FORFEITURE OF WAGES CLAUSES IN CASES OF ABANDONMENT OF EMPLOYMENT OR FAILURE TO GIVE NOTICE
It seems unfair – an employer cannot dismiss an employee on the spot, even for serious misconduct, and yet an employee can abandon his employment or not give the required amount of notice, seemingly without any penalty. It makes employers feel angry and helpless. That is why clauses began to be written into employment contracts that allowed the employer to, in such an event, withhold some or all of the employee’s final wage or holiday pay. It’s a good start. However, in a case before it in 2013, the Employment Court determined that such a clause does not give an employer carte blanche to withhold a sum that is disproportionate to the inconvenience caused by the employee leaving before working the notice period specified (Livingston v G L Freeman Holdings Ltd). In other words, the forfeiture clause cannot act as a penalty against the employee; it must simply be a reflection of any actual costs that the employer incurs, e.g. hiring a temporary worker to cover the position until a permanent replacement is found, having to pay overtime to existing employees, or losing work due to the employee leaving in an untimely fashion. And, before you ask, no, an employer cannot claim that the stress caused by an employee leaving thus, is an actual cost. Companies are not recognised as human, and it is most often a company which is the employer.
Of course, at law, there is nothing to stop an employer having a forfeiture clause that allows for a penalty as well as any costs incurred, but it would have to be proportionate to the loss. Ms Livingston was penalised just $500 by the Court under secs. 134 and 135 of the Employment Relations Act for breach of contract, while the employer had to pay the nearly $2,000 it had withheld from her. She had worked just two weeks of a required six weeks’ notice period.
So where does this leave an employer whose employee has breached their contract? I would suggest, to save legal costs, filing a request for a penalty themselves. It is a very straightforward process that is done through the Employment Relations Authority. There is a cost of around $75 to do this, and the staff at the Authority are always more than happy to walk an employer through it. It is not difficult. For many employers, it’s not so much the inconvenience and stress of such an event, but the unfairness of it, especially when such employees often demand that their final wage and holiday pay be given to them. I am all for both parties being held accountable for their obligations under their contracts, so I strongly recommend employers take this course of action.
ABANDONMENT OF EMPLOYMENT
This is a different animal to an employee not working a required notice period. This is when an employee fails to show for work and fails to contact the employer. A good employment contract would have a clause that allows for that eventuality, stating that after a specified period of time, normally 2-3 days, the contract is deemed terminated by the employee, not the employer, due to his or her unnotified absence. It is required of the employer that it make one or more attempts to contact the missing employee; after all, he/she may be lying in a hospital bed with broken limbs, unable to fulfil the obligation of ringing in, or some such other event that is not the employee’s fault. Then the situation changes to perhaps allowing sick leave, annual leave, or even unpaid leave to give the employee time to recover from the event. So it is an important point for an employer to remember if an employee goes AWOL. However, in the absence of such a situation and the employer invokes the abandonment clause, and said clause also has a forfeiture clause, then all the above stated for failure to work out a notice period also applies to this form of termination of employment.
Trial periods have been part of New Zealand's employment law since 2009 under section 67A of the Employment Relations Act 2000. They are a valuable asset for employers who need some assurance that the employee they are hiring can do the job and is a suitable person for their organisation. However, basic mistakes are still being made by many employers when taking advantage of them. Firstly, the trial period needs to be agreed by the employee BEFORE starting work, in other words, the fact that there will be one needs to be stated at the time of the job offer, or have it in an employment agreement that is signed before the employee begins work. Secondly, the wording of the clause must include certain information to be valid. It has to specifically mention that, if dismissed within the trial period, the employee cannot pursue a claim of unjustified dismissal. It also needs to state how long the trial period is for. The law allows up to ninety days, but an employer may wish to make the period, say, thirty or sixty days. This is permissible as long as the actual time frame is mentioned.
Another error commonly made is in the matter of termination. Some employers do not realise that if a specific notice period or wages in lieu of notice provision is not included in the trial period clause, then the termination clause that will be elsewhere in the agreement must be adhered to. Thus, if an employer's termination period for employees is normally two weeks, then two weeks must also be given to an employee who is being dismissed within the trial period. However, if the employer wishes to make that a shorter time, or pay wages in lieu of notice, then that must be stated in the trial period clause. Some employers mistakenly believe that they can give instant dismissal within the trial period, but this is not correct.
Employers understand that a reason for dismissal is not required within a trial period. However, even though section 67A does not mention anything about providing training and support during it, the Employment Relations Authority and Employment Court have laid down in case law that an employer must take into account its good faith requirement and do just that. This is only fair. An employee in the trial period does not have all the same rights as those outside one, therefore the Authority and Court wish to ensure that every chance is given to the employee to succeed.
Finally, trial periods are only permitted for new employees. If someone has worked at the organisation previously, even on a casual basis, they cannot be subject to a trial period.
There is much emphasis these days on the behaviour of employers, specifically, it seems, on what they cannot do, e.g. fire employees on the spot even if he/she is actually caught in an act of serious misconduct; discipline them without following a rigorous process which includes giving them notice that they face such a process, allowing them to have a support person, and then giving them time to respond; cannot vary previously agreed conditions of employment without the employee's consent. Much of this is only fair and reasonable. However, because employers are now held to such a high standard of behaviour, the point is often overlooked that employees, too, have obligations under law such as acting only in the best interests of the employer, behaving in good faith within the relationship, and complying with all lawful and reasonable instructions. In my work as an employment relations consultant, I frequently see employees with no notion of any of those obligations and, whilst the employer must go to great pains to deal with the results of that, the employee can wreak havoc on a work place as the employer dutifully follows due process. I would even go so far as to say that some employees feel that they can call the shots in their place of employment as they have the idea that the employer is severely limited in what it can do. One such recent case was that of Bhikoo v Stephen Marr Hair Design Newmarket Ltd. The relationship between Mr Bhikoo and his employers broke down. Mr Irvine, one of his employers, initiated an investigation into Mr Bhikoo's behaviour at the work place. Mr Bhikoo's lawyers objected to Mr Irvine being a decision maker once the investigation was completed, and it was agreed that another director of the company, Ms Vincent, would be the person responsible for making a decision about Mr Bhikoo based on the results of the investigation. He objected to this as well and refused to take part in the investigation. He was subsequently dismissed and filed a personal grievance of unjustified dismissal. The case went all the way to the Employment Court which found that he had not been unfairly dismissed and that, in fact, Mr Bhikoo had breached an employee's duty of good faith which required him, under sec. 4(1A)b of the Employment Relations Act 2000, to be responsive and communicative. This would mean attending disciplinary meetings and engaging in the process that his employers were following. The judgement, in fact, is quite damning of Mr Bhikoo's attitude to his employers, saying that his behaviour was sufficient to seriously undermine the trust and confidence that an employer needs to have in its employee. That last point of behaviour is one that is often levelled against employers, but could, in my view, be used far more often than it is against employees as well.
I am indebted to Buddle Findlay.com for knowledge of this case.
Another case which highlights an obligation of employees is that of Sunair Aviation Ltd v Walters. Mr Walters worked for Sunair for seven years at which point Sunair was required to go to tender for fire services at Tauranga Airport. If Sunair was not successful in its bid, its employees faced possible redundancy. Mr Walters decided that he, too, would put in a bid for the work despite having a clause in his employment contract with Sunair that he would not, during the course of his employment with it, not become involved in any way with a business that would be in competition. Mr Walters was ultimately successful in his bid and Sunair had to make its employees redundant. It then came to Sunair's notice who had won the tender and it sued Mr Walters for breach of contract and breach of an employee's implied duty of fidelity, which is a common law duty that all employees must act in their employer's best interests. In this particular instance, that translates to Mr Walters attempting, by his tender bid, to take work away from his employer. Sunair won its case on both its contractual and common law basis.
I conclude by saying that, in stating the above, I am not making a case that employees are more badly behaved than employers; I wish only to make an often overlooked point, which is that they, also, have obligations under the law.
WHAT HAS TO BE IN AN EMPLOYMENT AGREEMENT
It is not as well-known as it should be that there are certain provisions, called mandatory clauses, that must be in employment agreements, both collective and individual. This article covers only individual agreements. Section 65 of the Employment Relations Act 2000 states that the agreement must be in writing, may contain such terms and conditions as the employee and employer see fit, and MUST include the following:
- the names of the employer and employee;
- a description of the work to be performed by the employee (this can be a separate document listed as a Job Description), including a job title;
- where the job is to be performed i.e. the place of work;
- the wages or salary payable to the employee;
- an indication of the days and hours the employee is to work, although the agreement can state that those may be flexible;’
- a clause covering payment for work on public holidays as per the requirement of the Holidays Act 2003;
- a clause covering the employer’s obligation to consult with, and get a response from, the employee in the event of any restructuring of the business that will involve a new employer for the employee, plus the employer’s obligation to negotiate on the employee’s behalf with the new employer ;
- and an employment dispute resolution clause, outlining the process both employer and employee should follow in the event of any disagreements arising in the relationship. Such clause must make reference to the ninety day period within which a personal grievance must be raised by an employee (sec. 114 of the Act).
There are other statutes that cover the rights and obligations of employers and employees that do not have to be included in an employment agreement. These are:
Minimum Wage Act 1983
Wages Protection Act 1983
Equal Pay Act 1972
Holidays Act 2003
Parental Leave and Employment Protection Act 1987
Health and Safety in Employment Act 1992
Human Rights Act 1993.
Parties to an employment agreement cannot contract out of any of the provisions of the above Acts. In other words, it is not possible to offer any terms or conditions of employment which are less than the minimum rights and obligations outlined in them. It is, however, permissible to offer more.
FIXED TERM OR CASUAL AGREEMENTS
In conclusion, it must be stated that agreements that are not of an indefinite and ongoing nature, such as fixed term or casual agreements, may not need to follow the same list of mandatory clauses. For example, a casual worker may not be eligible to get paid extra time and a day in lieu for working on a public holiday as it may not be a day that he or she normally works, which is a requirement for such payment. Or, again, a casual or fixed term employee may not be eligible for the five days sick leave due to a permanent employee after working a continuous period of six months.
Thus, from the above, it can be seen that having an employment contract that complies fully with the law isn’t something that most employers would be au fait with. A final example would be that of a trial period clause which is permissible up to ninety days. A lot of employers are not aware that, unless said clause contains the provision that (a) the employer can dismiss the employee during the trial period, and (b) a provision stating that the employee is not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal, then the clause is invalid and the employer could find itself facing an unjustified dismissal claim if it invoked it (Employment Relations Act 2000 sec.67A(2) ). Going to the expense of getting legal advice on employee contracts would certainly avoid more costly time and trouble if an employer ever faced a personal grievance.
MISREPRESENTATION BY AN EMPLOYEE
Many employers rely on the results of criminal record checks to decide whether they will hire an otherwise suitable worker. However, since those checks can take up to six weeks to be processed, the employer often takes the word of the prospective employee as to whether they have any convictions, and hires them on the basis of an assurance that they do not have, or only have minor convictions that are of no concern to the employer. If it then transpires that the employee does have convictions that would have been grounds for not offering the position in the first place, the employee is often dismissed.
Now, if the employer’s paperwork does not cover the above outlined scenario, he/she could face an unjustified dismissal claim as the case of Richardson v Fonterra Cooperative Group Ltd  NZERA Wellington 132 shows. Fonterra has a zero tolerance policy for criminal convictions and it hired Mr Richardson on the latter’s assurance that he didn’t have any. He, in fact, did, but was relying on a mistaken belief that they were sealed under the Criminal Records (Clean Slate) Act 2004. He consented to a Ministry of Justice check which arrived five weeks after he accepted the job. This revealed that he did have convictions that had even led to a term of imprisonment. After an investigation, Fonterra fired Mr Richardson on the basis of misrepresentation. Mr Richardson claimed unjustified dismissal and won his case. The reasons why are very important for any employer to know who requires employees with no convictions.
In Fonterra’s application process online, the applicant is asked to disclose whether he/she has any criminal or driving convictions. The online application also informed the applicant that:
‘Sometimes background check results are not confirmed until after employment has started. Please note that nay information obtained will be checked with you for accuracy, but be aware that if you have not given Fonterra information that is relevant to the background checks or your general suitability for employment, or if you have provided misleading or false information, then this may be grounds for dismissal without notice’
Fonterra subsequently relied on this statement in its defence of the unjustified dismissal allegation, claiming misrepresentation under the Contractual Remedies Act 1979, which, if proven, would have the effect of cancelling the employment contract with Mr Richardson. Unfortunately, subsequent documentation pertaining to Mr Richardson’s employment, namely, the letter of offer of employment and his employment contract, made the offer of a job unconditional. There was no reference in either document as to any misrepresentation and the consequences that could arise from it, such as dismissal. Further to that, the employment contract also had a Completeness of Employment Agreement clause, which means that the contract superseded all other documents. Therefore, unless the contract had a misrepresentation clause, the employer could not rely on the above statement which was in the online application form.
So what does this case mean for employers? Simply this – that, if a prospective employee’s hiring is dependent on a clean criminal record which may not be proven until after the start of employment, then the employer must have a clause in the offered employment contract, and letter of offer of employment if one is provided, that covers the issue of misrepresentation. Such a clause must state that if the employee gave false or misleading information, then dismissal may follow as a result. An employee must, however, be given the opportunity to respond to such an allegation.
Note, an applicant’s criminal history may not be the only issue that can be covered by a misrepresentation clause. Another matter of concern for many employers is the state of health of any prospective employee.
Clearly, such a clause would be advantageous and is to be recommended.
From the above, it can be seen that dismissing someone on the spot does not fulfil the statutory obligations an employer has. Faced with behaviour so unacceptable that it cannot be reasonably tolerated, an employer is better off sending an employee home on pay, giving each party a cooling off period and time for both to consider their responses.
Another important factor in considering dismissal is whether an employer has a provision in an employment contract for ‘instant’ dismissal based on serious misconduct. This would be a sensible provision to have as it shows that the employee has foreknowledge of what to expect in the event of certain behaviours. A code of conduct can further spell out specific examples that an employer will not tolerate in the workplace.
As always, a well written employment contract with accompanying documents such as a code of conduct, and a clearly understood process to follow in the event of things going wrong will go a long way towards avoiding a personal grievance claim for unjustified dismissal.
Unpaid work trials in New Zealand are not uncommon, particularly in the hospitality industry. They have advantages for both parties; the hopeful employee-to-be gets practical training, and the potential employer gets free labour and the chance to see how the worker performs. However, just such a scenario turned sour for a business owner when she texted a worker who had completed a five hour (over two days) unpaid work trial with her, and told her there was no job for her. She believed that the worker had taken money from the till. The worker, Ms Howe-Thornley, took a personal grievance case against the business owner for unjustified dismissal and won her case at the Employment Relations Authority. The business owner appealed to the Employment Court but lost there also. The Court found that, under the provisions of the Employment Relations Act 2000 (ERA), specifically sec 66, ss 67A, and 67B, Ms Howe-Thornley, was an employee and was therefore unjustifiably dismissed for theft. This was because, as required by sec.103A ,ss.3 of the ERA, the employer did not raise her suspicions of theft to the employee, or investigate them, and did not thereby give the employee an opportunity to respond. The judge said that employers who want to 'try out' potential employees may have to engage them as employees but ensure that there is a trial period of up to 90 days allowed for in the employment contract. The ERA allows that an employee can be dismissed without reason in that time frame. However, the ERA also states that such a trial period must specify that, in such an event, the employee is not entitled to take a personal grievance claim (see ERA sec.67A(2).
This case raises important questions around unpaid internships or training that is undertaken as part of obtaining a qualification. The Employment Court judge recognised this and said: "What is the status of people undertaking practicums as part of a training or qualification, for example trainee teachers on assignments to schools teaching students under supervision and being appraised? What of the legal status of trainee doctors attending with consultants in hospitals and undertaking professional tasks consistent with their training and skills? It has been thought unlikely that such trainees would be employees of schools’ boards of trustees or the relevant district health boards, but the level of work undertaken by them may impose a degree of legal liability on those persons vis-à-vis third parties". He went on to suggest that if his judgment would impose "unreasonably arduous obligations on prospective employers and employees", it might be that "Parliament should consider the scope of the restrictions that it wishes to impose concerning work trials".
Until then, it would be best to play it safe and hire employees under an employment agreement that has a trial period in it, such clause adhering to the requirements of the ERA secs. 67A and 67B.
NATURAL JUSTICE DEMANDS THAT AN ACCUSED KNOW THE IDENTITY OF THEIR ACCUSER
It has become commonplace in society today for people hiding behind anonymity to criticise, vilify, or abuse others. Such reprehensible conduct is rife in social media and leaves the victims of it feeling so helpless that it has led to suicides. It is extremely cowardly behaviour, and often shows the perpetrators up as envious and spiteful. It is also common for these types of people to put forward assertions that are completely unsubstantiated but claim they are true. Unfortunately, they can largely get away with it on the internet but in our courts they cannot. It is a strong principle of our justice system that an accused should know their accuser in order to better defend themselves against any allegations.
The requested anonymity of complainants is an issue that is not uncommon in employment disputes. It usually arises in allegations of bullying or sexual harassment when the complainant fears repercussions from speaking out. That is understandable; however, the principle of natural justice must override that consideration or else people will feel free to make whatever assertions they like about others without being held accountable for them, as is the case on social media. The recent case of Adams v Wellington Free Ambulance Service Inc 23 July 2010 WA 81B/10 upholds this principle in that it finds that Ms Adams, although guilty of serious bullying and abuse of colleagues, was unjustifiably dismissed because Wellington Free Ambulance did not provide her with the names of the complainants and the details of their allegations. The Employment Relations Authority, however, would not give her the remedy of reinstatement that she sought as it found that the level of her offending and her continuing failure to appreciate the effect on others of her behaviour would not be conducive to a harmonious working relationship with her former employer and colleagues. The Authority also reduced by 60% the compensation it awarded her for the unjustifiable dismissal as recognition of her significant contribution to the circumstances that led to it. It is important to note, also, that some of this bullying and abusive behaviour consisted of comments posted on Ms Adam’s Facebook page. The employment courts have shown no hesitation in taking social media comments about employment issues into its purview.
The case of Brown v Bob Owens Retirement Village Ltd 15 November 2013  NZERA Auckland 526 reinforces the finding in Adams v Wellington Free Ambulance Inc.. Ms Brown was dismissed by Bob Owens Retirement Village after an investigation was carried out which depended entirely on the allegations of six other staff members who requested anonymity which was granted. Ms Brown was not given even the details of the allegations, and thus, concluded the Authority, she was wholly unable to properly defend herself. Again, the Authority held that a dismissal based on secret witnesses was totally inadequate and unjustified. It stated that it seemed that Bob Owens simply accepted what the complainants said about the fear of retribution without checking to see if there was any validation in such fear.
The latter observation points to another inherent weakness in anonymous complaints based on supposed fear of retribution. This is a very easy claim to make, but such a claim should have some provable substance to it. Instead, it is often taken at face value.
The courts have indicated that there may be circumstances where the identity of complainants may be legitimately withheld, but such circumstances would have to include evidence of serious threat, or some other legitimate fear that is based on reasonable grounds.
There is before Parliament (June 2014) legislation that will provide remedies to people who suffer from malicious comments by unidentified persons on the internet. It is to be hoped that, as in employment law, this will have the effect of largely stopping nameless cowards from hiding behind their anonymity.