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employment

Summary dismissal (firing on the spot): When is it legal?

Key Takeaway

Summary dismissal, or 'firing on the spot', is a serious employment action in New Zealand reserved for cases of serious employee misconduct. Employers must follow a fair process and meet the 'justification test' under the Employment Relations Act 2000, acting in good faith. Failure to do so can result in an unjustified dismissal claim.

Summary Dismissal in New Zealand Employment Law

Summary dismissal, often referred to as 'firing on the spot,' is the termination of an employment relationship by an employer without notice, or payment in lieu of notice. This type of dismissal is generally reserved for situations involving serious misconduct by an employee.

The Legal Framework: Employment Relations Act 2000

The primary legislation governing employment relationships in New Zealand is the Employment Relations Act 2000 (the Act). This Act establishes fundamental principles that employers must adhere to, particularly concerning dismissal.

Good Faith Principle

All parties to an employment relationship must deal with each other in good faith [Source: Employment Relations Act 2000, s 4]. This means acting openly, honestly, and without misleading or deceiving each other. The duty of good faith applies to all aspects of the employment relationship, including during dismissal processes [Source: Employment Relations Act 2000, s 4(1A)(c)].

Justification Test

For any dismissal to be lawful and fair in New Zealand, it must be justified [Source: Employment Relations Act 2000, s 103A]. This is assessed by determining whether the employer's actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred [Source: Employment Relations Act 2000, s 103A(2)(a) and s 103A(2)(b)].

Grounds for Summary Dismissal

The Act does not provide an exhaustive list of what constitutes serious misconduct warranting summary dismissal. However, it is generally understood to be conduct that fundamentally breaches the employment agreement and relationship, making continued employment untenable. Examples often include:

  • Theft or serious fraud.
  • Physical assault or threats of violence.
  • Serious insubordination (refusal to obey a lawful and reasonable instruction).
  • Gross negligence causing significant harm or risk.
  • Serious breaches of confidentiality.
  • Misuse of company property or resources in a serious way.

Employment agreements may specify examples of serious misconduct, but these examples must still align with the principles of the Act and the justification test.

Employer's Obligations for Lawful Summary Dismissal

To ensure a summary dismissal is justified, an employer must follow a fair and reasonable process. This typically includes:

  1. Investigation: Conducting a fair and thorough investigation into the alleged misconduct. This involves gathering relevant information and evidence.
  2. Notification of Allegations: Informing the employee clearly and specifically about the allegations of misconduct made against them and the potential consequences, including the possibility of summary dismissal.
  3. Opportunity to Respond: Giving the employee a reasonable opportunity to explain their side of the story, provide their version of events, or present any mitigating factors. This might involve a meeting where the employee can bring a support person or representative [Source: Employment Relations Act 2000, s 4(1A)(c), s 103A].
  4. Genuine Consideration: Genuinely considering the employee's explanation and any information provided before making a decision.
  5. No Predetermined Outcome: Ensuring that the decision to dismiss is not made until after the investigation is complete and the employee has had an opportunity to respond and their response has been considered. The employer must genuinely believe, on reasonable grounds, that the misconduct occurred [Source: Employment Relations Act 2000, s 103A(2)(b)].

Failure to follow a fair process, even if the misconduct was serious, can render a dismissal unjustified [Source: Employment Relations Act 2000, s 103A(2)].

Employee Rights and Personal Grievances

If an employee believes they have been unjustifiably dismissed, they have the right to raise a personal grievance [Source: Employment Relations Act 2000, s 103(1)(a)]. A personal grievance must generally be raised within 90 days beginning on the date on which the action alleged to amount to a personal grievance occurred or came to the notice of the employee, whichever is the later [Source: Employment Relations Act 2000, s 114].

If a personal grievance is successful, remedies can include:

  • Reinstatement: Returning the employee to their former position [Source: Employment Relations Act 2000, s 123(1)(a)].
  • Reimbursement: Payment for lost wages up to a maximum of three months, or more in some circumstances [Source: Employment Relations Act 2000, s 123(1)(b)].
  • Compensation: Payment for humiliation, loss of dignity, and injury to feelings [Source: Employment Relations Act 2000, s 123(1)(c)(i)].

When to Seek Independent Legal Advice

If an employee has been summarily dismissed, or an employer is considering summary dismissal, independent legal advice should be sought to understand specific rights, obligations, and processes. Free advice services are available through Community Law Centres across New Zealand.

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