Consider all options before sacking

A change in semantics has had a significant impact on how employers are expected to act during dismissals. The change was clarified in a case brought by a former employee of Air New Zealand. Dean Kilpatrick, an employment law specialist at Duncan Cotterill, explains.

The Employment Court has provided employers with a timely reminder that when considering acting against an employee, whether through a warning or dismissal, to ensure they examine matters fully and step back to take an objective overview before making a final decision.

The Court took another look at Section 103A of the Employment Relations Act recently in Air New Zealand Limited v V.

This piece of legislation has been subject to a reasonable amount of commentary since its enactment in 2004. The Employment Court has scrutinised the section on four occasions previously in Air New Zealand Limited v Hudson, Fuiava v Air New Zealand Limited, Simpson Farms v Aberhart (all decided in 2006) and X v Auckland District Health Board (decided in 2007).

Section 103A was enacted in 2004 by the Government to overcome the perceived harshness of the Court of Appeal’s decision in W&H Newspapers Limited v Oram which was decided in 2001. The Government sought to overturn the law to pre Oram as recorded by the Court of Appeal in BP Oil NZ Limited v Northern Distribution Workers etc IUOW of 1992.

The key change was taking the test as provided in Oram, what could a reasonable employer do in the circumstances and return it to the print test of the BP Oil case: what would a reasonable employer do. While it may appear semantic the changing of the test from `could’ to `would’ has had significant consequences for employers when addressing their performance.

In the Air New Zealand Limited v V case, the Court noted that while individual judges had dealt with the section previously, because Air New Zealand had asked it to depart from their views on the section it was appropriate to convene a full Court (of all four Judges).

The facts relevant to the question before the Court were noted as being “simple and few” as follows:

The employee was employed by the plaintiff in its cargo handling operation. This was a safety sensitive role.
Air NZ operated a policy which required employees, including the defendant, to be free of the effects of alcohol and other drugs at work. As part of this policy, employees in safety sensitive areas were subject to random alcohol and drug testing.
In September 2006, the Air NZ employee was subject to a random test which was positive for cannabis.
In all the circumstances, the employee’s conduct in being present at work while subject to the effects of cannabis was serious misconduct.
The Air NZ drug and alcohol policy included the option of rehabilitation for employees found to have breached the alcohol and drug-free requirement.
Air NZ declined to offer the employee rehabilitation and summarily dismissed him.

Air New Zealand argued that section 103A was enacted to return the law to the principles provided in the BP Oil case (thereby overturning the principles provided under Oram). In summary, the Court noted that Air New Zealand’s argument “was that matters which go to the seriousness or otherwise of the conduct [in question] will be subject to examination under the s103A, but once the Authority or the Court has determined that there was serious misconduct and that this was a decision that a fair and reasonable employer would have made in all the circumstances at the time the dismissal occurred, the Authority and the Court should have no further role”.

In considering the argument of Air New Zealand the Court canvassed the legislative background and judgements of the Court and Court of Appeal prior to and subsequent to the enactment of section 103A. In conclusion, the Court noted the last aspect of section 103A, “in all the circumstances at the time the dismissal or action occurred”, is important. The Court stated these words require the Authority or Court to make an assessment of not only the finding of misconduct but also the action taken by the employer as a result of any such finding. Put simply the test for the Authority and Court is:

1. Would a reasonable employer make a finding of misconduct in the circumstances; and

2. If a reasonable conclusion of misconduct has been reached was the action taken reasonable.

The questions would be examined from the perspective of the hypothetical or reasonable employer. The Court also noted the same principles apply to situations where a disadvantage claim has been made.

When reaching its conclusions the Court also referred to the select committee reports and probably most telling, confirmed the object of the section was to “overturn” the Oram decision.

The Court concluded that it and the Authority are required “to subject all of the employer’s relevant action to an objective assessment against the standard of what a fair and reasonable employer would have done in all the circumstances”.

The Court then applied the law to the facts of the case. It noted when a positive test was returned there were several options for the employer to consider (as an alternative to dismissal). These included reassigning an employee to a non-safety sensitive role or entering into a Rehabilitation Agreement.

The Court concluded that while these alternative options were available to Air New Zealand, as they were discretionary it was not obliged to offer them to the employee. The Court noted Air New Zealand had reasonably concluded the employee was not fit to return to his job and there were no suitable alternative roles in non-safety sensitive areas. Further, while the employee had agreed to abstain from cannabis use he did not see a need to abstain from alcohol. From the medical report provided by the airline to the employee it was clear he needed to do both.

Taking all the factors into consideration the Court concluded Air New Zealand was justified in terminating the employment of the employee.

While the decision of the Court provides nothing new against the previous decisions of the individual judges it is perhaps a timely reminder of the requirements under section 103A of the Employment Relations Act. In particular, employers should, when contemplating taking action against an employee, whether by way of warning or dismissal, ensure that they examine matters and, insofar as possible, step back to take an objective overview before making a final decision.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

Dean Kilpatrick is an employment law specialist at national and trans-Tasman law firm Duncan Cotterill. D.kilpatrick@DuncanCotterill.com

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