Employers should not be subjected to pedantic scrutiny - DAC Beachcroft

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Employers should not be subjected to pedantic scrutiny

Published On: 14 September 2016

Fair procedure is fundamental when dealing with employees. Fairness is intrinsically important, but critically for employers, it also ensures robust and justifiable decisions.  In A Ltd v H1, the Court of Appeal has emphasised that what a fair and reasonable investigation entails depends on the circumstances.  This signals a move away from over-exacting standards for employers, and indicates a balanced interpretation of the test for justification.  

When taking action against or dismissing an employee, an employer’s conduct must be within the range of what a fair and reasonable employer could have done in all the circumstances. Key procedural requirements are to investigate sufficiently, raise the concerns with the employee, give them reasonable opportunity to respond, and genuinely consider their explanation.2  

Significant decisions in 2014 and 2015, including H V A Ltd3, Harris v The Warehouse Ltd4 and Campbell v Commissioner of Salford School5, set a very high bar for employers, particularly regarding what amounts to a sufficient investigation. Even large employers with ready access to advisers have found it hard to attain the expected standards.

In granting leave to appeal H v A Ltd, The Court of Appeal recognised arguments that the Employment Court had “imposed a standard of inquiry which was too stringent and which bordered on a judicial investigation.”6 Those comments foreshadowed the Court of Appeal’s decision in A Ltd v H, released last week.  This found that the Employment Court had incorrectly veered away from a direct application of the statutory test for justification and set rules for investigations which ignored the statutory requirements.

H, an airline pilot, was on a Pacific island layover with colleagues, including a 19 year old novice flight attendant. The flight attendant later complained that the pilot sat on her hotel bed and touched her in a sexual manner.  The pilot’s explanation was that he had gone into her room to check on her welfare, sat on the bed without thinking, and touched her accidentally.  Following an internal investigation, the employer airline (A Ltd) concluded that the pilot’s explanation was implausible and that his conduct constituted sexual harassment and breach of the company’s code of conduct.  The airline decided that there had been serious misconduct and that dismissal was appropriate.

The Employment Relations Authority found the dismissal justified. The Employment Court disagreed, criticising the investigation process as not being adequate or “even-handed”.  The Employment Court found “significant breaches of natural justice” in the way the employer assessed credibility and tested witnesses' competing accounts.  It picked holes in the employer’s recording of witness interviews and the questioning of the complainant and other witnesses.  It considered that that the employer had not adequately explored the complainant’s reliability and motivation for the complaint or inconsistencies in some witnesses' statements.

The Court of Appeal has determined that the Employment Court’s approach was not correct in law – the Judge had applied a set of rules for investigations rather than focusing on what was open to a fair and reasonable employer. The Court of Appeal stressed that the test of justification in the Act is essentially an assessment of the substantive fairness and reasonableness of the employer’s conduct. The correct approach is not “minute and pedantic scrutiny” to identify the employer’s failings.

What is fair and reasonable, and the extent of inquiry required, is case and employer specific – it must be assessed “in all the circumstances”. In any case there might be a variety of ways of achieving a fair and reasonable result.  Even handedness means adopting a balanced approach, but there is no rule requiring that, for example, all witnesses should be questioned in the same way or to the same level of detail, or that all interviews should be recorded identically and verbatim.  

Employers should always strive to achieve a very high standard of investigation procedure, and a rigorous and systematic approach is best practice. However, this decision indicates that realistic and pragmatic processes, tailored to the particular circumstances, should normally be justifiable.   


1 [2016] NZCA 419

2 Section 103A Employment Relations Act 2000 (the Act)

3 [2014] NZEmpC 189

4 [2014] NZEmpC 188

5 [2015] NZEmpC 122

6 A Ltd v H [2015] NZCA 99