We regularly get employer clients asking “but what if I catch an employee red-handed – surely I can fire them on the spot?” The answer is no – not even then. Employers still have to follow a fair process.
Lawyers talking about formal procedures and “natural justice” can make it all seem too hard and costly, which can lead to employers either keeping staff they could otherwise dismiss, or (worse) taking the significant risk of dismissal without a fair process. The truth is that in most situations where an employer has solid evidence of serious misconduct, a fair dismissal process is pretty simple and protects against the significant costs of a personal grievance.
But surely the Courts won’t reward an employee’s bad behaviour, even if the process wasn’t perfect?
The Employment Relations Authority and Court take the fair process part of employment relations very seriously – and for good reason. How can an employer really know all the facts unless the employee has been given a chance to tell their side of the story? Having said that, if an employer has charged ahead with a flawed process but the employee has clearly misbehaved there will often be a reduction of their lost wages/compensation awards based on the employee’s level of contribution to the situation.
Judging contribution is more of an art than a science – even the Courts can’t seem to agree where the appropriate level sits. The way contribution works is that the Court figures out an amount of money for the remedies that an employee should receive, but then has discretion to reduce that sum for the employee’s contributory conduct.
If an employer has charged ahead with a flawed process but the employee has clearly misbehaved there will often be a reduction of their lost wages/compensation awards based on the employee’s level of contribution to the situation.
In one Employment Court case, an employer made relatively small procedural errors in firing an employee who had abused dairy cows on a farm. The hurt and humiliation compensation was assessed at $5,000. That remedy payment was reduced by 100% for the employee’s animal welfare abuses. It is worth noting that the employer was still left with a hefty legal bill for their mistake (significantly more than the $5,000).
In a more recent case, the Employment Court decided that remedy payments shouldn’t ever be reduced by 100%. They commented that a reduction is discretionary and that 25%-50% off would be rare – essentially reserved for very serious bad behaviour. However, they also left a “back-door” means to reduce remedies when there is bad behaviour, noting that there is a different discretion about how much/whether an employee should get for a remedy in the first place. Confused yet?
To add to the confusion, despite the recent “cap” at 25-50%, the Employment Relations Authority is still reducing awards by 50% and above for behaviour which is far from the most serious of its type.
Take home message
In these decisions, the Courts try to give guidance about how the Employment Relations Act operates in that particular scenario. We read the cases so that we can advise our clients about how to comply with the Act and the amount of remedies involved if they do not. This advice is critical for parties trying to settle personal grievances in mediation. Unfortunately, the confusion about how contribution works in practice means that it is a real gamble for employers who haven’t followed a fair process. Relying on an employee’s bad behavior to significantly reduce the remedies could backfire in a big way.
For employers to avoid that risk altogether, it is simpler and easier to just get the process right in the first place. Despite some commentary out there, a fair process is not that hard to achieve. If it’s your first go at running a disciplinary process, or if you simply want to assure yourself that you are doing things right, we recommend that you give us a call the moment you have an employee misconduct issue that you want to take to the next level. We can talk you through the process which reduces the risk (and cost) of a personal grievance.
Our thanks to Simon Davies-Colley for writing this article.