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The principle of "Good Faith" in NZ employment law

Key Takeaway

Good faith is a fundamental principle in New Zealand employment law, requiring employers and employees to be active, constructive, responsive, and honest in all aspects of their employment relationship. This duty applies from the start of employment through to its conclusion, including during bargaining and dispute resolution, fostering sound employment relationships.

The Principle of Good Faith in New Zealand Employment Law

The principle of good faith is a cornerstone of New Zealand employment law, permeating all aspects of the employment relationship. It mandates certain behaviours and obligations for both employers and employees, aiming to foster constructive and productive working relationships.

What is Good Faith?

Good faith, in the context of New Zealand employment law, refers to an overarching duty for all parties involved in an employment relationship to be active and constructive in their dealings with each other [Source: Employment Relations Act 2000, s 4(1)(a)]. It requires parties to be responsive and communicative, and not to do anything, directly or indirectly, to mislead or deceive each other [Source: Employment Relations Act 2000, s 4(1)(a), s 4C(1)]. This duty applies throughout the entire employment relationship, from its commencement to its conclusion [Source: Employment Relations Act 2000, s 4(1)(a)].

General Obligation of Good Faith

The Employment Relations Act 2000 (ERA 2000), which is the primary legislation governing employment relations in New Zealand, establishes the general duty of good faith [Source: Employment Relations Act 2000, s 4(1)]. Both employers and employees are required to deal with each other in good faith. This general obligation is fundamental to all employment interactions, whether they are formal or informal [Source: Employment Relations Act 2000, s 4(1)(a)].

Specific Requirements of Good Faith

Beyond the general duty, the ERA 2000 outlines specific requirements that illustrate what acting in good faith entails. These include:

  • Active and Constructive Participation: Parties must be active and constructive in establishing and maintaining a productive employment relationship [Source: Employment Relations Act 2000, s 4(1)(a)].
  • Information Disclosure: Both parties must be able to provide and consider information that is relevant to the employment relationship or a matter arising out of it. There are specific rules around the type of information that must be disclosed, particularly during bargaining, which must be 'sufficiently specific' to allow informed consideration [Source: Employment Relations Act 2000, s 4(1)(b), s 4B(1)(a)]. Confidential information or information that would prejudice the commercial position of a party generally does not need to be disclosed [Source: Employment Relations Act 2000, s 4B(3)].
  • Considering Views: Parties must provide each other with a reasonable opportunity to present their views and consider those views [Source: Employment Relations Act 2000, s 4(1)(c)].
  • Responsiveness: Parties must be responsive to each other [Source: Employment Relations Act 2000, s 4(1)(d)].
  • No Misleading or Deceiving: A crucial aspect of good faith is the prohibition on misleading or deceiving any party, directly or indirectly [Source: Employment Relations Act 2000, s 4C(1)]. This applies to statements made, information withheld, or any other conduct [Source: Employment Relations Act 2000, s 4C(1)].

Good Faith in Different Contexts

The principle of good faith applies across various stages and situations within the employment relationship:

During Bargaining

Good faith is particularly critical during the bargaining process for collective employment agreements. Both employers and unions (representing employees) must conduct bargaining in good faith [Source: Employment Relations Act 2000, s 4A(1)]. This includes:

  • Meeting and Considering Proposals: Parties must meet and consider proposals made by the other party [Source: Employment Relations Act 2000, s 4A(1)(a)].
  • Reasonable Engagement: Parties must recognise and deal with each other as the bargaining agent [Source: Employment Relations Act 2000, s 4A(1)(b)].
  • Refraining from Unreasonable Actions: Parties must not undermine the other party's bargaining position or engage in behaviour that is likely to mislead or deceive [Source: Employment Relations Act 2000, s 4A(1)(c), s 4C(1)].
  • Information Disclosure for Bargaining: Employers must provide unions with information that is necessary for bargaining, subject to certain exceptions for confidential or commercially sensitive data [Source: Employment Relations Act 2000, s 4B(1)(a), s 4B(3)].

During Restructuring and Redundancy

When an employer is considering restructuring or making roles redundant, the duty of good faith requires them to engage in genuine consultation with affected employees. This typically involves providing relevant information about the proposed changes, explaining the reasons, and genuinely considering employees' feedback before making final decisions [Source: Employment Relations Act 2000, s 4(1)(b), s 4(1)(c)]. Failing to consult in good faith can lead to successful personal grievance claims.

During Employment Relationship Problems

If an employment relationship problem arises, the parties are expected to address it in good faith. This means communicating openly, making genuine attempts to resolve the issue, and not acting in a way that exacerbates the problem or misleads the other party [Source: Employment Relations Act 2000, s 4(1)(a), s 4D(1)]. Mediation services provided by the Ministry of Business, Innovation and Employment (MBIE) are available to assist parties in resolving such problems in good faith [Source: Employment Relations Act 2000, s 59(1)].

Consequences of Breaching Good Faith

Breaches of the duty of good faith can lead to a range of remedies being sought by the aggrieved party. An employee may raise a personal grievance if they believe the employer has breached the duty, for example, by not acting fairly or reasonably in a process [Source: Employment Relations Act 2000, s 103(1)(a)]. The Employment Relations Authority (ERA) or the Employment Court can impose penalties for non-compliance with the good faith obligations and make orders for reinstatement, compensation, or lost wages [Source: Employment Relations Act 2000, s 123, s 134].

When to Seek Independent Legal Advice

Individuals facing complex employment relationship problems, considering a personal grievance, or requiring clarification on specific good faith obligations are encouraged to seek independent legal advice. Information is available from official bodies like the Ministry of Business, Innovation and Employment or through free services provided by Community Law Centres.

Key Resources