If you’re a New Zealand employer, it’s important that you know if, when, and how, you can safely dismiss or terminate an employee for misconduct or wrongdoing. Employment protection laws in New Zealand are strong – getting things wrong can open you up to claims from employees who believe they have been treated unfairly.
In general, you can dismiss or terminate an employee for misconduct if dismissal is something a “fair and reasonable employer” could do in the circumstances. Typically, this will result from serious misconduct by an employee that undermines the trust and confidence you have in them.
Of course, this answer is general and actually opens up its own questions that we will address below: What is “fair and reasonable”? What is serious misconduct? Do I need to issue warnings first?
Dismissal and Termination of Employment in New Zealand
Under New Zealand law, dismissal or termination of an employee is unlawful when it is unjustified.1
The test for justification is codified by Section 103A of the Employment Relations Act 2000, and supported by case law that is constantly developing. In summary, it was framed by Cooke P in the Court of Appeal as follows:2
The question of justification “is essentially was it open to a fair and reasonable employer to do in the particular circumstances”, and that this is necessarily a matter of fact and degree.
When it comes to dismissing an employee for misconduct, whether it will be justified therefore depends on the facts and degree of the misconduct, in the broader context of the employment relationship.
Unfortunately, there is no simple or fixed rule as to exactly where this barometer for justification will be met. 3 However, it is possible to get an idea by looking at what has been accepted by the Employment Court in the past:
What Level of Misconduct Will Justify Dismissal
The Employment New Zealand website separates misconduct into two different types:4
- Serious Misconduct.
Serious misconduct is misconduct that can have the effect of seriously undermining the relationship of trust and confidence between an employee and their employer.
If an employer conducts a fair investigation and disciplinary process and then decides that serious misconduct has taken place, they may choose to dismiss or terminate the employee – this will typically be justified.
‘Standard’ misconduct which is not serious and as such doesn’t, in and of itself, undermine or destroy the relationship of trust and confidence between an employee and employer, will not typically justify dismissal unless it is repeated.
In addition to the misconduct behaviour being repeated, the employee should be warned that they have committed misconduct. There is no set number of warning that need to be issued before an employee can be dismissed, but as always you must, as an employer, be fair and reasonable in this regard.
It may be advisable to issue a written “final warning” to an employee making it clear that they will be dismissed if they repeat the misconduct again.
What is the difference between misconduct and serious misconduct?
The key difference between misconduct and serious misconduct is that serious misconduct must be sufficiently serious to undermine the trust and confidence that the employer has in the employee (e.g. theft, sexual assault, using drugs at work). As a result, serious misconduct can be a basis for “summary dismissal”, whereas misconduct usually cannot.
Including Definitions of Serious Misconduct in an Employment Agreement
Sometimes employers will draft employment agreements that list conduct that the agreement states amounts to “serious misconduct”. As a general rule, this could be considered a wise idea as it makes expectations between employers and employees clear.
It has also been acknowledged by the courts that “what might amount to serious misconduct for one employee of a particular employer might be simply misconduct or even irrelevant for another employee of another employer.”5
However, if an employee engages in misconduct included on a “serious misconduct” list, this doesn’t necessarily mean that serious misconduct for the purposes of justifying dismissal has in fact occurred. Minor misconduct cannot become serious misconduct merely through its inclusion on the list – and an employer must still look at the facts, conduct a fair investigation, and act reasonably.
Frequently Asked Questions
Does an employer have to prove that the employee committed the misconduct?
Typically, no. An employer does not have to prove that the employee committed the serious misconduct. However, the employer must carry out a full and fair investigation that disclosed conduct to the employer that a fair and reasonable employer would regard as serious misconduct.6
When should I issue warnings for misconduct?
It is advisable to be relatively liberal with written warnings for misconduct. If you later dismiss an employee, the absence of a warning might affect the substantive justification for dismissal, if it can be shown that you had led the employee to believe from past practice that the misconduct in question was “minor” misconduct, for which dismissal for a first “offence” could not reasonably have been expected.