Removal of rewards for at-fault employees

In a recent article, we discussed planned changes to the Employment Relations Act 2000 (“the Act”) which would see high-income earners barred from raising personal grievances for unjustified dismissal.

Shortly after making that announcement, the government announced further planned changes to the Act which would allow for greater reduction, or even total removal, of remedies for at-fault employees.

Why is the Government planning to introduce these Employment Law changes?

The government has indicated that the rationale behind these planned changes is to restore balance to the personal grievance system by better weighing an employee’s conduct against the employer’s actions. In the government’s view, the current system too often rewards poor behaviour by an employee, while punishing employers who, despite their best efforts, have made minor errors from a procedural perspective. The changes are intended to bring employers more certainty, and to give them more confidence to impose disciplinary action for poor behaviour.

What are the key proposed changes if they are passed?

Specifically, the planned changes are:

• Removal of all remedies for employees whose behaviour amounts to serious misconduct. This would include things like: violence; bullying; sexual, racial or other harassment; theft or fraud; behaviour endangering the health and safety of the employee or others; using illegal drugs at work, and dishonesty.
• Removal of eligibility for reinstatement, and for compensation for hurt and humiliation, when the employee’s behaviour has contributed to the issue, for example due to repeated instances of poor performance.
• Allowing remedy reductions of up to 100% where an employee has contributed to the situation which gave rise to the personal grievance. This can be contrasted to the current ceiling on remedy reductions for contribution, set by a case of the Employment Court, which is 50%.
• Requiring the Employment Relations Authority and the Employment Court to consider whether the employee’s behaviour obstructed the employer’s ability to meet their fair and reasonable obligations. For example, if an employee refuses to engage in an investigation into their conduct, the Authority and the Court would be obligated to factor this into any assessment of remedies available.
• Increasing the threshold for procedural error in cases where the employer’s actions against the employee are considered fair. In other words, where the action taken against an employee is, on balance, fair, there would be greater tolerance for procedural errors by the employer than the current “minor” defect threshold.

How will the changes impact Employers and Employees?

It remains to be seen just how these changes will impact the current landscape, and we anticipate that this will largely depend on how the amendments to the Act are drafted, and how they are subsequently interpreted by the Authority and Courts.

The employment institutions have tended to interpret employer-favourable law narrowly, (given the inherent inequality of power between employer and employee), and we would expect the same approach to be taken if these changes are passed.

For employers, this means they will need to continue exercising caution and following fair processes to ensure that their actions are considered fair should they be scrutinised by the Authority or Courts.

Equally, employees will also need to exercise caution, as there will be a real risk of their remedies being eroded for poor behaviour – including, for example, obstructing an investigation into suspected misconduct or serious misconduct. The duty of good faith in employment relationships is mutual, and if these changes are passed, there will be greater consequences to employees of breaching their duty of good faith.

 

If you require specific advice or would like to find out more about how these changes may affect your business, please contact our Employment Law team.