Facebook can also bite employers

It appears that it is not only employees that may find Facebook  causing problems in an employment relationship.  A recent Employment Relations Authority decision (Kloeten v Combined Tanning Supplies Ltd [2012] NZERA Auckland 9) indicated that facebook comments may prove counter-productive when defending an allegation of unjustified dismissal.  In this case  the dismissal (by the employee's aunt) shortly after the employee announced she was about to take maternity leave was held to be unjustified.  The employer had claimed the dismissal was for serious misconduct.  The employer's case was not helped by her Facebook status change to  A catastrophic event … is watching everything you’ve worked for, your entire networth, the thing that defines you as who you are & the hopes & dreams you had … all gone which was posted the same evening as the employee announced she was taking maternity leave.  The alleged misconduct, which the Authority did not accept had ocurred, happened a few days later

Trial Periods: Guest Post by John Hughes

There’s no doubt that managing people can be a tricky business. In just one workplace, recently, manager A had to deal with a team member who had been found to have misrepresented the nature of some personal spending on a credit card dedicated for business use, while manager B discovered that a member of his team had directed inappropriate sexual comments at women who also worked there. Disciplinary action would obviously have been on the cards under conventional employment law principles.
But each of these managers showed themselves to be acutely responsive to the needs of the team members in question. Manager A described the credit card offence as a technical matter and argued strongly that no action should be taken until a high level investigation had taken place and natural justice observed. Although the offender took it on himself to resign, he was soon reinstated. Manager B, meanwhile, explained his team member’s lewd behaviour by saying that he was unused to the work environment he now found himself in and as demonstrating that he needed to grow into a job that was new to him. He was given a “talking to”.
Manager A, we might remind ourselves, was Prime Minister John Key faced with the issues arising from Housing Minister Phil Heatley’s misuse of his ministerial credit card. Manager B, again, was ACT leader Rodney Hide, dealing with the fallout from the misbehaviour of ACT MP David Garrett.
So why are both men now so keen to introduce trial periods which will potentially deprive all employees in New Zealand of the consideration that they extended to their own colleagues? Since it might seem churlish to suggest anything as simple as a double standard at work, let us consider the arguments that have surfaced since the decision to extend the current trial period scheme was announced.
First, there is the freedom of choice argument. In the view of the Prime Minister, no-one needs to sign up to a trial period. They can “opt out”. Despite attempts to distance the current government from the thinking underpinning the Employment Contracts Act 1991, this is neo-liberal ideology at its purest. Employers and employees, in this theoretical world, are seen to possess equal bargaining power. Whilst some job applicants (a successful foreign exchange trader, for example) may indeed possess a degree of bargaining power, in the real world others plainly will not (for instance a pizza deliverer, even if the government had not already voted down legislation to improve his or her existing working conditions as a contractor).
The Government has pinned much of its propaganda on findings in a Department of Labour report that surveyed 771 employers in detail but interviewed only 13 workers (this purportedly due to “resource constraints”). Ironically, perhaps, that research makes this very point about bargaining power. The report showed that the employers surveyed generally made a take it or leave it offer which included non-negotiable trial periods and that the employees surveyed generally were unaware of their ability even to attempt to negotiate on the issue.
Even if such awareness existed, how realistic is it to expect job applicants to expect to bargain over such issues when hundreds of people queue for a few vacant positions at a fast food outlet and there remains the very real prospect of a social security stand-down if a job offer including a trial period is refused?
Second, the Prime Minister and the Minister of Labour have argued that the current limited trial period law has increased job opportunities. Once again, however, the Department of Labour research on which this claim is based shows nothing of the sort. Rather, in the words of that report “it cannot be stated categorically that trial periods had created extra job opportunities”. The much-trumpeted 40% of employers surveyed who claimed that they were unlikely to have hired a particular recruit without a trial period tells us nothing about how that conclusion was reached and certainly does not tell us that the job would not have been there in the absence of trial periods.
Third, the Prime Minister and Minister of Labour have both asserted that the extension of trial periods will assist marginalised groups such as lone parents and migrants who would otherwise not get job offers. It’s remarkable, isn’t it, how the purported concern of the Government for the poorest in society always manifests itself in practical measures that further worsen their lives, working or otherwise? That concern was not apparent when officials repeatedly warned the Government that axing ACC entitlements would hit the most vulnerable groups the hardest; it wasn’t there when the decision to raise GST was taken, again disadvantaging the poor infinitely more than the rest of society; and it certainly wasn’t there when the Government passed legislation allowing the Work and Income Service to halve the benefits of parents who fail new work tests, at a time when the Public Health Advisory Committee reported that there is already massive, and we would say utterly shameful, inequality in the health status of New Zealand children (beneficiaries’ children were identified as the most likely group to face continuing serious hardship in this respect).
Then, of course, if employers were indeed behaving as the Government claims, they had ample opportunity to demonstrate this in the skewed Labour Department Report on which the Government has relied so heavily. Unsurprisingly, that Report found instead that “very few” employers had used trial periods to employ marginalised workers. By telling these same employers that marginalised groups are a risky prospect without trial periods, moreover, the Government has effectively legitimised prejudices which would amount to unlawful discrimination if acted upon.
Fourth, if this new-found compassion for the poor seems a remarkably convenient camouflage for a right-wing policy that suits the Government’s natural constituency, it isn’t alone in this respect. So also is the much-vaunted comparison with other countries that use trial periods, especially the UK. Three years ago, when the parties forming the Government were in opposition and UK standards were used to promote legislation for flexible working arrangements, the present Minister of Labour Kate Wilkinson decried the comparison. “The current set of labour market and economic and social conditions in New Zealand”, she said, “does not present a close enough match to any [other] countries for that country’s solutions to be the obvious choice”. Indeed, she stated then that “it is dangerous simply to compare our situation with the United Kingdom situation and say this is the law for us”. Three years on, it appears that this danger only arises when the comparison with the UK favours employees rather than employers.
Then, finally, there are the simple misrepresentations. The Prime Minister has claimed that unions are “hyping up” the 90 day trial period and that workers currently on trial periods cannot be dismissed without reasons being given: “you can say it didn’t work out, but you have to say why it didn’t work out”. This is completely false. The trial period provisions introduced by the Government expressly remove the usual obligation to provide reasons for dismissal and the relevant official background papers state that the trial period proposals were “explicitly developed on the basis that there would be no requirement for employers to give reasons”. As misrepresentation goes, the Prime Minister’s claim ranks with Labour Minister Wilkinson’s original assurance that trial periods were covered by good faith provisions requiring notification of proposed dismissal. Once again, to the contrary, this aspect of good faith is expressly excluded from trial periods.
BAS, of course, is primarily concerned with the interaction of trial periods and the social security system. Here, the Work and Income Service requires that clients who are receiving the unemployment benefit and are referred to trial period of employment either take up the trial or face loss of benefit. Further, if a worker’s trial period is terminated after moving to trial employment from other work, he or she faces a social security stand-down. Despite original promises by the National Party in opposition, when trial periods were introduced under urgency in December 2008 no change was made to the provisions for waiver of the one or two-week stand-down before receiving a benefit. (This stand-down can be waived only if the applicant has been in full-time employment for less than 26 weeks; was receiving a benefit immediately before they were employed; and if their benefit was stopped because they moved into work.) Even worse, if a Work and Income case manager believes that a trial period employee has been dismissed for misconduct, or left work voluntarily, that employee ultimately faces a 13 week disqualification period without the option of first testing the validity of the dismissal (and the consequent stand down) through an unjustifiable dismissal claim, a right which exists for all other dismissed employees.
So, once again, we are back to the brutal politics of the 1990s in which the marginalised are squeezed between precarious working conditions and an increasingly mean-spirited and punitive social security system. Freedom of choice, anyone?

This piece was first published in the Spring Newsletter of the Beneficiary Advisory Service, (“BAS”). The BAS specialises in information and advice on low-income issues and social security advocacy and can be contacted at Suite 18, 107 Armagh Street, Christchurch, PO Box 130090, Christchurch. Phone, 379 8787, Fax, 377 3561. Email bas.cprc@gmail.com

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.

Behind National's Reforms

In the nineteenth century Sir Walter summed up the fears of British Tories and the propertied classes when he feared the day that “unwashed artificers” might get the vote, a sentiment that caused Borderers to jeer at him and stone his carriage. Universal suffrage, in Britain as in New Zealand, posed a major threat to the ability of the propertied class and expanding corporate capitalism to treat the great bulk of the population as exploitable commodities. In their view capital was endowed by god, or the “laws” of economics to exploit whatever resources were available, including human resources, and to accumulate the benefits of that exploitation for its private benefit.

Before universal suffrage the subordination of workers could be guaranteed through penal sanctions and imprisonment as well as the threat of unemployment, destitution and the workhouse for the worker and their family. Universal suffrage, the growth of effective trade unions, collective agreements, legislated minimum employment standards and welfare systems undermined these controls but the employment relationship, however, remained one of subordination. The courts invented new torts to crush worker organisation and developed a new form of contract embodying mechanisms to ensure effective control of employees. Employees were held to owe onerous duties of fidelity to their employer but such obligations were strictly one way – employers were obliged to pay wages but owed nothing more to their employees. The ASLEF case in the UK and decisions of the New Zealand Court of Appeal in the 1990s made it clear that in the view of the law an employment contract is a contract intended to benefit the employer – its function is to allow the owners of property to maximise the gain from their property. Employees are there to promote that function.

Employees however have no interest worthy of legal recognition in their employment. While the common law courts have long shown incredible flexibility in creating abstruse property and proprietary rights to protect employers, increasingly including quasi-property rights in their workforce in part or as a whole, they have never recognised any such rights for employees.

Subordination depends on fear. Historically fear was generated by the threat of flogging, transportation and the workhouse. Universal suffrage and effective political power ended the more draconian of these threats but the common law courts, always one of the strongest supporters of the interest of property, ensured that one threat remained clear and untrammelled – the right to dismiss without reason and without consequences. The common law has always taken, and continues to take the position, that any employee, be they employed part-time for a day or have worked productively and faithfully for 30 years, can be dismissed on a whim and without reason or even for reasons which any reasonable person would regard as totally unacceptable. An employee who has spent half a decade or more accumulating professional or technical expertise, increasing at their own expense, may have their reputation and their investment compromised or destroyed in a second by an arbitrary or vindictive employer and the common law gives not a jot.

Since the Second World War, however, most democratic developed countries, with the notable exception of the United States, have moved to limit such arbitrary power by requiring employers to justify a dismissal on some rational grounds-economic or commercial or employee misconduct or incapacity. New Zealand introduced this protection in 1973 and while personal grievance protection was never perfect, and rarely provided adequate remedies against unjustified employer actions, it did act as a significant deterrent to at least the more obvious abuses of employer power. Protection from unjustified dismissal, as with union organisation, thus qualifies employee subordination and hence the power of an employer to unilaterally and arbitrarily control its labour force. An employee who can insist on their contractual rights, or on some control in how their labour is utilised, constrains the so-called right of capital to have an untrammelled ability to exploit that capital. On the other hand an employee who knows that they can be dismissed without reason, and see their own and their dependents future jeopardised, is an employee who for all practical purposes has few if any legal rights and will have no power or ability to control or protect their own economic security. Understand that and the logic behind National’s reforms becomes clear.

Political constrains may mean that John Key's government is not be able to introduce the United States employment-at-will rule which reduces employees to totally disposable assets, as many National supporters would have liked to do in 1991. Gutting the balanced test of justification and replacing it with one that comes close to equating lack of justification with employer irrationality is however a large step in that direction.

Government discussion paper on PGs

In case you missed it the government has just released its discussion paper on personal grievances. Submissions due by 24 March - a whole 3 weeks to consider and respond to one of the core areas of employment law!

When I read it in detail I will comment. However even a brief glance over it shows a strong focus on employer concerns with loaded questions that will encourage criticisms of the current law. Interestingly there is virtually no mention of why the PG protection exists or of the problems that employees might face in taking a grievance. Even the basic notion that employees should have a clear right to protection from unjustified and arbitrary actions or other actions that cannot be objectively justified seems to have been overlooked.

The Ministers press statement can be found at the following link which contains a link to the discussion papers http://www.beehive.govt.nz/release/submissions+sought+personal+grievances

personal grievances and the mythical grievant

I suspect that the proposals to reform personal grievance law will help fill out this blog over the next few weeks. One of the most common criticisms of the personal grievance process is that it favours form over substance and that totally undeserving employees gain large payouts when clearly guilty of serious misconduct or even criminal conduct. One such example is the employee who was held to be unjustifiably dismissed for theft because the employer never told him that theft was misconduct. John Hughes wrote an illuminating article on this mythical case over a decade ago (The Grievant Who Never Was [1998] ELB 136). Apart from showing the mythical employee left no forensic record, Hughes gives examples that suggest, if anything, that the courts tended to lean in the opposite direction when theft or unauthorised taking of property is suspected. As Hughes points out the courts have upheld dismissals or reduced remedies to nil even where there have been serious procedural failings. Generally all that is asked of employers is that there is a proper factual foundation for their action. Hughes also makes the point that "demonstrably inaccurate political statements" and a misunderstanding of case law are a poor basis for legal reform.

Fast forward to early January this year and the sensationalist headline that appeared in a number of news headlines: "Worker fired for supplying drugs gets payout". A spokesperson for the employer concerned was apparently quoted saying that "employers are being shafted" and "its so unbalanced its not funny." The most issue of NZLawyer has an interesting article on this case "Don't believe everything you hear.." written by Aaron Lloyd and Bridget Smith of Minter Ellison (not previously suspected of being a hive of left-wing activism) who clearly went to the trouble of reading the case before commenting. What their analysis shows is clear procedural failures and a failure to properly define why the employee was being dismissed. Briefly, the employee had admitted supplying marijuana to a co-employer at some stage in the past and the employer then suspended and later dismissed him. The authors sum up the problem as follows: "the company failed to properly establish exactly what is was that Wilkinson had done. In particular it was not clear whether there was a recent alleged sale, when any previous exchange of drugs had occurred, or where any alleged sale or exchange may have taken place. In particular the company took no steps to ascertain if the activity...was inside or outside work hours, or whether or not it was on company premises." It seemed all that was established was that sometime in the past the employee had given a colleague drugs outside of work. There was no proper investigation, no opportunity to respond and no proper connection established between the non-work conduct and the work. As the authors note the fact that (non-work) actions amount to a criminal offence does not by itself justify dismissal.

This was a clear example not of employers being shafted but of an employer failing to follow even the most basic procedural steps - in spite apparently of having the benefit of HR advice.

In my next post I will provide an idiots' guide to procedure. For the moment I will close with a statement on its importance:

Megarry J explained this in John v Rees [1969] 2 All ER 274 at 402:
"It may be that there are some who would decry the importance which the Courts attach to the observance of the rules of natural justice. ‘When something is obvious,’ they may say, ‘why force everybody to go through the tiresome waste of time involved in framing charges and giving an opportunity to be heard? The result is obvious from the start.’ Those who take this view do not, I think, do themselves justice. As everybody who has had anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change. Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events."