Can I legally dismiss an employee?

The short answer is “yes”, but the dismissal process you must follow will depend on the situation.

The duty of good faith does not stop an employer dismissing an employee if:

• the employer gives notice of the dismissal before the end of a trial period, or
• there are genuine grounds for dismissal, and
• a fair process has been followed.

The “test of justification”

By requiring employers and employees to act in good faith, the Employment Relations Act creates responsibilities for both you and the employee. You must fulfil reasonable commitments made to each other. Where the employee has breached a commitment in a significant way, and the matter has been investigated and managed fairly, the result can be dismissal or other sanctions.

The Employment Relations Act applies a “test of justification”. This “test of justification” does not apply where the employer has given notice of dismissal to an employee before the end of a trial period, unless issues such as discrimination or harassment arise. Whether a dismissal is justified depends on whether your actions and decisions are what a fair and reasonable employer would have done in the circumstances. A relevant factor to consider is how you have dealt with similar issues in the past; you should treat employees similarly when the circumstances are the same.

This “test of justification” also applies if you take an action other than dismissal that disadvantages the employee, such as delaying an agreed performance payment or an agreed promotion, or issuing a warning.

Explaining trial periods

If you employ 19 or fewer employees and wish to hire a new employee on a trial period, the trial period must be included in the new employee’s employment agreement. 

You and your employee must both bargain in a fair way about a proposed trial period.  This includes you considering and responding to any issues raised by the new employee.

If you have concerns about the performance of an employee on a trial period, then you should raise them with your employee.

If an employment relationship problem arises during the trial period or in relation to an employee’s dismissal during or at the end of the trial period, you and your employee can access the Department’s mediation services. 

While your employee cannot pursue a personal grievance for unjustified dismissal if he/she is dismissed during the trial period, personal grievances may still be pursued on other grounds, such as discrimination or harassment.

Explaining probation periods

If you wish to hire an employee on a probationary period, this must be clearly recorded in the employment agreement. The agreement should indicate:

• what is expected of the employee
• what the employer is committing to (for example, in terms of training the employee to do the job)
• the length of the probationary period, which should be set at an appropriate level for the job.

You and your employee must both bargain in a fair way about a proposed probationary period.  This includes you considering and respond to any issues raised by the new employee.

Probation cannot be treated as a way of avoiding using fair performance management processes.

Where concerns arise about the performance of an employee who is on probation, you should first look to the probation agreement to see what the agreed expectations and responsibilities are.

If a probationary employee is not performing to expectations, you should raise your concerns with the employee and discuss them as soon as possible. If the level of performance is unacceptable, then:

• provide the employee with reasonable guidance and assistance to help him or her to improve
• provide time and opportunity to improve
• review performance during that time and give feedback on performance.

You might also consider whether commitments given on training during the probationary period have been met.

Any discussions, performance expectations, reviews and warnings should be clearly documented.

If a probationary employee is dismissed without having been treated fairly, he or she has the same right to take a personal grievance as any other employee.

Investigating and dealing with misconduct

You are entitled to, and may be required to, investigate matters that come to your attention, such as an allegation of serious misconduct.

If you decide to investigate, it is important that you:

• collect all the facts
• keep an open mind
• make it clear to the employee what the process will be.

In potentially serious situations, you may be wise to get some initial guidance from the Department of Labour on 0800 20 90 20 or seek specific advice from another advisor, such as your local employers’ organisation or industry association.

Other steps can be taken to avoid common pitfalls:

• The employee should be advised in writing that allegations have been made, what they are and what disciplinary action (including dismissal, if relevant) could result. This ensures the employee is aware at the outset of the seriousness of the situation.
• The employee is entitled to be shown any evidence of the allegations, including information provided by witnesses, and be provided with a reasonable period of time to consider that information and make a response.
• The employee is entitled to be informed of the right to be accompanied by a support person (or representative) in any investigation meeting and should be invited to bring someone along if they wish. It is preferable to record this invitation in writing.
• Equally, you are wise to have a witness present at meetings and to record in writing what is said. The record can be a summary of key points from the meeting.
• If an employee provides new or additional information in an investigation meeting, you will need to conduct further inquiries and present the findings of those inquiries to the employee.
• Encourage the employee to present a full explanation at any meeting. If your employee declines to answer questions, you should advise (preferably in writing) that, in the absence of a response, you will have no option but to make a decision without the explanation.
• If your employee asks for time to provide a response, then you should agree to a reasonable amount of time. Both of you should be clear about the time available to respond.
• You should take time out from the meeting so you can consider an employee’s explanation, before restarting the meeting to tell the employee your final decision. Any break in the meeting does not need to be for long.
• Disciplinary action must not be predetermined and must be decided upon only after the investigation is complete. Drafting a dismissal letter before an investigation is complete, or telling other staff that a dismissal will occur, indicates predetermination.
• The nature of the action you eventually decide to take (for example, dismissal or a written warning) must be seen to be fair and reasonable bearing in mind the wrongdoing and the circumstances. Relevant things to consider could include the employee’s previous work history, your workplace policies and how you have dealt with similar issues in the past.
• Instant dismissal is only warranted where the serious misconduct interferes with or prejudices the safe and proper conduct of your business. Examples include theft, or physically or mentally abusive behaviour to other employees or customers.
• When a disciplinary decision is made, the employee should be treated with respect and consideration. This includes communicating and explaining the decision to the employee in a way that has due regard to privacy and feelings.

Suspending an employee

Suspension is when an employee is excluded from the workplace and not required to do any work while certain matters are being investigated or resolved.

Suspension generally needs to be with pay. You can only lawfully suspend an employee without pay where this is permitted under the employment agreement or under a statutory power.

Suspension may be appropriate if the employer considers, given the nature of the alleged misconduct, that it would be inappropriate for the employee to carry on in the job. Suspension could be appropriate if, for example, there was risk to the company, other employees or the public or by some other compelling factor.

When an employee has been suspended, you should handle the investigation promptly and confidentially. This ensures that the employment relationship can be preserved if the suspicion is unfounded.

Suspension can have drawbacks, including:

• disruption in the workplace
• creating suspicion or rumour in the workplace
• damaging an employee’s reputation with clients or workmates
• harmful emotional, social or financial effects on the employee.

Suspension can also impact, or even prejudice, the outcome of an investigation – particularly if the period of suspension is lengthy.

Issues to consider in making the decision to suspend an employee include:

• whether the allegation and/or evidence is serious enough that suspension might be required
• whether there is a legal right to suspend
• whether the proposed period of the suspension is reasonable in all the circumstances
• the impact that suspension will have on the employee.

The Department of Labour can provide guidance at this stage, as well as later in the process.

If you decide to suspend an employee, you must use processes that are as fair as those used in any other disciplinary situation. The required process includes:

• advising the employee in advance that suspension is being considered and how it might be applied
• giving the employee an opportunity to comment on whether there should be a suspension.

During the suspension period, you should make the employee aware of the progress of the investigation. The employee has the right to seek outside advice.

You should also be careful when discussing with third parties the reasons why an employee has been suspended, as this may breach privacy requirements.

Persistent lateness and absenteeism

It is important that you raise promptly any concerns over lateness or absenteeism with the employee.

You should seek to understand the problem from the employee’s point of view. If there are genuine reasons, consider whether you can do something to help the employee deal with the problem.

On the other hand, if you fail to take action and bad habits are permitted to continue, remedying the problem will be more difficult, and the employee’s obligations can become blurred.

Discussions and warnings should be clearly documented, so that everyone knows what has been said and what is expected.

Problems arising from employee illness

You are not obliged to continue indefinitely the employment of persistently ill employees, but any decision to terminate employment must be fair and reasonable and must be seen as reasonable in your industry or among other employers.

Factors to be considered include:

• the duration of the employee’s illness to date and the effect it is having on the business
• the employee’s entitlement to sick leave (paid and unpaid)
• the prospects for recovery (which should be based on objective information such as a doctor’s report)
• how long the employee has worked for you
• steps you could take to aid rehabilitation, such as providing part-time or light duties
• the need to communicate clearly with the ill employee, including the employee’s right to know a reasonable time in advance that employment is in jeopardy
• whether there are alternatives to dismissal that are reasonable in the circumstances
• whether the employee holds a key position for which it is especially important that the employer has a permanent employee, or a position it is especially difficult to cover for an uncertain period.

Conflict among employees in the workplace

Employees involved in workplace conflict have an obligation to work co-operatively with their colleagues and to treat fellow workers and their managers with the same respect and consideration that they themselves wish to be shown.

You need to respond to workplace conflict quickly, before people become fixed in their positions.

Make every effort to look beyond the emotion to the underlying reasons for the conflict and encourage everyone involved to do the same. It is crucial to focus on facts, rather than allegations or assumptions.

Ensure that any action you take is, and can be seen to be, even-handed for everyone involved.

It is preferable for all parties to agree to a solution. Whether a solution is agreed or imposed by you, review regularly to check that the underlying cause of the problem has, in fact, been resolved.

The Department of Labour provides mediation services to assist employers in seeking solutions to workplace conflict.

Disclaimer & Acknowledgement

The material featured on this page was sourced directly from the Department of Labour and is subject to Crown copyright protection.

The Crown copyright protected material may be reproduced free of charge in any format or media without requiring specific permission. This is subject to the material being reproduced accurately and not being used in a derogatory manner or in a misleading context. Where the material is being published or issued to others, the source and copyright status should be acknowledge.

These guidelines provide general information and guidance. The Employment Relations Centre does not accept any responsibility or liability, whether in contract, equity or tort, or under any other legal principle, for any direct or indirect losses or damage of any kind arising from the use of this guide. This includes any action taken as a result of reliance on any part or all of, the information in this guide. It is also noted that:
1. The Employment Relations Centre may change, add to, delete from, or otherwise amend the content of these guidelines without notice.
2. The Employment Relations Centre gives no warranties, guaranties or undertakings as to results that may be achieved from use of the information contained in these guidelines.
3. These guidelines are not intended to address the specific circumstances of any particular individual or entity nor are they professional or legal advice.