By Vaughan Granier 

Right now, businesses in New Zealand are struggling under a real weight of economic pressure and external demands. There’s a lot of stress that comes with leading an organisation through constant changes and challenges. 

And while these are difficult times ahead, it’s a good idea to approach any tough workplace situation with caution – don’t forget that New Zealand’s employment laws remain in place, even during a pandemic. Sometimes, the decisions made during these first few moments can set you up for future successes or failures and this is where your “instincts” coupled with the principles of employment law will come in to play.  

New Zealand’s employment laws have a “principle” that is embedded deep into all our required employment processes such as discipline, performance management, grievance handling, and restructuring.  

It’s the principle of “good faith”. 

We’ve all heard about good faith, but what does it mean? It has been defined very clearly in law, but somehow it still gets missed, ignored or “worked around” in many businesses. Let’s look at what good faith means, and I’ll share some scenarios to show you how you can use it to protect yourself as an employer. 

Why is it important? 

I like to use the analogy of a suit of armour. In an employment law situation, there’s only one suit of armour; and it’s the employer who gets to decide who wears it. The employer can follow processes, make good and reasonable decisions and adhere to the principles of good faith, and then they get to wear the armour. If they choose to shortcut processes, prejudge situations, make hasty decisions, or ignore good faith concepts, then they’re giving the employee the suit of armour. If faced with a “battle” such as a personal grievance, well, logic will tell you that it’s the person wearing the suit of armour who will have the best chance of winning! 

Good Faith (s4, Employment Relations Act 2000): 

 “Good faith means dealing with each other honestly, openly, and without misleading each other. It requires parties to be active and constructive in establishing and maintaining a productive relationship in which they are responsive and communicative.” 

 S 4(1A) adds some clarity by saying that this “goes wider than the implied mutual obligations of trust and confidence”.  

On www.business.govt.nz, this is said to mean: “Before making a decision, which may result in employees losing their job, the employer must give the affected employees sufficient information to be able to understand the proposal and then give them a proper opportunity to comment.” 

It applies to every employment situation 

It’s very easy to read these words and think, “Ah, but that only applies to restructuring, and I’m not doing that, so it doesn’t apply”. The concept of “may result in employees losing their job”, however, does not specify only restructuring. So, it must be read as including every situation or process where an employee could “lose their job”! This includes probation periods, performance management and disciplinary processes. The one possible area to which the general principle of good faith doesn’t specifically and rigorously apply, could be terminations based on trial periods. 

Undoubtedly, the duty of good faith extends everywhere into the employment relationship, from hiring to termination and everything in between. Chief Judge Graeme Colgan, in 2008 wrote that, “It affects all employment relations interactions, or at least most that I can think of”. 

The Government websites provide further guidance; regarding a restructuring, for example, they add the following guidance: 

 “Before making a decision, which may result in employees losing their job, the employer must give the affected employees sufficient information to be able to understand the proposal and then give them a proper opportunity to comment.” 

Regarding discipline and performance management, they add that:  

“Good faith is also wider than this. It is more than just following the letter of the law. It involves treating others fairly using common sense. Broadly, good faith requires employers, employees and unions to: 

  • act honestly, openly, and without hidden motives. 
  • raise issues in a fair and timely way. 
  • work constructively and positively together. 
  • give each other relevant information ahead of when it is needed and as soon as possible, all information given should be carefully considered. 
  • be fully honest with each other. 
  • raise concerns or issues as soon as possible and respond to these quickly. 
  • keep an open mind, listen to each other and be prepared to change opinion about a particular situation or behaviour. 
  •  treat each other with respect.” 

 What’s not good faith? 

Now let’s put good faith in the context of your workplace and consider some specific situations. Each of the following points is a real example I’ve encountered over time: 

In workplace change situations, it’s NOT good faith when: 

  • Announcing a restructure long after a business becomes aware of the need for it, thus reducing and pressurising the available consultation time; 
  • Not providing complete information about what challenges a business is facing, why change is needed, or about what other possible options are possible to avoid redundancies; 
  • Consulting “just for appearances sake”, with a predetermined outcome that won’t be changed by anything; 
  • Not providing full and honest reasons for why you have rejected an employee’s proposal; 
  • Selecting employees to be terminated, rather than selecting employees to be retained (this isn’t playing with words – this would be a misuse of objective, good faith selection criteria); 
  • Shortening timelines to avoid the responsibilities and complexities of proper consultation; and 
  • Dealing with affected employees in full public view. You should be consulting with them in private. 

 In disciplinary situations, it’s NOT good faith when: 

  • Not giving full information about the allegations; 
  • Rushing a process or a decision; 
  • Making a pre-determined decision beforehand; 
  • Using past behaviour to decide guilt or innocence in this specific case; 
  • Rejecting explanations because they don’t fit presuppositions; 
  • Not considering disclosed mental health concerns when proceeding with discipline; 
  • Selectively finding evidence that suits only one side of the case; and 
  • Letting small issues build up over time and then “throwing the book” at an employee. 

 In performance management situations, it’s NOT good faith when: 

  • Using a restructuring process to terminate an employee who you have performance issues with; 
  • Not giving clear and specific performance expectations; 
  • Freezing out an employee and excluding them from meetings, discussions and projects; and 
  • Letting small issues build up over time and then “throwing the book” at an employee. 

 In grievance situations, it’s NOT good faith when: 

  • “Restructuring out” an employee who has taken issue with something and is following a proper grievance process;  
  • Listening to rumours and favourite employees, and not doing the hard work of gathering evidence; and 
  • Treating the complainant like they are the problem. 

 In recruitment situations, it’s NOT good faith when: 

  • Discriminating against or preferring someone without giving all suitable applicants an equal chance; 
  • Issuing a contract that is different to other similar employees’ contracts for no reason. 
  • Hiring a casual or a fixed-term employee to “test out” the employee and avoid the challenges of a probation period; and  
  • Hiring casuals instead of fixed-term permanents because it’s easier to terminate them. 

 In Workplace Health and Safety, it’s NOT good faith when: 

  • Doing a half-hearted job of worker participation, training and consultation; 
  • Sacrificing minimum quality standards around H&S for convenience, speed or cost; 
  • Pushing employees into fatigue or high-risk situations unnecessarily or unprepared; 
  • Doing as little as possible to manage risk and placing the burden on the employees; and 
  • Misleading an incident investigation/WorkSafe inquiry to avoid blame or consequences. 

All the above scenarios, in principle at least, can apply in other situations where they aren’t explicitly listed. These might also be a real transgression of the law, but playing the “brinkmanship” game, where you deliberately skirt the limits of what is legal, can easily lead to “not good faith” behaviours! By understanding and acting instinctually in good faith, you can benefit from more harmonious employment relationships while reducing the risk of personal grievances arising.  

If you have a question about the principles of good faith or any of the information in this article, please contact HR Assured’s Telephone Advisory Service. 

 

Vaughan Granier is the National Workplace Relations Manager for HR Assured NZ. He has over 24 years’ experience in international human resources, health and safety, and workplace relations management. With over 10 years working in New Zealand and Australian companies, he provides in-depth support to leadership teams across all areas of HR, Health and Safety, and employee management.