Would you buy a used car from this man?
A fact of the current economy is that many businesses are subject to frequent, and sometimes dramatic, change. Over recent years, many businesses have been caused to reorganise, either as a result of "downsizing" or as a consequence of a need to adapt to business change. A recent decision of the Employment Relations Authority illustrates some of the pitfalls to which an employer may be liable if a reorganisation is undertaken without due regard being given to employees' interests.
The applicant in Easterbrook v Cycle and Carriage (City) Limited (Unreported, Employment Relations Authority, Wellington, 27 February 2001) was employed as a new vehicle salesperson at the respondent employer's car franchise "City Nissan". She worked alongside another salesperson, a Mr Lai, in her role.
A significant change to the business came about in late 2000 when the employer was offered a franchise to sell a new range of cars at the exclusive "top end" category of the market. This new business opportunity required a person to be appointed in a dedicated position. The two current employees who could be considered to fill this role were Ms Easterbrook and Mr Lai.
The employer arranged a meeting with Ms Easterbrook on 2 November 2000 at which she was both advised of the "opportunity" brought about by the new business and the appointment of Mr Lai to the position. The employer provided reasons for the selection of Mr Lai including, among others, the fact that market research has indicated that a segment of the possible market would be Asian, and that Mr Lai had language skills that would assist the company in this regard.
Ms Easterbrook contended that the employer told her that Mr Lai would better suit the role because he was Asian, that he had better experience in trading vehicles and that Ms Easterbrook would not be taken seriously by other dealers because she was female. The employer denied these contentions. In essence, Ms Easterbrook felt that she was the best person for this new role and that she had been discriminated against both on the basis of her gender and her race. She resigned the next day and brought an employment action against her employer.
The question for the Authority's determination was whether there had been a breach of duty by the employer sufficiently serious enough for it be reasonably foreseeable that Ms Easterbrook would resign. The Authority was also required to consider the application of sections 104 and 105 of the Employment Relations Act (which provide prohibited grounds of discrimination and a general definition of what constitutes discrimination in employment).
At the core of the Authority's decision was the reconciliation of the competing evidence given by the employer and employee concerning the reasons given for Mr Lai's appointment to the new position. On balance, the Authority concluded that it was probable that the employer had made reference to Mr Lai's ability to suit the role because he was Asian, and that as a woman Ms Easterbrook would not be taken seriously by other dealers.
These were material findings, because they inclined the Authority to the conclusion that there existed grounds for discrimination under sections 104 and 105 of the Act. The Authority concluded that Ms Easterbrook had been disadvantaged in trying to obtain the position, that her resignation was foreseeable given the status of the position and that, in the course of the meeting, Ms Easterbrook had indicated her intention to leave her job.
In the event, the Authority awarded Ms Easterbrook the sum of $15,000 to compensate her for the hurt caused by her employer's actions.
To some extent, this decision serves to emphasise the serious consequences which may result if an employer is guilty of discrimination in the way that it manages its business. On that note, it is somewhat heartening that cases of this type are relatively rare in New Zealand law.
On the other hand, the real message that possibly should be taken from this decision does not relate to the fact of the discrimination at all - it relates to the process undertaken by the employer in the first place. The Authority recognised that the entire issue of discrimination would not have come about if the employer had been more transparent about its decision making process. Section 4 of the Employment Relations Act does require employers to consult with employees about business changes that will have implications for their employment. A process of consultation can be undertaken quickly, and at relatively little expense and could have, in this case, avoided the resignation of a key employee, and the creation of a significant employment problem.
As a matter of practice, the employer in this case should have met with each of the employees who were being considered for this new position to inform them about the upcoming change to their workplace and the need to appoint a dedicated person to respond to that business change. The employees should have been provided with information about the new job, and the factors which the employer intended to take into account in deciding who to appoint. The employees could have been given 24 hours to consider the matter and to provide their responses to the employer. The employer could then have taken those responses into account in making its decision. As a matter of practice, this process would probably have caused the employer to focus upon the legitimate grounds for appointment and would have disinclined it to provide reasons for the appointment which were obviously discriminatory.
This case serves a timely reminder for employers undertaking business reorganisations to seek legal advice before effecting business change.