Navigating employment termination in New Zealand requires careful adherence to legal requirements and fair process principles. Both employers and employees have rights and obligations that must be respected throughout the termination process, whether it is initiated by the employer or the employee, or occurs due to redundancy. Understanding these procedures is crucial for ensuring compliance and avoiding potential disputes.
The framework for employment relations in New Zealand is primarily governed by the Employment Relations Act 2000, which emphasises good faith and fair process. This includes specific requirements around notice periods, the grounds for dismissal, and the procedures that must be followed to ensure a termination is justified. Employers must be diligent in their approach to avoid claims of unjustified dismissal.
Notice Period Requirements
The required notice period for terminating employment in New Zealand is typically specified in the individual employment agreement or collective agreement. There is no statutory minimum notice period that applies universally to all employees. However, if the employment agreement does not specify a notice period, a reasonable notice period is implied by law. What constitutes 'reasonable' depends on factors such as the employee's length of service, position, and industry norms.
Commonly, employment agreements specify notice periods based on the employee's tenure or role. For example:
| Length of Service | Typical Notice Period (as per agreement) |
|---|---|
| During Probation/Trial | Often 1-2 weeks |
| Less than 1 year | Often 2 weeks |
| 1 year or more | Often 4 weeks |
| Senior/Management Roles | Often 1-3 months |
Either party can give notice to terminate the employment relationship. Notice must generally be given in writing. In cases of serious misconduct, an employer may be able to terminate employment summarily (without notice), but this is only permissible in specific, serious circumstances and still requires a fair process.
Severance Pay
Unlike some other jurisdictions, New Zealand law does not mandate statutory severance pay upon termination, including in cases of redundancy. An employee's entitlement to severance pay only arises if it is explicitly provided for in their individual employment agreement or a collective agreement.
If a severance entitlement is included in an agreement, the method of calculation will be defined within that agreement. Common methods might include:
- A fixed number of weeks' pay per year of service.
- A lump sum payment.
- A formula based on salary and tenure.
Employers are not legally required to offer severance pay unless contractually obligated. However, in redundancy situations, employers may sometimes offer an ex gratia payment (a payment made voluntarily) as part of a redundancy package, even if not contractually required. This is distinct from contractual severance.
Grounds for Termination
Employment can be terminated for various reasons in New Zealand, broadly categorised as termination with cause and termination without cause (redundancy).
Termination With Cause
Termination with cause typically relates to issues with the employee's conduct or performance.
- Misconduct: This can range from minor issues requiring warnings to serious misconduct justifying immediate dismissal (summary dismissal). Examples include theft, serious insubordination, harassment, or serious breaches of company policy. A fair process is always required, even for serious misconduct.
- Poor Performance: If an employee is not meeting the required standards of their role, an employer can terminate their employment. This usually requires a process of identifying the performance issues, providing clear expectations for improvement, offering support or training, and giving the employee a reasonable opportunity to improve over a specified period.
Termination Without Cause (Redundancy)
Redundancy occurs when an employee's position is no longer required by the employer. This is a termination without cause related to the operational requirements of the business, not the employee's performance or conduct. Lawful redundancy requires a genuine reason based on the employer's business needs and a fair process, including consultation with the affected employee(s).
Procedural Requirements for Lawful Termination
Regardless of the grounds for termination (except in specific, rare circumstances like genuine frustration of contract), a fair and reasonable process must be followed. Failure to follow a fair process is a common reason for a dismissal to be found unjustified, even if there was a substantive reason for termination.
Key procedural steps typically include:
- Identify the Issue: Clearly define the reason for considering termination (e.g., specific instances of misconduct, performance issues, or the genuine business need for redundancy).
- Investigate: Conduct a thorough and objective investigation into the facts. This may involve gathering evidence, speaking to witnesses, etc.
- Inform the Employee: Clearly inform the employee in writing about the concerns or proposed action (e.g., allegations of misconduct, performance issues, or proposed redundancy). Provide them with all relevant information gathered during the investigation.
- Opportunity to Respond: Give the employee a reasonable opportunity to meet and respond to the concerns or proposal. They have the right to have a support person or representative present at any meeting.
- Consider Response: Genuinely consider the employee's response before making a final decision.
- Communicate Decision: Inform the employee of the final decision in writing, clearly stating the reasons for the decision and the effective date of termination.
- Provide Notice/Payment in Lieu: Provide the required contractual notice or payment in lieu of notice.
Common pitfalls include insufficient investigation, failing to provide all relevant information to the employee, not giving the employee a genuine opportunity to respond, and pre-determining the outcome.
Employee Protections Against Wrongful Dismissal
Employees in New Zealand are protected against unjustified dismissal. If an employee believes their dismissal was unfair, either substantively (no good reason) or procedurally (unfair process), they can raise a personal grievance.
A personal grievance must typically be raised with the employer within 90 days of the action occurring or coming to the employee's attention. If the issue cannot be resolved directly with the employer, the employee can seek assistance from the Ministry of Business, Innovation and Employment (MBIE) mediation service. If mediation is unsuccessful, the matter can be referred to the Employment Relations Authority (ERA) for investigation and determination. Decisions of the ERA can be appealed to the Employment Court.
If a dismissal is found to be unjustified, remedies can include:
- Reinstatement: The employee is returned to their former position or a similar position.
- Reimbursement: Payment of lost wages.
- Compensation: Payment for humiliation, loss of dignity, and injury to feelings.
Understanding and correctly applying New Zealand's employment termination laws and fair process principles is essential for employers to manage their workforce effectively and mitigate legal risks.
