News and events

Inquiries, reviews and reviews of inquiries…

Inquiries seem to be a fact of life these days. They come in all shapes and sizes. Some are obviously very public, whilst others are conducted well out of the glare of the media and their very existence may be highly confidential. The more public ones are often conducted under particular statutory provisions. Entities such as the Auditor-General, the State Services Commissioner and the Ombudsman have statutory powers (and, usually, immunities) to inquire into events or issues. Conversely, being asked to conduct an inquiry by on behalf of an organisation in respect of a more private matter can present a different set of challenges.

Why undertake an inquiry?

An inquiry is often announced to assure the public that some particular issue of concern will receive the (generally independent) scrutiny it requires. Sometimes the very fact of announcing an inquiry or review is enough to take the heat out of a particular issue, whilst the announcement of the results of that inquiry or review can go almost unnoticed.

A lack of independence can undermine the credibility of a review; witness the review undertaken at the end of last year by the New Zealand Rugby Union into the recent Chiefs debacle. Stuff reported:

“The Chiefs board has announced they’ll review their handling of the stripper fracas and its fallout, as players and prominent Kiwis condemn how the investigation was handled.”

The condemnation of “how the investigation was handled” appeared to be in large part because it was not undertaken by an independent party, but by an employee of New Zealand Rugby.

Independent barristers, along with senior (often ex-) public servants, have been involved in their fair share of both formal and informal inquiries recently.

Before looking at some of the challenges in undertaking such an inquiry, this article summarises some of the different statutory powers available to those who do so (noting that this is not an exhaustive list).

Some relevant legislative provisions

  • Inquiries Act 2013

 

This Act came into force in August 2013 following an extensive Law Commission review. Its purpose is to modernise the law relating to inquiries. It now gives a statutory basis for “public inquiries”, enabling them to enjoy certain procedural and inquisitorial powers which only Commissions of inquiry established under the Commissions of Inquiry Act 1908 (such as the Pike River inquiry and that into the causes of building failure in the Canterbury earthquake) previously enjoyed. It also specifically makes reference to the need for an inquiry, and each of its members, to “act independently, impartially and fairly” (section 10).

It was expected that the protections afforded by this legislation would mean that ministerial inquiries would no longer be undertaken, but even after the Act came into force, in July 2014 Foreign Affairs Minister Murray McCully confirmed that John Whitehead, former Secretary to the Treasury, would head a “Ministerial Inquiry” into how “ambiguity” was created about New Zealand’s position on the fate of a Malaysian High Commission official accused of an attack on a Wellington woman.

It is to be assumed, however, that the Act will generally be used where possible. Under it, inquiries can now be one of 3 types – a Royal commission, a public inquiry established by the Governor-General or a government inquiry established by a Minister and notified in the Gazette, in the latter two cases in respect of matters of public importance. All three types of inquiry enjoy the duties, powers, immunities and privileges set out in Part 3, including powers to take evidence on oath or affirmation (section 19), obtain information from any person (section 20), order disclosure of evidence to a person participating in the inquiry (section 22) and summon witnesses (section 23). In accordance with section 11, no inquiry has the power to determine the civil, criminal or disciplinary liability of any person – notwithstanding that an inquiry can make findings of fault or recommendations.

The differences between Royal Commissions, Public Inquiries and Government Inquiries lie in the way they are established, and the way they report.  A Royal Commission or a Public Inquiry is established by the Governor-General (on the advice of Ministers) and reports to the Governor-General.  Its report must be presented to the House of Representatives.  A Government Inquiry is appointed by and reports to one or more Ministers (section 6).

Recent “government inquiries” have included the Whey Protein Concentrate Contamination Incident chaired by Miriam Dean QC; the inquiry into allegations former minister Judith Collins was part of a smear campaign against former Serious Fraud Office boss Adam Feeley undertaken by former High Court judge, Hon Lester Chisholm, the inquiry into the escape of Philip John Smith, chaired by former High Court judge, Hon John Priestley CNZM QC and, more recently the enquiry into the Havelock North water supply contamination incident, chaired by another former High Court judge, Hon Lyn Stevens QC – which has just delayed its report-back.

The Act sets out some particular matters which are of relevance to all inquiries. A number of these are summarised below, including the importance of the terms of reference (section 7) and of the need to comply with the principles of natural justice (section 14).

  • Others

 

Other statutory officers and institutions have specific inquiry powers. Some examples are set out below. It is perhaps trite to say it, but when conducting an inquiry it is critical to be constantly mindful of the statutory basis for undertaking that enquiry.

Privacy Act 1993: The Privacy Commissioner’s functions include the ability to inquire generally into any matter relating to the privacy of the individual under section 13 of the Privacy Act. For example, in March 2012 the then Privacy Commissioner announced that her office had commissioned an independent inquiry and approved the terms of reference into the breach of privacy at ACC when thousands of files were sent to the wrong person.

Public Audit Act 2001: The Auditor-General has an inquiry power under section 18(1) of the Public Audit Act 2001. This provides that the Auditor-General may inquire, either on request or on her own initiative, into any matter concerning a public entity’s use of its resources. “Public entity” is given a wide meaning in section 5 of the Public Audit Act 2001 and includes the Crown, offices of Parliament, entities falling within a certain class such as community trusts, Council-controlled organisations, Crown entities, public service departments and state-owned enterprises, as well as a raft of specific named entities including the Nursing Council of New Zealand and the Plumbers, Gasfitters and Drainlayers Board.

The recent inquiry into the Saudi Arabia Food Security Partnership was conducted under this legislation.

Ombudsmen Act 1975: The Ombudsman has powers under section 13 of this Act “to investigate any decision or recommendation made, or any act done or omitted….. relating to a matter of administration and affecting any person or body of persons….”.

State Sector Act 1988: Under section 8, the Commissioner has the power to conduct any inspections or investigations that he or she considers necessary, or the relevant minister directs. Section 7 gives the Commissioner all such powers as are reasonably necessary or expedient to carry out the functions and duties imposed on the Commissioner under the Act.

Independent Crown Entities: The Transport Accident Investigation Act 1990 establishes the Transport Accident Investigation Commission as a standing commission of inquiry under the Commissions of Inquiry Act 1908. Thus, the powers available under that Act, and under TAIC’s own Act, are available to the Commission, whose principal purpose is “to determine the circumstances and causes of accidents and incidents with a view to avoiding similar occurrences in the future, rather than to ascribe blame to any person” (section 4). Other independent Crown entities, such as the Commerce Commission and the Law Commission, also have a variety of powers to inquire and review.

Non-statutory Inquiries

The vast bulk of inquiries, although not “enjoying” the same public profile, are however likely to be purely internal to an organisation. They can range from employment inquiries, for example into inappropriate conduct in the workplace, to allegations of leaked information or of bias. Where there is capacity in-house to conduct such an inquiry, it often falls to the legal team to undertake the inquiry itself or to be responsible for it by commissioning an independent lawyer to assist.

In-house inquiries can have both pros and cons. On the plus side, the inquiry is internal and discreet. On the downside, relevant statutory assistance and protections are absent. Without statutory powers to compel witnesses to give evidence, afford protection to those giving evidence or require documents to be produced, the “truth” of a matter or allegation cannot always be ascertained. In addition, the person conducting the inquiry can be exposed to liability. Allegations that the person conducting the inquiry has defamed a party named in a final report, or has not adhered to the relevant principles of natural justice, even if unfounded, can make undertaking such inquiries less attractive than might be thought. In some situations, assurances may be sought to hold the Inquirer harmless if such allegations result.

There is often an expectation that such inquiries can be very quickly conducted; this is not always the case. Ensuring that the terms of reference are robust, and that adequate time is allowed to uncover evidence (including interviewing relevant parties) whilst adhering to the principles of natural justice, require that these things not be rushed. Some important considerations are referred to below.

  • Terms of reference

 

As with all inquiries, and as is dealt with in section 7 of the Inquiries Act, the terms of reference are critical to the ambit of the relevant inquiry; an inquiry must be guided by them. The Ombudsman’s investigation into SSC’s conduct of the MFAT leaks inquiry makes a number of comments which are pertinent to anyone undertaking an inquiry. The report can be found at: http://www.ombudsman.parliament.nz/system/paperclip/document_files/document_files/1587/original/investigation_into_ssc_conduct_of_mfat_leaks_inquiry.pdf?1466629016

In particular, the findings in MFAT’s final report were found to have exceeded the terms of reference for the inquiry. The problem with terms of reference, which need to be developed at the outset, can often be that as an inquiry continues it becomes obvious that they are inadequate in some way. In fact, in relation to the MFAT inquiry, they were amended some three weeks after the inquiry started. It is useful to include a provision allowing this to happen.

  • Conduct of the inquiry

 

Decisions will need to be made at the outset as to who might be interviewed, bearing in mind the ability (or lack of it) to “require” persons to be interviewed and give evidence. There is an overriding duty that any inquiry be fairly conducted, even if there is no statutory requirement to do so. In practice, this means that interviewees must be given proper notice of an interview and advised how that interview will be conducted; for example, whether the interview will be recorded and transcribed. Whilst an employee must comply with reasonable requests from his or her employer, such as attending an interview, generally no such requirement extends to others who might be able to contribute to the inquiry. This means that others can be invited to attend an interview, but cannot be compelled to do so.

  • Natural justice

 

Section 14 of the Inquiries Act specifically requires an inquiry to comply with the principles of natural justice. In particular, section 14 (3) provides that if an inquiry proposes to make a finding that is adverse to any person, the inquiry must be satisfied that the person is both aware of the matters on which the proposed finding is based and has had the opportunity to respond to those matters.

Any non-statutory inquiry must also adhere to these principles. Natural justice can be equated with the duty to act fairly. This concept has been clearly endorsed by the Court of Appeal for a number of years, since the leading case of Daganayasi v Minister of Immigration [1980] 2 NZLR 130.

Where allegations of misconduct are involved, the relevant person must be given notice of those allegations and a real, as opposed to nominal, opportunity to refute them. In the words of Cooke J in the Daganayasi case, the relevant person “should have a fair opportunity of correcting or contradicting any relevant statement prejudicial to his or her view”. Consideration of those explanations must be unbiased and free from predetermination, uninfluenced by irrelevant considerations.

A further important rule of natural justice is that an inquiry must also ensure that the evidence relied upon reasonably supports the conclusions reached (see Lord Diplock in Re Erebus Royal Commission (Re Erebus). [1]

In short, attention to some of these fundamental principles at the outset of an inquiry, whether statutory or not, can make the process more straightforward and reduce the chance of a successful challenge by, for example, judicial review.

[1] Re Erebus Royal Commission, Air New Zealand v Mahon [1983] NZLR 662 (PC) [Re Erebus] at 671

2016 Public Law Round Up

Image result for 2016 to 2017

2016 has been a remarkable year: Brexit, the US election, the loss of Leonard Cohen, the Queen’s 90th birthday and PM John Key’s abrupt resignation.  In the midst of this, one would be forgiven for overlooking some of the public law developments taking place in New Zealand. Here are some of the more notable of them:

Justiciability in judicial review

In response to over 1,750 claims of child abuse in state care, the Ministry for Social Development set up an internal process to attempt to resolve the claims out of court.  The process proved to be slow, so the Ministry developed a new “two path approach”: claimants could accept an expedited settlement offer or could opt to have their claim assessed fully.  In XY v The Attorney-General [2016] NZHC 1196, the implementation of the “two path approach” policy was challenged by 615 claimants who allege historic abuse.

Although the Ministry’s decision to compensate victims of historic abuse amounts to an exercise of prerogative power, which is, in principle, amenable to review, Gendall J concluded that this decision was not justiciable because there was no “legal framework against which the decision can be assessed”, at [35], and because permitting the court to supervise an alternative dispute resolution process such as this could “procure a potentially chilling effect in which the Crown might become reluctant to engage in settlement discussions for fear that any decisions would be subject to the Court’s supervision”, at [36].

The court has held previously, on the same “no legal framework” basis, that ex gratia compensation to persons who are wrongfully imprisoned is not justiciable: Akatere v Attorney-General [2005] NZHC 477; [2006] 3 NZLR 705.

Ex Gratia compensation for wrongful imprisonment

This year there have been two high profile cases of ex gratia compensation for wrongful imprisonment.  In New Zealand there is no legal right to compensation for wrongful conviction or imprisonment; compensation payments are made on an ex gratia or discretionary basis.  The Cabinet Guidelines provide a standard process for considering the grant of compensation and the ultimate decision rests with Ministers.

In May, retired High Court judge Rodney Hansen QC found, on the balance of probabilities, that Teina Pora was innocent of the charges for which he was convicted and for which he spent 21 years in prison.  Cabinet accepted the finding and agreed to pay over $2.5 million in compensation.

In August, retired Australian High Court judge Ian Callinan QC found that David Bain had not established his innocence on the balance of probabilities.  On that basis, David Bain was denied compensation.  Cabinet nevertheless decided to make an ex gratia payment of $925,000 to reflect the time and cost involved in his compensation claim (which lasted nearly six and a half years), to avoid further legal proceedings, and to bring to an end the whole matter.

Unreasonableness in judicial review

Wong v New Zealand Parole Board [2016] NZHC 1401 is one of the rare cases in which the Court has disqualified a decision on the ground of unreasonableness.

Mr Wong, who was serving a term of imprisonment for importing, and possession for supply of, methamphetamine, challenged the Parole Board’s refusal to grant parole.  As a pre-requisite to parole, the Parole Board required Mr Wong to complete a drug treatment unit programme, even though there was no evidence that he had ever been a drug user.

The High Court found that, in the absence of any evidence that Mr Wong had used drugs and in light of the Probation Service’s assessment that there was no need for such rehabilitation, the Board had acted unreasonably.

Innominate ground of judicial review

In AI v The Immigration and Protection Tribunal [2016] NZHC 2227, Mr AI challenged, under the “innominate ground”, the Tribunal’s refusal to grant him refugee status, citing a series of errors by the Tribunal.

Palmer J observed, at [41], that the “innominate ground” has been misunderstood.  It does not authorise the Court’s intervention on the “stand-alone basis” that something has gone wrong of a sufficiently serious nature and degree.  In other words, it is not a separate residual and instinctual “something has gone wrong” ground of review, at [2], [43], and [46].

The “innominate ground” simply means that the lawfulness of the exercise of powers by an unusually constituted body must be judged against its nature and functions, powers and duties, and the environment in which it operates, at [43].  Palmer J commented, at [43], that “this is a routine and orthodox approach to interpretation of a body’s constitution.  It is not an invitation to courts to strike down a decision of a public body based on a court’s instinct as to whether “something has gone wrong”.

In Electoral Commission v Cameron [1997] 2 NZLR 421, the “innominate ground” was relevant insofar as the CA had to consider the overlap of powers between the Electoral Commission and the Advertising Standards Complaints Board.  The Court held, at p 430, “if on a proper construction of the powers of the board they do not extend to interfering with the exercise by the commission of any of its statutory functions and powers, a decision by the board having that effect will be beyond its powers.”

By contrast, in this case “the law governing the decision-making by the Tribunal is clearly set out in statute.  There is no need to delve further into its legal parameters by reference to its functions, powers or duties”, at [48].  Accordingly, the innominate ground was not applicable.

A very Merry Christmas and best wishes for the New Year from all of us here at Clifton Chambers

 

Jane Meares appointed as the new Chief Commissioner of TAIC

Clifton Chambers is delighted to share the news that Jane Meares has been appointed the Chief Commissioner of the Transport Accident Investigation Commission (TAIC) for a five-year term, as announced today by Transport Minister, the Hon Simon Bridges.

This is an additional governance role for Jane, as Chair of the TAIC Board, supplementing her ongoing corporate and governance advisory services as a Barrister with Clifton Chambers.

The International Evolution of Mediation

pepp-10-logo-eduPepperdine University School of Law’s Tom Stipanowich and Karinya Verghese have recently published a well researched article exposing fascinating regional differences in mediation practice which include regional divergence such as the relative use or non-use of joint sessions; how mediators handle information received from parties in caucus and mediator evaluation and opinion giving.

The article is a revised and expanded version of lectures delivered by Tom as the New Zealand Law Foundation’s International Dispute Resolution Visiting Scholar. The full text is at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2712457

Dismissing an employee who is on leave

Can an employee be dismissed while they are away from the workplace?

Click on this link to read an article by HRM online – in which Karen Radich discusses this issue.

Points on dismissal from the KiwiRail case

This recent Employment Court decision[1] contains useful guidance for dismissal cases: about the disparate treatment of employees when policy regimes are updated and about exercising a delegated authority to dismiss.

More well-known for its facts than for these legal points, this was the case where a train overshot the Melling station in Lower Hutt and crashed into a concrete block stop. There was significant damage to the train and to overhead wires, and two passengers sustained minor injuries. A post-incident drug test was positive for cannabis and the employee was dismissed.

Disparate treatment

During the investigation and subsequent legal proceedings, the employee pointed to three earlier cases where rehabilitation was offered to locomotive engineers who had failed drug tests, instead of them being dismissed. However, those instances had occurred 4-5 years earlier when different contractual and policy regimes were in place.  In particular, there is now a greater emphasis on health and safety and a ‘zero tolerance’ stance towards drug use.

KiwiRail was able to demonstrate that it had gone to considerable lengths to ensure that this new stance on drug use was well known, including staff being rostered-off duty in order to attend presentations – at which they were provided with information to take away and given the opportunity to consult with union delegates. It could also point to the date that this particular employee had attended a presentation.

In the circumstances the Employment Court considered the new policy framework to be “a sound explanation for the disparity”. In other words, because the disparity could be explained, the employer’s action in treating him differently was not held to be unjustified.

Exercise of delegation to dismiss

Many organisations have formal delegations which enable certain managers to dismiss employees. This is critical in the public sector, where the legal authority to ‘hire and fire’ stems from legislative provisions (e.g. in the State Sector Act 1988 and the Crown Entities Act 2004).

Pursuant to KiwiRail’s policy, the General Manager of the business unit held the authority to dismiss but could delegate that authority to the ‘investigating manager’ – but only after the General Manager had ‘seriously reviewed the case’ to ensure there was no bias and that the process had been procedurally fair.   The General Manager was also required to consult with the HR Manager.

This particular case was complicated by the ‘investigating manager’ to whom the General Manager had delegated the authority to dismiss the employee (after the requisite ‘serious review’ of the case) also being the HR Manager. This allowed the employee to argue that the policy requirement to consult with the HR Manager had not been met, because the HR Manager was one and the same person as the authorised decision-maker.   The Employment Court disagreed, holding that on the evidence before the Court such consultation had in fact occurred.  Even so, the Court noted that even if this was wrong, it would have been a minor defect in the process that did not result in the employee being treated unfairly.

Points to remember

  • New policy that alters rules of conduct should be clearly communicated to employees, preferably in a way that will allow the employer to demonstrate that this communication has occurred.
  • The authority to dismiss should be delegated and exercised in accordance with any applicable policy. To avoid any procedural issues, such delegation should be made to a person who can then operate within and according to that policy.[1]Thorne v Kiwirail [2015] NZEmpC 48

Court Involvement in Mediation

Many jurisdictions have grappled with the extent to which their courts should get themselves involved in the mediation of litigated cases.

Many different approaches have found favour around the globe, with diverse programs being implemented in courts from Hong Kong to Florida and places in between. Some courts are hands off while others are heavy handed – regulating every aspect and some even use judges to mediate.

Some programs are creatures of statute, others are mandated by procedural rules while others simply rely on a mediation friendly presiding judge. Some courts, I suspect, see mediation as a competitor – taking the best cases out of the system and contributing to the vanishing trial phenomena occurring in many jurisdictions.

At a recent Resolution Institute conference (formerly LEADR) in Auckland, a high-powered panel of judges and NZ/UK barristers discussed the appropriate degree of mediation involvement of courts in the New Zealand context in a session entitled Courts and Mediation: A Symbiotic Relationship?

Some would say New Zealand is, on any measure, a mature even sophisticated mediation jurisdiction. So the question arises in NZ and elsewhere, do our courts really need to nudge litigated matters towards mediation or are we better to simply build it and they will come? The research is mixed however it’s clear many litigated cases do not find their way to mediation without encouragement and direction from the court.

Our panel discussed the Continuum of Court Involvement below – being a spectrum ranging from hands off/light touch to mandatory referral of all civil matters.

NZ is in the judicial persuasion space verging on some fairly weak tick box case management levers. I would like to see it move right.

UK is a little further along, utilising pre action protocols and soft (financial) sanctions for unreasonable refusal to mediate.

Singapore is further along still – subscribing to a presumption of ADR (parties can opt out with reasons) in its Subordinate Courts – resulting in around 6000 mediations annually.

At the far right of our continuum are many courts in mature jurisdictions, most notably some states in the US and Australia, which not so much nudge as two hands push disputes out of the courtroom into the mediation room.

Some refer selected litigants to mediation without their consent however most stop short of a wholesale referral of all civil filings. Or as Nadja Alexander puts it, there exists discretionary mandatory, soft mandatory and routine mandatory.

Spectrum Capture2

To some extent, many of the issues that arise within the court environment (confidentiality, status of the outcome etc.) are different from those where mediation is outside it, however part of the problem with court programs is that often they are designed by people who know little about mediation but know everything about court process. Add to that judges who use the ability to refer cases out as a blunt instrument (maybe even as a hospital pass) without understanding the nuances of the process.

If one gets past that old chestnut of mediation being a voluntary process therefore how can there be any coercion of any kind by anybody (coercion into mediation/coercion within mediation) then the litigation community’s primary concerns appear to be;
1. what cases are mediated
2. how that referral takes place
3. who selects the mediator
4. who pays the mediator

Florida and the UK are good examples of how two justice systems have approached these issues.

Florida is widely seen as the pre-eminent US state when it comes to court connected mediation. Some figures have over 100,000 cases being referred out annually. Florida judges have the ability to order cases to mediation and parties have the ability to challenge that referral on grounds that the case has already been mediated or that it involves a question of law only or “for other good cause”. Florida’s success is in large part due to the fact that parties can choose their own mediator.

The UK soft sanctions approach is perhaps more familiar to readers of this blog. It is one that I favour as stopping short of mandatory referral but having enough teeth to nudge cases that would not otherwise get to the mediation table. While there is much to say and cases to read, essentially the UK position allows judges to impose financial sanctions (in the form of costs) if a party unreasonably declines to mediate, in some cases whether or not they prevail at trial. One of the latest cases in the Halsey line of cases is Laporte & anor v Commissioner of Police of the Metropolis

Other Common Law jurisdictions take a similar approach, for instance, Hong Kong’s District Court recently imposed adverse costs orders against a party who unreasonably refused to mediate; Wu Yim Kwong Kingwind v Manhood Development 

[a useful summary of both cases by Herbert Smith Freehills here and here]

Prohibited Preference and Passing On

Tensions can arise during bargaining processes when some employees are union members covered by the collective agreement and others are not[1]. Where the employer provides greater wage increases for some employees via a longer back-dating period, this could escalate into being unlawful preference.

Last year the Employment Court held that an employer had conferred unlawful preference on employees who were not union members (Pact Group v SFWU and The PSA[2]).  The employer was also held to have misled and deceived the unions during collective bargaining.  As a result, the employer was ordered to pay additional wages to each union member employee, in order to put them in the same position as their non-union member colleagues. However, the Court held that the employer had not unlawfully passed-on new terms and conditions of employment to non-union members.

Unlawful preference

It is unlawful for a contract, agreement or other arrangement to confer a preference on an employee because they are a member, or not a member, of a union[3].  In this case, different back-pay dates were applied to the wage increases for union and non-union employees.  As a consequence, union members were each approx. $249 worse off than the employees who did not belong to a union.  This was held to have given the non-union staff an unlawful ‘preference’ over the union members, as a consequence of their union membership.  The question of whether or not the employer intended to confer preference on employees because of their union status was considered to be irrelevant.

Misleading conduct

Misleading and deceptive statements in collective bargaining breach ‘good faith’ obligations.  In this case, the employer stated, during collective negotiations and to employees directly, that it was financially unable offer a wage increase over the 1% increase in Government funding that it had received. Because this was framed as a non-negotiable upper limit, the union eventually agreed to a wage increase equal to 1% over the year. The individual agreements offered the non-union employees the same percentage increase, but starting at the earlier date. This meant that, overall, the wage increase given to employees was in excess of the 1% – so the employer had misled and deceived the union by its statements.

Passing on

The meaning of “passing on” in this context is where an employer is bargaining for or has agreed a new collective agreement with a union or unions, and offers the same or substantially the same terms and conditions to employees who are not union members.  Doing so is not necessarily unlawful.  In determining whether there has been unlawful passing on, the Act provides for the following matters be taken into account:

  1. whether the employer bargained with the employees before they agreed
  2. whether the employer consulted the union in good faith before agreeing with individual employees
  3. the number of employees bound by the collective agreement compared to the number of the employees not bound by the collective or not covered by the bargaining
  4. how long the collective agreement has been in force.

To satisfy the first test above, employers must provide individual employees with the proposed terms of conditions it intends to pass on, give them the opportunity to seek advice, invite them to enter into negotiations, and genuinely consider any issues raised.  The second consideration requires the employer to notify the union of their intention to pass on and to consider their response before deciding whether to do so. Where passing on is the long accepted practice between the parties, the union’s agreement may be assumed.  However, express communication is preferable.  The last two matters reflect considerations of whether the passing on is likely to adversely affect the collective agreement or not.

In this case, passing on terms and conditions settled in collective agreements was the accepted long-standing process between the unions, the employer, and its non-union employees.  The employer invited its non-union employees to enter into new individual employment agreements and expressed a readiness to negotiate with them individually.  The court found that the requirement of good faith was satisfied.

Points to keep in mind

For employers in collective bargaining, this case provides the following key lessons:

  1. Don’t just assume individual employees want collective terms and conditions passed on – give them an opportunity to respond.
  2. Don’t assume unions agree to terms being passed on – notify them of your intentions and listen to any concerns.
  3. Make sure the potential to obtain a preference is extended to all employees doing the same work in the same circumstances – as it will otherwise be difficult to justify why one group obtained a benefit.
  4. If, during collective bargaining, a central term is portrayed as non-negotiable or an ‘upper limit’ and this induces the union to accept the offer, later conduct that contradicts this position invites a finding of bad faith.

[1]Eastern Bay Independent Industrial Workers Union Inc v ABB Ltd [2008] ERNZ 537

[2]Pact Group (A Charitable Trust) v Service and Food Workers Union Nga Ringa Tota Inc and The Public Service Association Te Pukenga Here Tikanga Mahi Inc [2014] NZEmpC 119

[3] Section 9, Employment Relations Act 2000

Justified dismissal in conflict of interest case

It can be hard to determine whether an employee’s private activities give rise to a conflict of interest with their employment duties.  However, the Employment Relations Authority has recently considered a case in which the conflict of interest was relatively easy to identify.

In Williams v Fletcher Construction Company Ltd[1] the employee (Mr Williams) was initially a Contract Supervisor and then a Works Manager for Fletcher EQR, a business unit of Fletcher Construction.  Fletcher EQR assessed work required to earthquake-damaged properties and then an accredited contractor would submit a quote.  Mr Williams was responsible for allocating work to accredited contractors and for overseeing their work.

In 2014 the EQC carried out an audit of claims completed by Fletcher EQR.  In that review, the director of an accredited contracting company stated (in a recorded interview) that Mr Williams had prepared ‘five or six’ quotes for the company and had charged $30 per quote.  This information was provided to Fletcher EQR, which commenced a disciplinary process against Mr Williams.  Mr Williams conceded that he had helped to prepare the quotes and said that the contracting company had given him $150 cash. However, he did not accept that this was a conflict of interest, but said it was “just a mate helping a mate”. 

The Authority held that a fair and reasonable employer could conclude that it was serious misconduct for an employee to accept payment for work done at home which was connected with his work duties.  It was also fair and reasonable for that employer to no longer have trust and confidence in him.  The Authority noted:

  • Mr Williams was in a position to decide who should be allocated work, as long as the quotes were accepted by the quantity surveying team. Accepting payment from a contracting company in those circumstances did create a conflict of interest situation.
  • The employment agreement stated that the employee must not receive any payment, fee, gratuity, commission or other benefit, except with the company’s consent. Mr Williams said that he was not aware of this provision. The Authority held that he could be expected to know that accepting money in those circumstances was improper, even if he had not reviewed that clause.
  • It was fair and reasonable for the employer to take account of the fact that it had a high public profile. It could and should have been able to expect to have a high level of trust and confidence in contract supervisors and their dealings with contractors.
  • The fact that the conduct was historical (from 2011) did not cause the dismissal to be unfair, as the employer had not known about it earlier and had investigated it promptly.
  • The employer was able to refer to Mr Williams’ employment record, which contained a warning from 2013, even though that warning concerned an unrelated matter and was issued after the 2011 conduct. The Authority noted that if his record had been unblemished, that would have been a factor in his favour that the employer would need to take into account. There was therefore no unfairness in having regard to the warning.
  • The employer took account of mitigating factors, including an admission of the conduct and his service with the company. This was reflected in the decision to pay Mr Williams’ one month’s notice.

[1] [2015] NZERA Christchurch 58

How far does an employment investigation need to go?

When investigating misconduct allegations, it is well-established that an employer is not obliged to undertake a detailed criminal investigation or quasi-judicial process.  But how far does an employer need to go in order to be fair? Many employers are having difficulty satisfying the standard being set by the employment institutions, even after quite involved investigation processes.

In this context, the Court of Appeal recently granted an employer leave to appeal a decision of the Employment Court that ordered the reinstatement of a pilot after an investigation into allegations of sexual harassment: A Limited v H [2015] NZCA 99. The Court of Appeal indicated in its leave decision that the quality of the investigation demanded of the employer, by the Employment Court, was too high.

The crux of the allegation in the case concerned physical contact, in a private setting, which the pilot claimed was accidental. As part of the employer’s investigation it interviewed the employee complainant, as well as all other witnesses (none of whom were present when that particular event occurred). As will often be the case, recollections differed. The Employment Court decided that the efforts made by the employer to clarify the inconsistent accounts were insufficient. In particular, while the pilot’s statements in response to the allegations were tested with him “in a penetrating, and at times, a relentless fashion”, the complainant’s statements were essentially accepted at face value.  Inconsistencies in her accounts of events, and other possibilities, were not put to her.  Also, where the accounts differed, the most incriminating version was used.  The Court found that the company’s investigator did not approach his task in a fair way, because he tested the pilot’s account vigorously but did not approach the complainant employee’s evidence in the same manner.

The requirements to conduct an even-handed investigation, and to put the accounts of witnesses to the respondent employee, are not surprising.  But it need not be to the same level as a criminal investigation, in which the Crown must be satisfied (and prove) beyond reasonable doubt what was actually said and done, and with what motive – which requires that type of penetrating investigation. An employer’s task is to determine, acting as a fair and reasonable employer, that it is more probable than not that the alleged misconduct occurred. While an employer’s investigation must reflect their resources and the seriousness of the allegation, a higher standard than this would not be within the reach or capability of most employers.

In this case, the Court of Appeal considered that it was reasonably arguable that the Employment Court had imposed on the employer a standard of inquiry that was too stringent and which bordered on the equivalent of a judicial investigation. It therefore granted the employer leave to appeal the question of whether the Employment Court’s approach to determining whether the company had “sufficiently investigated” the allegations was correct in law.

This may be an opportunity for the Court of Appeal to provide some guidance on the degree of investigation required of an employer before it can make misconduct findings. I will keep you posted.