October 2024 Update

Unjustified Dismissal Case Law Development

A recent case, Ross v S & D Decorators Limited 2024, highlights the importance of having formal processes in place to conduct a performance review involving an assessment of an employee’s work. This case is particularly interesting because the employee started working for this company as a sub-contractor.

Ms Ross performed work for S & D Decorators Limited (S&D) as a sub-contractor in late 2022 before entering an employment arrangement with S&D in January 2023. Ms Ross lodged a claim with the Employment Relations Authority (ERA) for unjustifiably dismissal and disadvantage in her employment, along with claims for lost wages and wage arrears owing from short payments made in February 2023.

Issues arose early in the employment relationship regarding the quality of Ms Ross’ work. S&D believed it was conducting a performance review of her work and given Ms Ross corrective action reports while she was a contractor. However, the review was not integrated into a formal process, and Ms. Ross said she addressed any concerns that were brought to her attention.

In February 2023, S&D reluctantly granted Ms Ross one week of annual leave in advance. She also took two weeks off as sick leave starting on 28 February 2023. S&D sent her a letter dated 1 March 2023 stating she needed to participate appropriately, thereby failing her performance review. S&D wrote that it required her resignation, setting out her final payment details and wishing her well.

The ERA found no evidence of a formal performance review plan being implemented. S&D had given Ms Ross corrective action reports while she was a contractor. However, it did not raise performance concerns with her when she was an employee. She asked for more details on the issues but has yet to be forthcoming. S&D claimed it planned to hold a performance review on 1 March 2023. However, the evidence did not support this. Instead, S&D told Ms Ross to resign. S&D then wrote to her on 2 March 2023 asking her to return to work. The ERA felt it to be “too little too late”. Ms Ross was dismissed by a letter sent on 1 March 2023.

Decision

The RA found that S&D unjustifiably dismissed Ms Ross.

Penalties

Ms Ross was awarded wage arrears from February 2023 of $337.50, unpaid overtime of $922.50, unpaid KiwiSaver employer contributions of $175.16, unpaid annual holiday pay of $467.10 and $5,881.14 in compensation for lost wages. Annual holiday pay of $571.29 and KiwiSaver contributions of $214.23 were payable on awards of arrears of wages, unpaid overtime and compensation for lost wages.

Ms Ross's compensation claim was upheld, but a 10% deduction was made for blameworthy conduct. She insisted on taking leave shortly after she started as an employee, given the workload S&D had and the impact of this on other employees. The compensation paid was $4,500 rather than $5,000.

Key Takeaways

• Have transparent documented processes in place for raising and managing performance issues with employees
• Asking employees to resign is fraught with personal grievance risk for employers – always seek advice before proceeding to do that
• Do not treat workers who started as contractors as such when they become an employee

Health and Safety Update

After a third successive serious workplace incident in Christchurch recently, it is an important time to highlight the critical need for employers to rigorously evaluate their Health, Safety, and Wellbeing protocols.

Read more here to understand your employer health and safety responsibilities ⭢

Case Law Update

With unemployment still on the rise in challenging economic times, many recent cases are highlighting the importance of following a fair and reasonable practice ‘Good Faith’ process and maintaining Good Faith obligations to potentially affected employees when disestablishing a position and making employees redundant. This is particularly applicable when a business is being sold to another company. While commercial sensitivity in these situations is a legitimate concern for employers, employees are entitled to be kept informed on developments in a confidential way that protects the integrity of the party's commercial position. Non-disclosure agreements can be used in these situations.

The following are key points to consider when a business is considering restructuring.

• Have genuine commercial reasons for initiating a restructuring and provide details such as figures, dates, sales trends
• Employees must be provided with information that potentially may have an adverse impact on the continuation of an employee's employment
• Employers are obligated to consider redeployment options before declaring a position redundant
• Employee feedback on a restructuring proposal must be formally acknowledged and fully responded to before deciding to disestablish positions
• Advise the parties of the right to independent legal advice and bring a support person to meetings

You can view ALL the latest updates on our Case Law page.

Our Restructuring and Redundancy toolkit is available at a special price of $400 for members if purchased during November, find out more about this resource here.