Important Employment Law Case
The Full Court of the Employment Authority recently released its first decision focusing on how the Employment Relations Act (ERA) 2000 works in practice. Because it will have a large impact on redundancy law, it's worthwhile covering it in some detail.
The case is called Baguley v Coutts Cars Ltd. Coutts is an Auckland motor vehicle dealer specialising in luxury cars. It decided that it could save several thousand dollars a year by halving the number of car groomers it employed. It planned to contract out any excess workload.
Michael Baguley was one of those groomers. He was called to a meeting, which he attended with his solicitor, and was told that his job was at stake. The managing Director of Coutts allowed Baguley and his solicitor to believe that Baguley would be appraised for the purposes of assessing whether he would be made redundant. In fact the appraisal had already been completed. In addition, the managing Director refused to supply the appraisal criteria the company was "intending" to use.
Baguley was dismissed on the grounds of redundancy. He was allowed reasonable time off during his notice period without any loss of pay so that he could attend job interviews and the like. An offer of general assistance was made to him by Coutts, but no further contact was made with him after his termination by the company.
Baguley challenged his redundancy, and after an investigation, the case went to the Full Court (at least in part because the case was seen as a precedent-setter for the way the Employment Relations Act would be seen to work in practice).
What the Court Found
The Court found that Coutts had engaged in deceptive conduct by saying that Baguley would be appraised (when the appraisal had already had taken place), and refusing to release the appraisal criteria. The Court also found that the tone of the meeting, with the general manager shouting at the lawyer when she persisted in trying to obtain the criteria, and the lack of information given to the employee, made it impossible for Baguley to adequately put his point of view. The Court found that the employer's conduct "fell a long way short of the required standard of fair dealing" which underpins the ERA.
As Baguley's claim for getting his job back was considered impractical, the Court awarded him $10,000 compensation for hurt and humiliation, and $5,756 for loss of benefit equivalent to 3 month's wage.
What Does It All Mean?
This case is significant because it increases the obligations of employers to employees when making them redundant. In contrast to the Employment Contracts Act, which focuses on the terms of the employment contract, the spotlight is now on the employment relationship and what is fair and reasonable now depends on the facts and circumstances of each case, as well as the current law.
Any 'consultation' has to be a real dialogue and not the mechanical one it may have become under the Employment Contracts Act. The employer is not allowed simply to go through the motions and follow a pre-determined process, but is required to listen to employees and take their feelings, thoughts and suggestions into account.
It seems that the employer may have an obligation to mitigate the effects of redundancy on its employees to the extent that it is able. The importance of access to information is a theme running through the ERA and one which the Full Court picked up on. This obligation will require employers to provide good quality, accurate information to employees at times of consideration for redundancy.
The Court says that providing timely and useful information will often be decisive in terms of the justness or lack of it in the employer's actions. The employer is required to recognise the employee's worth as a human being, even if that person is no longer required as an employee.
Practical Effects
The decision will increase the time and effort required from employers when considering redundancy for their employees.
The Court accepts that a decision to make a person redundant is a commercial decision and the Court cannot interfere with that. It also says that it doesn't expect the employee's agreement in commercial decisions, but it does expect employees should be given an opportunity for input into that decision.
The question of whether a particular employee acted in a fair and reasonable way, and thus complied with the law, is a question that will have different answers depending on the particular facts of a situation.
Throughout the judgement the court emphasised good faith dealings, and in particular, making sure that accurate information is provided to employees. At the very least, therefore, employers should ask themselves these questions:
- What is going to cause the greatest havoc to the employee and how do I avoid this?
- What will injure the employee the least and how do I achieve that?
- Can these employees be used in other positions even though their current positions are redundant?
- If I do have to make employees redundant, what process will I be using to select those persons to be made redundant?
- What information do employees need in order to be fully informed of the situation?
- Am I holding anything back from the employees, which they are entitled to in order to consider their positions?
- What advice and support should I be offering my employees throughout this process?
Thanks to Cullen The Employment Law Firm and also 'Law Scene'
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