As some of you may recall, from 1 April 2011 the test for a justified dismissal changed from what a fair and reasonable employer would have done in all the circumstances, to what a fair and reasonable employer could have done in all the circumstances.
There has been some doubt as to whether this change would have any real impact on personal grievance claims. However the Employment Court has recently confirmed that the change is important and significant.
In Angus v Ports of Auckland Limited, two former employees filed separate applications alleging unjustified dismissal. A full bench of the Employment Court was then assembled to deal with the preliminary issue of what the new test of justification (set out in section 103A of the Employment Relations Act) meant in practice.
The Court rejected the argument that the change was of no significance or effect. It noted the previous test required the Court to decide what a fair and reasonable employer would have done. However under the new wording, the legislation contemplates that there may be more than one fair and reasonable decision that a reasonable employer could reach, and if the employer’s actions fell within that range of reasonable responses, the employer’s actions must be lawful.
The Court was very clear that if a dismissal (or any other formal action such as a warning) was a decision that a fair employer could reasonably have come to, then the Authority or Court could not substitute its view for that of the employer. Instead, it is incumbent on the Authority or the Court to objectively assess both what the employer did and how the employer did it, and then decide whether it falls within the scope of what a fair and reasonable employer could have done in those circumstances.
From a practical perspective, we believe this decision should give employers more confidence to make decisions which they believe are right and fair, even though the issue might be more grey or borderline than is ideal. That is because if the decision reached is within the scope of what a reasonable employer could have concluded, then the test in section 103A will have been satisfied.
It’s important to note too, that the need to follow a fair process remains just as important under section 103A. In fact, in section 103A (3) (a)-(d) there is a list of procedural considerations that the Authority or Court must consider when
assessing whether or not the actions of the employer were those that a fair and reasonable employer could take.
These include whether the employer sufficiently investigated the allegations; whether the employer raised its concerns with the employee before dismissing; whether the employer gave the employee a reasonable opportunity to respond; and whether the employer genuinely considered the employee’s explanation before taking action.
Ultimately though, employers will be pleased with this decision as it suggests the courts may be slower to overturn decisions if the employer can show it was within the range of sanctions open to a fair and reasonable employer.