The impact on employers of the change from ‘would’ to ‘could’

Employment | Print Article

[Spring 2012]

The Employment Relations Act 2000 provides the test for whether an employer’s actions in dealing with an employee are justified or not (section 103A).

The test was amended in 2011 to require an assessment of whether the actions were what a fair and reasonable employer ‘could’ do, rather than what a fair and reasonable employer ‘would’ do. Whether the change from ‘would’ to ‘could’ has any substantive effect on the test of justification was recently discussed by the Employment Court in Angus & McKean v Ports of Auckland [2011] NZEmpC 160.

The Court held that the new ‘could’ test is broader than the single standard ‘would’ test. There are a range of actions of what a fair and reasonable employer could do in all the circumstances, as opposed to the single answer as to what a fair and reasonable employer would do.

In applying the justification test of whether the actions were what a fair and reasonable employer could do in all the circumstances, the following factors must be considered to determine whether the employer’s procedure was sufficient:

  • Having regard to the resources available to the employer, whether sufficient investigation was undertaken by the employer.
  • Whether the employer raised the concerns with the employee prior to taking any action.
  • Whether the employer provided the employee with reasonable opportunity to respond prior to taking any action.
  • Whether the employer genuinely considered the employee’s explanation before taking action.

Despite these considerations not practically being able to apply in all circumstances, the Court noted that the considerations are clear and mandatory and that the Authority and Court should try to provide a sensible interpretation in each case.

The change in the justification test is not an indication to employers to ‘throw caution to the wind’ when dealing with employees. It is crucial that employers continue to ensure their actions are both substantively justifiable and carried out in a procedurally fair manner. If anything employers should be more vigilant when dealing with employees.