New Zealand: Court of Appeal scales back rules for employment investigations

Last Updated: 15 September 2016

This week the Court of Appeal handed down its decision in A Limited v H [2016] NZCA 419, allowing the appeal against the Employment Court's decision in H v A Limited [2014] NZEmpC 189.

The decision is significant because it clarifies the expectations on an employer when carrying out employment investigations and emphasises that the circumstances of the case will be highly relevant to the way in which a matter is investigated.

The Facts

The case involved the dismissal of an airline pilot, following allegations that he had sexually harassed a flight attendant during a layover.

The key facts, relevant to the investigation findings, were that Mr H (a 51 year old male pilot), entered the hotel room of a 19 year old female, novice flight attendant, whom he had never met prior to the trip, and sat on her bed under a blanket. Mr H accepted that he had touched the flight attendant on her leg (although he claimed it was accidental). He also accepted that there were chairs in the room that he could have sat on, instead of the bed.

The flight attendant complained of sexual harassment, alleging several occurrences, including the one in the bedroom.

After investigating the matter, A Limited upheld the allegation of sexual harassment and Mr H was dismissed.

Mr H claimed unjustifiable dismissal on the grounds that the investigation was insufficient and he had been treated differently to the way other employees in similar cases had been treated in the past.

Mr H's claim in the Employment Relations Authority was unsuccessful, but he succeeded on appeal to the Employment Court. He was awarded lost wages, compensation and reinstatement.

Employment Court Decision

The Employment Court decision imposed a high standard for employment investigations and set a precedent for judges to scrutinise the way in which the investigation was carried out.

The Employment Court held that Mr H's dismissal was unjustified, both because of the disparate treatment and because Mr H's explanation had not been considered in an 'even-handed' manner. The Judge specifically pointed to the vigour with which Mr H's account of events had been tested and found that the same scrutiny had not been applied to the accounts of the complainant and other witnesses.

In taking this approach, the Judge had imposed a rule, that an even-handed approach to workplace investigations required all witnesses to be questioned in the same way and to the same level of detail.

Challenge to Employment Court Decision

A Limited challenged the Employment Court decision on the basis that:

  • the Judge erred in applying a rule that all witnesses had to be examined in the same level of detail and in the same way, irrespective of the circumstances;
  • the Court had effectively substituted its judgement for that of the employer; and
  • the Judge had required the employer to undertake an investigation akin to a judicial enquiry.

Court of Appeal's Decision

The Court agreed that the Judge in the Employment Court had erred in law and that he had "applied a set of rules that got in the way of a direct application of the statutory test" for justification.

The Court said that this approach ignored the specific reference, in the s.103 test, to assessing what is fair and reasonable based on "all the circumstances" and taking into account the range of reasonable responses open to a fair and reasonable employer.

The Court (citing Angus v Ports of Auckland Ltd (No 2) [2011] NZEmpC 160), restated that "the requirement is for an assessment of substantive fairness and reasonableness rather than "minute and pedantic scrutiny" to identify any failings".

After assessing A Limited's approach, with specific reference to the circumstances (in particular those outlined in the facts above), the Court allowed the appeal and set aside the order for lost wages, compensation and reinstatement.

The case has been sent back to the Employment Court to consider remedy, along with other issues which have developed between the parties since the 2014 judgment.

Key message

This case scales back the employer's obligations when undertaking investigations, to the s.103 test, doing away with the additional rules made by the Employment Court.

Of course, employers will still have to undertake thorough and balanced investigations into issues arising in the workplace, but this case makes clear that there will be circumstances where it will be justifiable to take a different approach to questioning witnesses, so long as a fair and reasonable employer could have taken that approach, in those circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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