misinformation run by various employer lobby groups who claim that the system is unfairly weighted against them and that wholly justifiable dismissals are overturned on the basis of some minor procedural mistake – examples of which are rarely if ever produced or substantiated (see my post of 24 February).

So what are the reforms?

The most important is of course the exclusion of new employees from personal grievance protection if they “agree” to a trial period. I will not comment on this as the inevitable iniquities that will result have been well covered in the CTU’s campaign on this issue. However one point that might be noted is that these employees have not only been stripped of their statutory protections but also of the limited common law protection from wrongful dismissal as section 113 bars such actions. The government has therefore enacted employment-at-will for up to 400,000 employees who change jobs each year – a period that might easily be extended in a third round of reforms.

The most important change to the personal grievance procedure itself is to be found in the proposed new s103A. The first is the change in the test of justification from “what a fair and reasonable employer would have done in all the circumstances” to what that that employer “could” have done. This change may look linguistically insignificant but its import is clear from the Explanatory Note. This states that “the current test of justification, which inappropriately obliges the Judge to substitute himself or herself for the employer and determine what the fair and reasonable employer would have done” should be amended. The Note goes on to state that “By substituting the word “could” for the word “would” in the test of justification, the Bill recognises that there is a range of fair and reasonable responses (actions and courses of action) that could be made by an employer in any situation.”

Two points need to be made here. The first is that the Note suggests that the Authority and the Court take a rigid approach to what is reasonable and insist there is only one answer to the question: it refers to “the “false assumption that there is only 1 fair and reasonable course of action.” – this is garbage. Both the Authority and the Court are careful to look at the full range of circumstances in deciding whether a particular approach was reasonable and in fact recognise that there may be a proper range of responses. As Judge Shaw said in Air New Zealand v Hudson [2006] 1 ERNZ 415 “While the range of responses open to an employer is obviously one of the matters to be considered, it is not the only matter”, a statement that clearly gives the lie to the statement on p 4 of the Note (my emphasis).

What this amendment is intended to do was made clear by employer submissions Air New Zealand v V (2009) 6 NZELR 582. It was argued that

“once the Authority or the Court has determined that there was serious misconduct, and that this was a decision that a fair and reasonable employer would have made in all the circumstances at the time the dismissal occurred, the Authority and the Court should have no further role."

In other words it is nothing to do with the Authority of Court that the employer may have made a decision that was totally disproportionate in the circumstances or even totally irrational. Any person familiar with employment law could identify situations that might constitute “serious” misconduct but where dismissal would be totally unjust. Indeed the term “serious” should be regarded with considerable suspicion as it contains very strong pro-employer values, has become increasingly subjective and encompasses a range of conduct that many might regard as falling well short of conduct that justifies dismissal.

The second point that deserves comment is the idea that it is “inappropriate” for a neutral third party to decide if an employer’s substantive decision was reasonable in the circumstances. The point of independent evaluation is just that. Natural justice does not consist only of a right to be heard and it is not achieved when the decision maker is the judge of their own actions. Given the seriousness of the consequences of dismissal for an employee that employee is entitled to an unbiased and independent evaluation of a decision they challenge. It is also important to recognise what role the courts perform in such cases. The simplistic language in the Note suggests that judges act in an arbitrary and capricious fashion in imposing their own values. Perhaps the Minister might gain some value by a careful reading of the thorough and thoughtful analysis of Judge Shaw in Air New Zealand v Hudson in which she said:

“the s103A requirement for the Authority and the Court to stand back and determine the matter on an objective basis by evaluating the employer’s actions does not give an unbridled licence to substitute their views for that of an employer. Their role is instead to ask if the action of the employer amounted to what a fair and reasonable employer would have done and evaluate the employer’s actions by that objective standard. It may mean that the Court reaches a different conclusion from that of the employer but, provided this is done appropriately, that is objectively and with regard to all the circumstances at the time the dismissal occurred, a conclusion different from that of the employer may be a proper outcome.”

It is of course not yet clear how the courts will interpret this change of wording, and one should remember that the need for an objective standard of evaluation remains as does the general good faith requirement, but the objective of its advocates is clearly to reinforce the subordination of the employee and the vulnerability of their employment – on which see my blog of July 26.

The Bill, in sub clause (3), proposes to add a number of new considerations to be taken into account by the Authority or Court. These would seem to largely restate the existing law but do have the advantage of making explicit at least the basics of procedural fairness. Similarly sub clause (5) appears to add little. Perhaps the one concern relates to the need to consider the “resources available to the employer”, although this may be prove to be a cleft stick. All employers have access to professional advice and might be expected to seek it. It might also be recalled that in In Association of University Staff Inc. v The Vice-Chancellor of the University of Auckland [2005] 1 ERNZ 224 at [41] the Court suggests that professional HRM managers might be expected to be aware of appropriate standards and practice in their field.