Good faith is a duty imposed on employees and employers by the Employment Relations Act 2000. It is enshrined in the Act in order to promote productive relationships. Ultimately, good faith underlies all interactions in employment as it addresses the inequality of power between the employee and employer. From an employment law perspective, good faith is an important issue.
The Employment Relations Act 2000 stipulates that acting in good faith is wider than having trust and confidence in each other. The Act details that:
From an employment lawyer’s perspective, good faith is displayed through the employer and employee:
The duty of good faith feeds directly into unjustified dismissal. Whether a dismissal is unjustified is determined by what a fair and reasonable employer would have done in all the circumstances at the time the dismissal occurred. Factors taken into account when assessing the employer’s actions are whether concerns were raised prior to the dismissal taking place, whether there was a sufficient investigation and whether the employee had a reasonable time to respond. These factors directly relate to the concepts that make up good faith – honesty, openness and active communication. Good faith is interwoven into the behaviour of the employer and the employee.
The Employment Relations Act 2000 also provides for penalties for breaches of good faith. A party to an employment relationship can be penalised if their breach of good faith duty is deliberate, serious and sustained. A penalty can also be imposed where a relevant relationship is undermined. A situation will fall here where good faith is breached with the intention to undermine the relationship.
There needs to be “egregious bad faith” for a penalty to be awarded. An example of this is seen in Waikato District Health Board v New Zealand Public Service Assoc Inc, where it was found that an employer took advantage of an employee’s youth, inexperience, immigration status and vulnerability by making the employee pay $27,000 to secure their job. This was determined to be deliberate, serious and sustained conduct, and the Court awarded $3,000 to the employee as a result.
It is clear that the concept of good faith is foundational to employment law. All employment relationships are maintained on the basis of good faith. From an employment lawyer’s perspective, good faith dictates the success of all employment relationships and is always in employers’ and employees’ best interests to follow.