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March 2012

The Fair Employer

New Tests for Justification and Reinstatement

In any situation in which an employee is claiming that their dismissal was unjustified or that they were subject to unjustified disadvantage in their employment (which between them account for the majority of cases before the Employment Relations Authority (“ERA”) and the Employment Court “EC”)), the issue of justification is likely to be at issue.  In considering that issue, the ERA/EC is required to apply the test for justification set out in Section 103A of the Employment Relations Act 2000 (“the Act”). That test has recently been amended and as the issue of justification is likely to be relevant in the overwhelming majority of cases before the ERA/EC, the EC has recently issued a judgment intended to give guidance as to the interpretation and application of the new provisions.   

The Previous Test for Justification

The previous provision of the Act essentially provided that the issue of whether a dismissal or action was justifiable “… must be determined, on an objective basis, by considering whether the employer’s actions and how the employer acted were what a fair and reasonable employer would have done in all the circumstances at the time the dismissal or action occurred”. 

The EC had previously held that the former test required the ERA/EC to objectively review all of the actions of an employer. Those actions were then to be assessed against the test of what a “fair and reasonable employer” would have done in all the circumstances. 

The New Test for Justification

The new Section 103A requires the Court to determine whether the employer’s actions were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred.  Furthermore the Act now provides that in determining that issue, the ERA/EC must consider the following:-

  • Whether, having regard to the resources available to the employer, the employer sufficiently investigated the allegations against the employee before taking action; and
  • Whether the employer raised their concerns with the employee prior to dismissing or taking action; and
  • Whether the employee was given a reasonable opportunity to respond to those concerns; and
  • Whether the employer genuinely considered the employee’s explanation (if any) before dismissing or taking action against the employee. 

“Would” vs “Could”

The first point to note is the test is no longer what a fair and reasonable employer would have done in the circumstances, but what a fair and reasonable employer could have done in those circumstances. This means that the ERA/EC must still continue to make an assessment of the conduct of a fair and reasonable employer in the circumstances and judge the employer’s response against that standard.  However, the ERA/EC is no longer required to determine the issue of justification by the single standard of what a notional fair and reasonable employer would have done in the circumstances. Instead, the change contemplates that there may be more than one fair and reasonable response or other outcome that might be justified by a fair and reasonable Employer. If an employer’s decision to dismiss or to disadvantage the employee was one of the outcomes that might justifiably be applied by a fair and reasonable employer, then the dismissal or disadvantage must be found to be justified. 

What Has Not Changed

The EC also determined that there had not been any change to permit the ERA/EC to decide justification by deciding what they would have done in the circumstances. Rather, it has always been the case that the ERA/EC needs to assess objectively whether what the employer did and how they went about were what a fair and reasonable employer could have done.  This has not changed. 

Secondly, the EC found that nothing in the new test altered the importance of procedural fairness. Whilst the amendment to the Act introduces for the first time a statement to the effect that a dismissal or action should not be determined as unjustifiable solely because of minor defects in the process followed by the employer that did not result in the employee being treated unfairly, the EC held that in this provision merely continued the emphasis on substantial fairness and reasonableness, as opposed to “pedantic scrutiny”. 

Thirdly, the amendments do not affect the long-standing considerations such as the disparity of treatment of other employees in similar circumstances, the need for employers to comply with relevant contractual provisions and with their own codes of conduct and the need to consider an employee’s overall employment history.

Conclusion

In our view, the effect of this decision is to confirm that the test for justification has been somewhat relaxed in favour of employers. The employer is now only required to show that the dismissal or other action it took was only one of a number of possible actions that were open to a fair and reasonable employer, as opposed to showing that a fair and reasonable employer would have taken the action that the particular employer in fact took.