Understand your Good Faith obligations

A commentary by Tony McKone, Director McKone Consultancy, 17 February 2017

Good Faith

A key principle of “good faith” is that the parties to the employment relationship (the employer and the employee) must deal with each other in good faith; and must not, whether directly or indirectly, do anything to mislead or deceive each other; or that is likely to mislead or deceive each other.

In nutshell that pretty much says it all. However, good faith isn’t as simple as that.

Good faith in respect of your employment relationship applies equally to both you the employer and each of your employees. It is not a one-way street.

What the Employment Relations Act 2000 says about good faith is that each party in the employment relationship must be active and constructive in establishing and maintaining a productive employment relationship.

This is quite important. You therefore cannot employ a person and then simply leave them to their own devices. To do so would be neither active nor constructive. A lot of what you do with new employees will however be in line with this good faith principle. How you go about inducting a person into your organisation. How you talk to them about what you need them to do and give them feedback on their performance. This is all part of being active and constructive. An employee must in return participate as an “active partner” in these discussions. They must also bring their input, their ideas, their problems and concerns to the table.

Underpinning this active and constructive approach to good faith is the requirement on both parties to be, among other things, responsive and communicative.

Setting of terms and conditions

Good faith behaviour applies to the establishment of terms and conditions of bargaining whether you are bargaining with a union for a collective agreement or negotiating one-on-one with employees on their individual employment agreements.

Individuals are protected from unfair bargaining and good faith is required when entering into and varying individual terms and conditions of employment.

Bargaining individual terms and conditions must be consistent with, but is not limited to, the implied duty of mutual trust. This means that when offering individual terms and conditions (or varying them), as an employer you must:

Provide the employee with a copy of the intended individual agreement or variation; and
Advise the employee that they are entitled to seek independent advice on the intended agreement or variation; and
Provide the employee with a reasonable opportunity to seek that advice; and
Consider any issues that the employee raises and respond to those issues.

Consultation before deciding matters affecting employment

Where you are contemplating any change that impacts or has the potential to impact on an employee or an employees work, you must, in good faith, consult with them on the proposed changes that you are contemplating. This includes minor changes to an individual’s job through to making the job surplus to requirements and the employee redundant.

This consultation involves providing the employee(s) with the relevant information so that they can make an informed comment on your proposal. This includes providing an indication on the impact of the proposal on their employment and how you intend to handle that impact.

Before making a final decision on the proposal, you must consider in good faith all the feedback that is provided. You cannot merely receive and ignore the feedback. To demonstrate you have considered the feedback it is recommended that you:

Summarise the feedback received
Comment on what aspects of the feedback you agree with and how this changes your proposal
Comment on what aspects of the feedback you do not agree with and why this does not change your proposal

Communications

Good faith applies to your communications with your employees and their representatives. The Act talks specifically about good faith applying to communications in respect to bargaining, however I would argue that good faith applies to all your communications.

The biggest risk in communications is that your messages could be held to mislead or have the potential to mislead the other party. With bargaining, in particular, any communication that you do make about bargaining will be governed not only by the Employment Relations Act 2000 but by your agreement Bargaining Process Agreement – which sets out your agreed rules of engagement with the union. Section 32(1) (d) of the Act covers communications in bargaining. The Act does not create a complete ban on communications during bargaining. You are permitted to communicate statements of fact or opinions held reasonably about the employer’s business or union’s affairs to those people who the union is representing.

Terminating an employee

When you are considering terminating an employee, whether that be as a result of a restructuring or as a result of poor performance or misconduct or serious misconduct, before you do so you need to have investigated all the facts relevant to the situation.

Redundancy

If following a review of structure, the position an employee held is no longer required, have you considered whether or not the person can be placed into another suitable position? If there is another suitable position, then you must consider offering that to the employee before considering redundancy. Among the things to take into consideration are:

The employee’s view on the other job
The degree of training / upskilling required to support the employee in that other job
Will they be able to retain their existing terms and conditions if they move to that job?

An employee may want an alternative job in the organisation, however it needs to be suitable and they need to have a reasonable ability to perform that alternative job, even if that requires some training or upskilling. However, if the job is vastly different, then you do not have to offer the job as that would be unsuitable.

What might make a job unsuitable?

Different location
Different salary (though not a barrier on its own)
Different terms and conditions
Incompatible skills and experience (where this cannot be easily addressed by training/upskilling)

Dismissal for behaviour or performance problems

Where an employee’s behaviour or performance points to them no longer being suitable to remain in your employment, before terminating the employee you must:

Sufficiently investigate the allegations (the misconduct / poor performance) against the employee
Raise the concerns you have with the employee
Give the employee a reasonable opportunity to respond to your concerns
Genuinely consider the employee’s explanation
Where performance is the problem, have you given the employee a reasonable timeframe, with appropriate support and retraining, to improve their performance?
Consider is there some other form of sanction other than dismissal that would be more appropriate to the situation (e.g. issue a warning)

McKone Consultancy can provide assist with your employee relations to ensure that you are complying with your obligations of Good Faith. Contact Tony today for a no obligation chat on how we could help you.