Unjustified dismissal highlights importance of consultation

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A Queenstown medical practice, Midtown Medical Ltd, was ordered to reimburse wages and pay compensation in a determination released by the Employment Relations Authority (ERA) late last month. ERA member, M B Loftus, found that the employee had been unjustifiably dismissed.

The former employee claimed that, when confronted with fiscal pressure, her employer attempted to unilaterally reduce her working hours and that when she rejected the arrangement she was made redundant. In response, Midtown countered that they had attempted to consult with her, but that she had breached her duty of good faith by failing to engage in negotiations. They also claimed that she had not been made redundant.

Although the employment agreement failed to specify working hours, the employee generally worked 32 hours each week. “Regrettably [however] the practice did not perform at the level hoped and cash flow was poor. Mr Roberts [of Midtown] says he started providing staff with regular financial updates so they were aware of the difficulties faced,” Loftus wrote in the determination.

A dispute regarding the employee’s working hours ensued, the employee protesting a reduction in her working hours, and Midtown claiming that it could not afford to pay her for full-time hours. On November 11 the employee was sent a request for a formal meeting. At this meeting she reminded her employer that they had an agreement on hours and asked to discuss options other than reducing these. Mr Roberts claimed that there were no other options.

Loftus quoted from the former employee’s submission. “Mr Roberts then went on to say that ‘We don’t need a full-time nurse, it’s legally called redundancy’. I asked Mr Roberts ‘What does that mean, how does that work with notice, when does the redundancy apply from?’ Mr Roberts informed me that ‘it applies from now’,” it ran.

Loftus observed that Mr Roberts’s brief of evidence largely corroborated the employee’s.

The member then outlined the issues to be determined: whether the employee had been dismissed, or had simply left and whether, in the case of dismissal, it was unjustified.

 “It is, in my view, difficult not to conclude there was a dismissal,” Loftus judged. The employee was told that she had been made redundant on November 15, and redundancy is a form of dismissal. “I am satisfied that by the time she is alleged to have walked out the words of dismissal, namely advice of immediate redundancy, had already been uttered,” Loftus added.

In considering whether the dismissal could have been justified, Loftus referred to section 4(1A)(c) of the Employment Relations Act 2000. This “demands an employer who is proposing to make a decision that will, or is likely to, have an adverse effect on the continuation of an employee’s employment give the employee access to relevant information and an opportunity to comment before the decision is made,” Loftus observed.

Loftus remarked that the consultation process never ran its course, that Midtown failed to consider alternatives to redundancy, and that the consultation that did take place was inadequate.

As a result, Midtown was ordered to pay the sum of $13,248 in reimbursement of lost wages, $5,000 as compensation for humiliation, loss of dignity and injury to feelings, and a further $2,000 – the bonus payment promised to the employee and not paid.

Key takeaways:

  • Evidence was given that Ms Ross stormed out of the meeting and shredded some documents, however Loftus noted that the law requires employers to allow a ‘cooling period’ after such episodes. The fact that Midtown immediately advertised the position after this meeting shows that this didn’t happen.
  • The case also highlights the need for consultation when a decision that is potentially detrimental to an employee’s employment is being considered.
  • Loftus hinted at what this might entail. “In a setting such as this consultation implies an employer advising the nature of the problem, and asking if affected employees have any possible solutions before pursuing one it may wish to apply,” the member said.

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