Relief for employers over misconduct investigations

Friday 9 September 2016

Authors: Rachael Brown and Elisha Watson

​​​Employers concerned by a ruling that imposed certain standards on investigations into employee misconduct may find welcome relief in a Court of Appeal decision released this week.

The decision overturned an earlier Employment Court ruling that an investigation into employee misconduct was unfair because witnesses were not as rigorously questioned as the employee being investigated.1

This week's Court of Appeal decision confirmed that, when conducting an investigation, an employer was required to act in a substantively fair and reasonable way, but that an investigation should not be subject to "minute and pedantic scrutiny" to identify any failings. The Court also stressed the importance of assessing what was fair and reasonable in all the circumstances of the case.

The decision

This case related to an investigation conducted to determine whether an employee had contravened his employer's sexual harassment policy and whether his actions amounted to serious misconduct. The employee was dismissed by the employer following the investigation.

The Employment Court was highly critical of the investigation that was carried out by the employer. It found the investigator did not approach his task in a fair way because he rigorously tested the evidence of the employee but not of the complainant or other witnesses. The investigator did not ask certain questions or explore inconsistencies in different witnesses' accounts. In addition, while some interviews were conducted in person, others were conducted by telephone which did not facilitate the very careful questioning which was required, and only some of the interviews were recorded and transcribed. The Employment Court concluded that the employer's investigation into the allegations involved significant breaches of natural justice and that the dismissal was not justified.

On appeal, the Court of Appeal was required to determine whether the approach of the Employment Court in determining whether the employer had sufficiently investigated the allegations against the employer was correct in law. This required it to consider what section 103A of the Employment Relations Act requires of employers when conducting such an investigation.

Section 103A of the Employment Relations Act provides that the question of whether a dismissal or action is justifiable must be determined by considering whether the employer's actions and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances. The section was amended from 1 April 2011 when the test was changed from what an employer "would" have done, to what an employer "could" have done.

The Court of Appeal agreed with the employer that section 103A did not require the questioning of each witness to be the same and to the same level of detail. While an investigation must be carried out in an even-handed manner, this did not require the level of rigour adopted towards each of the witnesses to be the same.

The Court of Appeal therefore concluded that the approach taken by the Employment Court was not consistent with the requirements of section 103A. The Employment Court did not consider "all the circumstances" and ignored the requirement to consider whether the employer's actions were what a fair and reasonable employer "could", not "would", have done. The Employment Court had "in effect applied a set of rules that has got in the way of a direct application of the statutory test".

What this means for employers

The Court of Appeal decision will provide some relief to employers who were concerned that any investigation should be conducted to the standard required of a judicial inquiry. The Court has confirmed that that is not what is required of employers.

However, this decision does not mean that employers should not take real care when conducting such investigations. The Court of Appeal was very careful to note that the circumstances were all important in the case before it. The particular facts of the case meant that it was appropriate for the investigator to structure his approach around the inherent implausibility of an innocent purpose and accidental touching in these circumstances. However, there may be cases where the circumstances require the investigator to challenge a complainant in a more rigorous manner than was the case here in order to meet the requirement of genuine consideration of an employee's explanation.

1 A Ltd v H [2016] NZCA 419.​


This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Rachael Brown

    Partner Wellington
  • Tim Clarke

    Partner Auckland
  • Liz Coats

    Partner Auckland
Related areas of expertise
  • Employment and workplace safety