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New Zealand employment law is grounded on the mutual good faith obligation between employers and employees. As an employer, you have an obligation to treat your employees fairly and be honest and up-front in your dealings with them. Your employees also have an obligation to act in good faith towards you. This article will explain how the good faith obligation works in New Zealand, and what it legally requires from you and your business in practice.

How Does the Good Faith Obligation Work?

While there are some specific requirements and steps to the good faith obligation in New Zealand, for the most part, it is a general, common-sense duty. As an employer, you should do the right thing by your employees. Hence, you should conduct any particular action in good faith. Many other employment law elements in New Zealand are considered in light of this general obligation between employers and employees to treat each other well. 

Beyond this general common-sense definition of good faith, the law sets out a few specific ways in which you should act in good faith. These include:

  • that employers and employees must not act misleadingly or deceptively towards each other;
  • they must also be responsive and communicative towards each other; and
  • when an employer makes a decision that may result in the employee losing their job, the employee must have a fair chance to comment. 

Many of the good faith obligation’s specific implications are a simple extension of the principle that employers should assume the best of employees (and vice versa). An exception is in extreme situations where the relationship has broken down. Even at that point, you should attempt to deal with difficult employees fairly.

What Are the Practical Implications for My Business?

It is difficult to pinpoint how the good faith obligation can affect your business. Because it is a general duty for you as an employer to treat employees fairly, in some ways, it applies to everything you and your business do. However, there are certain practical implications of the good faith obligation to note.

As a consequence of your legal duty to treat employees in good faith, you should:

  • give your employees relevant information about any changes or situations that might affect them;
  • raise issues that emerge with employees in a fair and timely way;
  • work constructively to resolve issues your employees have;
  • be fully honest with your employees;
  • keep an open mind if your employees make any suggestions or requests; and
  • be prepared to change your opinion about a particular situation or your employee’s behaviour if new information comes to light.

What Does the Good Faith Obligation Mean for Dismissal Processes?

There are specific good faith duties regarding processes that might result in an employee losing their job. Having a fair process is a vital part of acting in good faith. This includes providing full and relevant information to an employee and making sure they get the chance to give their side of the story. You should have set procedures to ensure that your business follows this vital aspect of the good faith obligation. These should include guarantees that:

  • employees get access to relevant information about the possible decision; and
  • an opportunity to comment on this information.

The precise meaning of relevant information will change depending on your circumstances. It is usually the information that you will consider before deciding to dismiss an employee. For instance, you cannot just tell the employee that there are allegations of misconduct. Instead, you would need to provide specific evidence and give them a fair chance to refute those allegations or provide their perspective.

Key Takeaways

In New Zealand, both employers and employees must to deal with each other in good faith at all times. This is a concrete foundation for all aspects of the employer-employee relationship. It requires both parties to interact positively, honestly, constructively and in a fair manner. The good faith obligation has specific consequences for you as an employer, including being responsive and keeping an open mind to any issues your employees raise. Similarly, you must be honest and up-front with any issues you might have with them. This includes making sure they get access to, and a chance to comment on, any information in a process where they risk dismissal.

If you have any questions about the good faith obligation in New Zealand, you can contact LegalVision’s employment lawyers on 0800 005 570 or complete the form on this page.

FAQs

Are all employers bound by the good faith obligation in New Zealand?

Yes, all employers (and employees) are subject to the good faith obligation.

What happens if an employer breaches their good faith obligation?

The courts (and the Employment Relations Authority) can award penalties against employers for breaching good faith.

Do I still owe a good faith obligation if my employee is behaving unreasonably?

Yes, you must still deal with your employees fairly and reasonably, even if they are not behaving well. This includes a dismissal process where the employee is still entitled to comment on the information or decision you may be making.

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