Getting it right and being fair
When taking disciplinary action against any of your employees, you must follow the correct process or risk paying out large sums of money to aggrieved employees. The recent case of Stocker v Car Giant Limited (Stocker v Car Giant Ltd  NZERA Wellington 167) serves as a reminder of this.
Mr Stocker was an information technology manager at Car Giant, a car dealership in Petone. Car Giant called Mr Stocker to a meeting and told him he was dismissed, effective immediately. He was told he would receive no further payments from the company.
The Employment Relations Authority found that Mr Stocker had been unjustifiably dismissed without notice, and ordered Car Giant to pay him three months’ wages, together with $5,000 in compensation and legal costs. Settlement totalled more than $25,000.
This case shows that knowing and following correct procedure when disciplining or dismissing your employees is crucial.
Employment legislation doesn’t prescribe a specific dismissal/ disciplinary process. Case law, however, dictates that the process followed and decisions made must be fair and reasonable for all.
“… knowing and following correct procedure when disciplining or dismissing your employees is crucial.”
Before you start on any disciplinary process, you must investigate the issues that have arisen. From that investigation you then decide whether those issues warrant going through a disciplinary process. If the process is justified, you must inform your employee in writing of the nature of the allegations against them, that you will be starting a disciplinary process and the potential outcomes of that process. You should call your employee to a meeting (you need to give at least two days’ notice) and let them know they have a right to have a support person or their lawyer at the meeting. You should include all of this in your letter to your employee.
At the meeting, tell them of your concerns and give them a chance to respond. Listen and consider any explanation they give; you have a duty to deal with your employee in good faith and to be open and fair in all dealings with them. After the meeting, you’ll need to decide whether any misconduct has occurred and advise your employee of this in writing. You should then consider what disciplinary action, if any, should follow. You must consult your employee before a decision is made. A further meeting may need to be held with your employee at which you give your decision.
If a first warning is given, this should be recorded in writing and given to your employee. This warning will last for the period specified in the notice, which must be reasonable in the circumstances. If a second warning is given within the period of the first one, and your employee comes up for disciplinary action a third time, then you may be able to dismiss them.
If the employee’s conduct was grave enough, it could support a final written warning being given at the first offending. You should check with us first, however, as a safeguard against a potential claim, if you believe that to be the case.
“Employment matters invariably require flexibility and proper advice.”
In cases of serious misconduct, instant dismissal may be justified following the disciplinary investigation. What constitutes serious misconduct varies on a case-by-case basis; it would be wise to contact us as soon as you find yourself in this situation.
Throughout the disciplinary process, you must provide your employee with all information available. You should also keep an open mind and avoid any appearance of predetermination. Warning letters or letters of dismissal should be written after the process is complete and not during the disciplinary process itself.
Employee vs independent contractor
Another issue raised in the Car Giant case was the important difference between a contractor and an employee. Car Giant dismissed Mr Stocker without notice (or pay in lieu of notice in the case of redundancy) as provided for in the company’s standard individual employment agreement, as the company mistakenly considered him a contractor.
Mr Stocker was actually an employee. Knowing the difference between a contractor and an employee is crucial. Employees are entitled to benefits and have certain rights that contractors don’t. Only an employee can raise a personal grievance.
An employee is any person employed under a contract for service, for payment. The real nature of the relationship and all relevant matters should be considered when determining a worker’s status. All relevant matters include the parties’ contract, intentions, operation of the relationship in practice, application of the common law tests and industry practice.
Employment matters invariably require flexibility and proper advice. If you decide to start a disciplinary process, it’s well worth contacting us so we can advise you on each step.