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Karyn Gould
June 11, 2021

Employee Dismissal - Process vs. Substance. Do you have both covered?

It is easy for employers to fall into a trap of considering that their reasons for issuing a warning or terminating an employee, justify getting to an outcome, regardless of the process followed. Perhaps a manager will consider a process as “red tape” that doesn’t help them get the business outcomes they want.


From the employer’s point of view the employee may have:

  • Repetitive or significant failures to meet the required performance or conduct standards
  • Failed to apply effort or achieving little improvement
  • Failed to demonstrate a sense of urgency to perform work in a timely manner, and/or
  • A lack of awareness of their impact on the business or other team members.

As frustrations boil up, the employer then takes action based on their perception of the situation. If these concerns regarding the employee are genuine, many other business owners or managers could empathise with the decision to just take action, resulting in a negative consequence for the employee. However, the foundation of employment legislation in New Zealand requires employers to be fair and reasonable, and this is measured not just on the genuineness of concerns, but also the process involved in determining that genuineness.


Where there is potential poor performance, an employer has the obligation to provide timely and regular feedback, and support for improvement. Where there is potential misconduct, an employer has the obligation to set clear expectations and hold a consistent standard with all workers. Following this, there is a formal process to raise concerns with an employee by inviting them to attend a meeting, where they enter knowing the specific concerns they will be asked to respond to. In addition, they have the opportunity to bring a support person or legal representative.


Section 103A of the Employment Relations Act 2000 sets out the Test of Justification. This outlines the objective basis on which a dismissal or other action is determined justifiable, being what a fair and reasonable employer could have done in all the circumstances at the time. The Employment Relations Authority must consider under Section 103A(3):

  1. “whether, having regard to the resources available to the employer, the employer sufficiently investigated the allegations against the employee before dismissing or taking action against the employee; and
  2. whether the employer raised the concerns that the employer had with the employee before dismissing or taking action against the employee; and
  3. whether the employer gave the employee a reasonable opportunity to respond to the employer’s concerns before dismissing or taking action against the employee; and
  4. whether the employer genuinely considered the employee’s explanation (if any) in relation to the allegations against the employee before dismissing or taking action against the employee.”


In a recent publicised case, the ERA took a hard-line with an employer, whose focus was more on what they considered the impact that an employee was making in the workplace and therefore delivering a consequence to that employee (termination of employment), rather than the process they followed to manage that situation. As a result they awarded that employee 6 months of lost wages valued at $65,000, $30,000 for hurt and humiliation, and also imposed a penalty fine of $3000 dollars against the company.


It shows us that even larger organisations with the ability to access the right expertise, can make decisions that are not viewed favourably by the ERA.


This is an opportunity, for us as leaders and managers, not to point fingers, but to reflect on whether we could end up in a similar situation given some of the actions we have might have taken.


The questions to ask ourselves are, “where are we exposed by a lack of procedure or, possibly understanding, potentially due to our own closeness to the situation?” and “when should we step back and seek a trusted third-party opinion, internally or externally?”.


We also need to think about our actions from the point of ourself or a loved one as the employee. Wouldn’t you want to be told what the expectations are, where you are in comparison to them, and given the opportunity to improve? Consider it then, from a viewpoint of other employees who observe interactions in the workplace, because little often remains 100% confidential e.g.:

  • How is your perception as an employer impacted through the apparent lack of a fair process?
  • Is there a sense of unease or fear that procedures aren’t followed?
  • How would it affect the employer brand (of employees both current and future, and perhaps even customers)?
  • How would that affect retention (intent to stay with the employer)?
  • What about the impact on attributes of high performance, such as creative problem solving, which research shows occur best when minds are focused, calm and enjoyably challenged, as well as free from anxiety, fear or overwhelming pressure?

Employment legislation and case precedent should be factored in decision making, especially when the danger of a lack of due process can have wider implications. Balancing process and substance both form part of sound business decision making.


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