5 minute read
Employment Law: Good faith in a crisis
Alice Anderson, Solicitor at Dundas Street Employment Lawyers, looks at what employers may have to deal with in the business-recovery phase, following the COVID-19 seven-week lockdown. She discusses the requirement for employers to act in good faith, and explores implications employers may face when working with employees over this period.
The COVID-19 global pandemic has put New Zealand workplaces to the test as they have navigated their employment relationships in a world full of new restrictions and changing government assistance programmes. The requirement to deal with one another in good faith, as set out in section 4 of the Employment Relations Act 2000 (the Act), can act as a guiding principle to employers during this uncertain crisis.
The duty of good faith underpins the Act and should colour every employment interaction. The duty is wider than the implied duty of trust and confidence and, similar to acting ‘fairly and reasonably’, how it looks practically, depends entirely on the situation. While the duty is a two-way street, it is often the employer being put to the test as to whether they have acted in good faith.
The Act provides that good faith requires:
• the parties to be ‘active and constructive’ in establishing and maintaining a productive employment relationship, including an obligation to be ‘responsive and communicative’
• the parties not to do anything that misleads or deceives the other, or that is likely to mislead or deceive the other
• where an employer is proposing to make decisions that will, or are likely to have, an adverse effect on the continuation of an employee’s employment, the employer must provide the employee with access to information relevant to their decision-making, and an opportunity to comment on that.
Section 4(4) of the Act confirms where the duty applies but is a nonexhaustive list (section 4(5)). The list confirms that good faith is central to collective bargaining, which is expanded on in section 32 of the Act, and places specific requirements on the parties to uphold the duty (and importantly, the duty applies to unions too). In the bargaining context, the law is well-established and accessible to parties when bargaining.
Perhaps more relevant when we think about a ‘crisis’, however, is a redundancy situation. As New Zealand workplaces have navigated their COVID-19 pandemic responses, they have had to do so in a way that is consistent with their good faith obligations. The COVID-19 crisis did not and does not mean that employment laws no longer apply. Although the government-offered assistance programmes have potentially prevented some redundancies, and possibly prevented an employer from implementing a redundancy for a 12-week period, workplaces will still be facing this possibility.
Section 4(4)(e) of the Act confirms that the duty of good faith applies when making an employee redundant. When proposing redundancies, employers must demonstrate a genuine business reason for the redundancy and follow a fair and reasonable process. This includes providing information relevant to the proposal, and a reasonable opportunity for the employee to comment before the employer makes a final decision to implement a redun
dancy. That duty of consultation extends to how employees are selected for redundancy, including what process and criteria will be used to select employees if the proposal proceeds. Notwithstanding the realities of operating during the pandemic, the employee’s responses to the proposal, including alternative ideas and proposals, must be considered by the employer, before a decision to make them redundant could be justified. An employer’s good faith duty will require them to consider alternatives to redundancy, which in this setting could involve options such as reaching mutual agreement with employees to pay reductions, leave without pay, or reduced working hours. It could also include considering options such as accessing government wage assistance programmes, loans, or making other roles redundant as opposed to the affected employee.
An employer would be expected to communicate openly and honestly with their employee during this time. Similarly, an employee’s duty of good faith would require them to be responsive throughout the process and communicate honestly with the employer.
Chief Judge Inglis noted in a 2019 paper Defining good faith (and Mona Lisa’s smile) that it has been suggested that Parliament’s vision for the concept of good faith is yet to be fully realised. 1 The Chief Judge goes on to comment that the duty cannot and should not be pinned down and referenced to a clear-cut legal rule, rather “it is a standard which applies flexibly depending on the particular circumstances of the case. It necessitates an evaluation of the alleged breach in its human dimension”. 2
Employers often search for a ‘tickbox’ approach and run an overly legalistic process in an attempt to avoid a personal grievance and meet their legal obligations. However, rushing decisions in a crisis could end up costing employers more in the future if they do not comply with their good faith duties.
Employers have found their usual processes have needed to be revamped, because most New Zealanders were prohibited from interacting kanohi ki te kanohi (face to face) with their employers, employees and colleagues for a period, requiring parties to quickly adapt, and consider how best to meet their good faith obligations in this environment. This challenge will most likely lead to further judicial commentary around the duty of good faith in the future.
However, in the meantime, processes that, although informed by the legal requirements, are adaptable and underpinned by manaakitanga (caring and respect for others), awhina (support), honesty and a readiness to listen, will go a long way towards upholding the duty of good faith and may also promote healthier and more productive employment relationships.
Alice Anderson, Ngāi Tahu, is a Solicitor at Dundas Street Employment Lawyers and has experience dealing with a range of employment issues. Alice is an active member of Te Hunga Rōia Māori o Aotearoa, the Māori Law Society, and has a strong interest in incorporating tikanga-based values into the workplace and dispute resolution.
