Hockey Manawatu's $171k reminder to business owners

Dealing with employees is the core business of employers. Most employers get the basics right in managing employment relationships. But failing to do so can be costly. A recent decision of the Employment Court highlights the importance of implementing processes that are sufficiently robust to withstand judicial scrutiny. 

In this litigation, the court ruled a dismissal was unjustified and awarded costs of over $123,000 against the employer. In its substantive decision, the court ordered the employer, Hockey Manawatu (HM) to pay its employee, Warren Banks, the sum of $48,000 in lost wages and compensation for loss of dignity and injury to feelings. 

HM is an incorporated society.  Its purpose is to foster, encourage and develop the game of hockey throughout the Manawatu district.  At the relevant time, HM employed no more than five employees.  Mr Banks was employed as HM’s operations manager from 2008 until his employment was terminated on medical grounds in September 2014. 

The court reviewed HM’s dealings with Mr Banks, describing the employer’s failures as “significant and unrelenting.” 

These included:

•  failing to put to him promptly allegations made against Mr Banks by another employee;
•  failing to provide him with a reasonable opportunity to respond to HM’s concerns; and
•  failing to consider Mr Banks' response before taking further action. 

Instead HM held a confidential meeting to review options for dismissing Mr Banks and requested that Mr Banks attend mediation without identifying the issues to be discussed. Although the board obtained advice as to its legal options, the evidence showed that the emphasis was on reaching an outcome that would end Mr Banks’ employment. Mr Banks’ lawyer likened HM’s decision to dismiss Mr Banks to a train which, “having left the station and embarked down the track to ‘termination’ … was unstoppable.” 

The court referred to both the test of justification in section 103A of the act and the employer’s good faith obligations before stating that there was nothing in any of the court documents produced to the court indicating that the board of Hockey Manawatu had any appreciation of its basic obligations as an employer in relation to grievance and disciplinary matters.  The judge added that in the month leading up to the termination of Mr Banks’ employment “there was not very much that the board of HM got right”.  Accordingly, the dismissal could not be justified even though the court recognised that “it can sometimes be difficult for non-commercial enterprises…made up of volunteer members to comply with the strict letter of the law in terms of employment matters. However, the Employment Relations Act 2000 makes no distinction between commercial and non-commercial enterprises. The duties and obligations imposed under the act remain constant and apply to all employers and employees alike.”

This decision is a timely reminder for both small and large employers that obtaining sensible legal advice at an early stage is the most effective means of avoiding significant costs at a later stage. If an employment process fails to meet minimum standards, then employers can expect to pay significant sums for loss of earnings, compensation for loss of dignity, and their employees’ legal costs.

Carolyn Heaton is a partner and John Goddard an associate in Morrison Kent’s dispute resolution team.