December 2006

The Importance of Procedural Fairness

Good grounds for dismissal of an employee are not enough

A recent decision from the Employment Relations Authority (“the ERA”), Paterson v Woodland Developments Limited, attracted some attention in the media for what many employers might consider to be something of a bizarre and unsatisfactory outcome. However, the case demonstrates the critical importance ensuring the requirements of procedural fairness are observed, no matter how serious and obvious the misconduct involved.

The Facts of the Case

Mr Paterson had been employed in May 2005 by Woodland Developments Limited (“WDL”) as a plasterer. He was dismissed from his employment on 22 July 2005 after arriving late for work. However, prior to the incident that led to the termination of his employment, there had been two previous incidents that had been of concern to WDL. The first incident involved Mr Paterson attempting (unsuccessfully) to use a WDL fuel card to purchase petrol for his own car after a night out drinking one Saturday evening. The second incident involved offensive graffiti being written on the side of a house WDL was plastering. A complaint was received from the homeowner and Mr Paterson acknowledged he was responsible for the incident.

As mentioned above, the incident that directly resulted in the termination of Mr Paterson’s employment was his arriving late for work. The reason for the lateness was that Mr Paterson and another employee had taken a diversion so that they could stop at Mr Paterson’s home to collect his lunch. It seems that when questioned about the reasons for lateness, Mr Paterson had lied to WDL about the reasons for his lateness. He was accordingly dismissed on one week’s notice (although he left the workplace later that day).

The Claim

In light of the above, it might be thought that Mr Paterson was an employee who probably deserved to be dismissed. However, Mr Paterson brought a personal grievance claim in the ERA alleging that his dismissal was unjustified. Mr Paterson’s claim was upheld and he was awarded compensation of $2,400.00 for hurt and humiliation (which had been reduced from $3000.00 for his own contributory conduct, which had been assessed at 20%). Mr Paterson was not, however, awarded any loss of remuneration as the ERA found that he had not taken the proper steps to obtain alternative employment following his dismissal.

Reasons for the Outcome

It is suggested that many employers would regard the outcome of the case as difficult to comprehend. However, the outcome of the case was determined not so much by whether or not Mr Paterson’s conduct was sufficiently serious to justify his dismissal, but whether or not he had been adequately warned that this was so. The ERA found that although the WDL discussed the fuel card incident with Mr Paterson, made it clear that it was a misuse of the fuel card and that it was wrong, and said that if there were any further incidents of wrongdoing, WDL would be “taking action”. However, the ERA found that the words used did not put Mr Paterson on notice that his employment was in jeopardy.

In relation to the graffiti incident, Mr Paterson was made to apologise to the homeowners. WDL asserted that following the incident Mr Paterson had been told that if there were any further problems, he would be dismissed. Mr Paterson denied that such a discussion took place. The ERA found that whilst Mr Paterson had been counselled about this behaviour, he had not been provided with an unequivocal warning that his job was in jeopardy. The ERA indicated that the main focus was not whether or not there had been misconduct, but whether or not WDL had reasonable grounds for believing that there was misconduct justifying dismissal. The ERA further held that the requirements of fairness and reasonableness required Mr Paterson to be given an understandable account of the allegations of misconduct with sufficient particulars and enough time to provide a real opportunity to refute the allegations or mitigate the conduct. The ERA found that this had not occurred and that the decision to dismiss was based on WDL’s misapprehension that having previously warned Mr Paterson about these issues, he could be dismissed for future problems. As mentioned above, the ERA was not satisfied that such warnings had been given.


The outcome of the case should serve as a clear illustration of the importance of procedural elements in any dismissal. In this case, there was undoubtedly misconduct on the part of the employee concerned, which if handled correctly, could have led to a justified dismissal. However, the employer was found not to have followed the requirements of procedural fairness and for that reason the dismissal was unjustified. This is because not only must an employer have good grounds for dismissing an employee, but dismissal must be carried out in a manner that is in accordance with the requirements of procedural fairness. If either the requirements of there being good grounds for a dismissal and of procedural fairness are not met, then the dismissal will be found to be unjustified.

No doubt the outcome of the case was disappointing for the employer concerned. However, the case is an example of a situation where had the employer sought advice as to the appropriate procedures to be followed at that time of the first incident, the situation could have been managed in a way that the employee’s employment could have been justifiably terminated in view of the subsequent events of misconduct. 
Employers who are facing problems with employees should therefore seek advice at the earliest possible opportunity so that they can be guided through the process and minimise the chances of a successful personal grievance claim being brought.