John Farrow, Partner at Anderson Lloyd, shares an overview of the amendment of the Employment Relations Act in 2018 to return reinstatement as the primary remedy in unjustified dismissal cases and the evolving impact this has had on various cases since.
In 2018, the Employment Relations Act was amended to return reinstatement as the primary remedy in unjustified dismissal cases. The stats on the number of successful reinstatement cases don’t show any significant difference between when reinstatement was the primary remedy and when it was not. However, that may be about to change.
The Chief Judge’s judgment in Humphrey v Canterbury District Health Board [1] signals a fresh perspective.
“It is distinctly arguable that, properly interpreted, the amendment to s125 reflected a Parliamentary intention to raise the bar that employers would have to negotiate in order to prove that reinstatement was neither reasonable nor practicable.”
The Employment Relations Authority decision of Sinnott v Minter Ellison Rudd Watts[2] seems to support that observation.
Both cases involved interim reinstatement applications. Both applicants were successful. Both applicants had been dismissed due to alleged incompatibility.
The Court of Appeal in Reid v NZ Fire Service Commission[3] has made it clear that a dismissal for incompatibility will only be available in an “unusual and rare case”. That is because an employer cannot be justified in dismissal on the basis of irreconcilable breakdown if it was itself substantially the cause of it.
The CDHB Decision
Dr Humphrey was the Medical Officer of Health. A number of managers and clinicians from the DHB wrote to the then Chief Executive raising concerns about various public statements made by Dr Humphrey and working relationship issues.
An enquiry was conducted by Hon Kit Toogood QC. He concluded that some of the allegations had been established; others had not. He was critical of the DHB’s inaction in addressing relationship issues earlier. While the relationship between Dr Humphrey and a number of colleagues had become untenable, he could not fairly or reasonably conclude that the breakdown was irremediable. He considered professional intervention to be necessary.
Against that background, the acting Chief Executive commenced a disciplinary process based on concerns with incompatibility and bringing the DHB into disrepute. He wrote to Dr Humphrey’s colleagues seeking their opinion on Dr Humphrey’s proposal for improving his relationship with them.
However he did not include crucial information which would have enabled Dr Humphrey’s colleagues to provide a more fully informed response. The Toogood Report, an earlier Report (the Fowler Report) and a legal opinion on the complexity of the interface between the statutory role of the Medical Officer and employee were omitted. Unsurprisingly, none of Dr Humphrey’s colleagues expressed confidence that the relationship could be repaired.
Chief Judge Inglis found that there was no evidence that the DHB took any further steps to identify for itself what options might exist.
The DHB’s decision to dismiss was criticised for a lack of procedural fairness. In short, Dr Humphrey’s colleagues were asked leading questions and the DHB received predictable answers.
In granting interim reinstatement the Court emphasised that the threshold was an ‘arguable case’. This is distinct from an application for permanent reinstatement.
The Court weighed the following factors:
- Dr Humphrey’s colleagues indicated they would struggle to work with him if he were reinstated. One indicated they would leave. Others said they would reconsider their options;
- The DHB would need to apply significant resources to support reinstatement and this would likely place additional pressure on the workplace. Against this the Court assessed the resources of the DHB as an employer;
- The option identified in the Toogood Report to bring in professional support and assistance to try to rebuild the damaged relationship had yet to be explored and therefore it was unsafe to conclude there had been an irremediable breakdown in the employment relationship;
- Substantive steps had been taken by Dr Humphrey to acknowledge and address the issues that had been raised. He expressed willingness to engage in a process to rebuild workplace relationships.
- The longer Dr Humphrey was out of the workplace, the more difficult it would be for him to reintegrate back into it.
The application for interim reinstatement was ultimately successful, however Dr Humphrey subsequently resigned.
The Minters Decision
Ms Sinnott was employed as Special Counsel in Minter Ellison Rudd Watts Environment Law Team based in Wellington. She was dismissed due to the relationship between her and Minters having irreconcilably broken down and that as a result the parties were incompatible.
Ms Sinnott applied for interim reinstatement and was successful.
In delivering its decision, the Authority quoted from the Humphrey decision:
“One of the central features for the Act is its recognition of the importance of the employment relationship, the obligations both parties have to be responsive and communicative, and that issues ought to be dealt with promptly and between the parties, if possible – in other words, supporting constructive employment relationships and repairing them where feasible.”
The dismissal was prompted by a complaint written by a Minters Partner based in Auckland (Ms Tree). The complaints outlined in the letter were not formally investigated prior to dismissal. The complaints were critical of Ms Sinnott, including allegations she reacted in an unpredictable manner; was not respectful; was confrontational and acted in a way that was not collaborative or collegial.
Minters appointed Andrew Scott-Howman to undertake an independent review of matters raised in the complaint.
Mr Scott-Howman undertook a preliminary assessment and recommended that the parties engage in a form of facilitation. His preliminary assessment was that an attempt shouldn’t be made to revive the relationship but noted that neither the complainant nor Ms Sinnott should be expected to accept any blame or responsibility for the breakdown, but should accept that the relationship was no longer tenable.
In granting reinstatement the Authority referred to the following matters:
- Minters’ Counsel conceded that there was an arguable case for permanent reinstatement;
- There was little evidence in respect of any steps taken or any investigation undertaken into how the relationship might be repaired;
- There was no evidence that Ms Sinnott was unwilling to take steps to address the relationship issue;
- Despite some 11 affidavits being lodged on behalf of Minters raising concerns should Ms Sinnott be reinstated, these did not indicate Minters would have a great difficulty in managing the situation. Ms Sinnott was the sole member of the Environment Law Team working in Wellington, with the balance of the Team working in Auckland;
- It is difficult to imagine that Minters appeared to be in a position where they could protect Ms Tree and Ms Sinnott and, indeed, other parties and staff and manage any difficulties arising out of the interim return of Ms Sinnott to the workplace.
The Learnings
Both of these cases involved interim, as distinct from permanent, reinstatement. The Chief Judge acknowledged that the threshold was lower and only required establishing an arguable case.
Both cases involved dismissal for incompatibility which the Court of Appeal has made clear, will only be available in unusual and rare cases.
However, the Chief Judge’s comment that Parliament intended to raise the bar, clearly signals that where an employee applies for reinstatement, the employer is going to need to argue a strong case that the dismissal was justified, together with a strong case that reinstatement is neither reasonable nor practicable.
[1] Alistair Ross Gordon Humphrey v Canterbury District Health Board, Te Poari Hauora o Waitaha [2021] NZ EmpC 59 [30 April 2021]
[2] Sinnott v Minter Ellison Rudd Watts [2021] NZERA 257 3132275
[3] Reid v New Zealand Fire Service Commission [1998] 2 ERNZ 250 at 280 (EC; Reid v NZ Fire Service Commission [1999] 1 ERNZ 104) (CA)
John Farrow is a Partner co-leading Anderson Lloyd’s National Employment and Health and Safety Team. He is a member of the Institute of Directors, a LEADR accredited mediator and an ‘Association of Workplace Investigators’ Certificate-holder. Contact John at john.farrow@al.nz or connect via LinkedIn 
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Disclaimer: The opinions expressed in this article are those of the writer and do not purport to be specific legal or professional advice
