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November 2001

The Good Faith Requirement

Dealing With A Major Change Contained In The Employment Relations Act 2000

One of the fundamental aspects of the new Employment Relations Act 2000 is the requirement for all parties to an employment relationship to act and deal with each other in good faith. Good faith itself is not defined in the Act but commentators have stated that the relationship between employer and employee should be based on fair dealing and mutual trust and confidence.

Correct Procedures

A tangible part of acting in good faith from the perspective of the employer is the use of correct procedures in dealing with employees, especially when there is a need for disciplinary action. Gone are the days of simply letting an unsatisfactory employee "go". Employers must be careful to ensure that correct procedures are followed.

In the case of employee performance problems, or more minor breaches of an employment relationship, employers must be careful to ensure that the correct warning procedures are used and that good faith and fairness has been clearly displayed.

The employee must always be given an opportunity to explain their actions or reasons for lack of performance and the employer must give clear directions of what is expected in the future and a reasonable period of time to improve. The employee must be advised that they can bring a representative or witness to disciplinary meetings.

Any decisions reached or warnings given by the employer should be followed up in writing, with copies kept on the employee’s file. The written warning must refer to specific areas for change or improvement and should ideally provide a time frame for change or improvement.

The Employment Agreement may specify the warning and dismissal procedure to be adopted by the employer. But in the absence of a formal procedure in the Agreement, or if there is no Agreement in existence, it is suggested that an employee should be given at least three warnings before termination is justified. Notably, the warnings must relate to the same employment problem and should clearly state that if improvement is not made then termination may result. At least one of the warnings should be written, but preferably all verbal warnings should be followed up by confirmation of the warning in writing.

Summary Dismissal

There are always instances where an instant dismissal is warranted, such as violence against another staff member or customer and theft. However, before dismissing an employee, careful thought must be given to possible repercussions. An employer must show that they have taken all investigative steps to determine whether an instant (or summary) dismissal is warranted.


If in doubt regarding procedural matters, we strongly urge you to seek our advice. Employment grievances can be costly for businesses both financially and in terms of employee morale. Employment matters call for the proverbial fence at the top of the cliff, rather than the ambulance at the bottom.