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Quick Reference Employment MARCH 2005 Team Members Michael Quigg Partner DDI: 474 0766 [email protected] Quick Reference: SERIOUS MISCONDUCT – COMPANY POLICIES – EVENHANDED TREATMENT – REINSTATEMENT Serious Misconduct 1 Company Policies – Evenhanded Treatment A recent decision of the - Reinstatement Employment Court in Chief Best Policy 4 Executive of the Department of Jol Bates Inland Revenue v Buchanan is DDI: 474 0759 Anton Piller Orders – important for its consideration of: Civil Search Warrants 5 £7.5m Sex • what constitutes serious misconduct, Discrimination Case 7 • the need to show staff have read policies and procedures Mandatory Discretionary • the availability of reinstatement (even where Bonus Payments 8 the employee’s conduct contributes to the dismissal). Contractor/Employees 9 Sean Heywood The Facts DDI: 474 0752 Holiday Surcharges 10 The case concerned two employees of the Department Competition Winner 10 of Inland Revenue (IRD), Gillian Buchanan and Lynn Symes, who were summarily dismissed in July 2003. Further Information 11 Both were long-serving employees with very good service records. They were dismissed after a general Employment Seminar 12 audit of employees’ use of the department’s database Programme 2005 of taxpayer records. The general audit generated 35 disciplinary investigations. In this case it revealed Deirdre Marshall that they had accessed, on multiple occasions, the DDI: 474 0765 Quigg Partners files of family members. It was found that the Level 7, The Bayleys Building employees had changed addresses, issued and 28 Brandon Street P O Box 3035, Wellington confirmed personal taxation summaries, issued Phone: 04 472 7471 stationery, and in Ms Buchanan’s case, transferred a Fax: 04 472 7871 credit from one tax year to another. www.quiggpartners.com Tim Sissons 472 7471 2 These actions were found by IRD to be in breach of the employees’ obligations under the department’s code of conduct, to be in breach of their statutory obligations under the Tax Administration Act, and to be in breach of their employment agreements, which obliged them to comply with the code of conduct. The Determination of the Employment Relations Authority The department had, in accordance with its obligations under the State Sector Act, issued a code of conduct. The most recent code had been issued in 2001, at which time training was provided to staff. Both employees attended these training sessions, at which they were given copies of the code and asked to sign forms acknowledging their receipt of the code and their attendance at the session. Both did so. However, it was accepted that neither employee read the code, even though they received a number of newsletters stressing the importance of understanding it. The Authority found that they were aware that the IRD had concerns, but thought that these related to “celebrity surfing” – looking into the tax affairs of celebrities. In fact, the communications had been of a more general nature, and had explicitly referred to accessing the files of staff members’ families. While the Authority determined that neither employee was aware that they had done anything wrong, this was only because they had “completely failed to take on board the repeated messages that they had been given about what constituted serious misconduct”. The Authority found that this did not necessarily mean that their serious misconduct was excusable. Despite finding that serious misconduct occurred, the Authority granted the employees reinstatement on the basis of disparity of treatment. It was found that three other workers whose misconduct had come to light as a result of the same audit process, and whose circumstances were very similar had received only a final warning. Because there were no other factors justifying the harsher treatment of Ms Symes and Ms Buchanan, their dismissals were held to have been unjustifiable, and reinstatement was ordered. The Employment Court Decision Misconduct- Serious or not? The Employment Court noted that the actions of the employees were serious, even when done with the permission of the taxpayer involved, because they were suggestive of preferential treatment, and could give rise to suspicion of “some degree of favouritism bordering on corruption” in a department where employees are required to be above suspicion. This was despite the fact that there was no suggestion of actual wrongdoing. It was held that the employees’ actions, when viewed in isolation, included activities potentially amounting to serious misconduct. However, it was held that such activity “cannot amount to serious misconduct irrespective of circumstances”. The Court found that misconduct occurred, but that it was not serious misconduct, having taken into account a number of factors: the employees were open and honest with the decision-maker IRD accepted their explanations the dismissal was for not reading the code 3 the decision to dismiss was based largely on the number of occasions of access and the time over which it occurred; and the fact that failure to read the code would explain the multiple access over a long period; Disparity Disparity of treatment is an issue which crops up not infrequently in employment law decisions. As described by the Chief Judge in this case, it involves the proposition that “employees who behave in much the same way should sustain much the same punishment”, and, where an employee can establish that another employee guilty of a similar offence was penalised significantly less heavily, it may be found that the more severe punishment is not justifiable. In this case, the principles governing disparity issues were identified as: “a.) If disparity is established, an employer may be found to have dismissed unjustifiably unless an adequate explanation is forthcoming. b.) If the explanation is adequate, the disparity becomes irrelevant.” In this case the explanation for the disparity was considered inadequate to justify the dismissals. The Court accepted the Authority’s factual finding that IRD had accepted that the employees were unaware of the prohibition and therefore that the misconduct had been committed unconsciously. It held they were treated as if they were aware – the decision to dismiss was influenced by the number of times access occurred and the period over which it occurred. The Chief Judge suggested that guidelines, or a short internal review or confirmation of decisions to ensure consistency could have prevented the disparity. As regards the timing issue, it was held that the other cases were part of the same process, and that “consistency across the relatively brief period of time of these disciplinary inquiries could be expected”. It was held that given the conclusions reached about the employees’ conduct, it could not be said that their contribution to the situation was such as to require them to forfeit their entitlement to reinstatement. If a reduction was to occur, this should be made from any monetary remedies ordered, whether for loss of remuneration or as compensation for hurt and humiliation. The Court left the determination of such remedies, and any reductions, to the Authority. Comment Serious misconduct in this case was assessed under the Oram test as the case arose prior to the new test now found in s103A of the Employment Relations Act. A significant test case is still awaited as to the difference between what a fair and reasonable employer could have done in all the circumstances (the Oram test) and what a fair and reasonable employer would have done ie ERA Amendment Act. 4 The ERA found the conduct to be serious misconduct. The Employment Court disagreed, holding it was potentially serious misconduct but not serious misconduct in this case given the circumstances. Hence BEWARE if there is a list in an employment agreement, code, manual etc. of what constitutes serious misconduct. It does not automatically follow every incident of that type will be serious misconduct. This case illustrates the importance of codes of conduct, and of making sure that employees are aware of their existence and their contents. The case also illustrates the need for careful consideration of how employees are to be punished for misconduct. Employers must ensure not only that the punishment fits the crime, but also if a number of employees are guilty of similar conduct, that punishments are comparable across the board. There is a need, particularly in large organisations for someone (eg HR or legal) to have an overview of all disciplinary decisions made to ensure consistency and evenhanded treatment. BEST POLICY – WHEN IS A POLICY MANUAL PART OF AN EMPLOYMENT AGREEMENT? In December 2004, the Court of Appeal declined the application of Unisys New Zealand Ltd (“Unisys”) for leave to appeal against an Employment Court decision which had held that Unisys was obliged to pay its employees salaries within 10% of “market reference points” (“MRP”). An MRP was a point set through market research into salaries for equivalent positions. The Agreement The plaintiffs’ employment agreements stipulated that Unisys’ Policies and Procedures Manual was a part of the terms and conditions of employment between the parties, and provided that a key objective of Unisys’ remuneration policy was to: “establish and maintain fair and competitive market remuneration”. The remuneration policy provided that: “Since market reference points are norms, actual salaries that are 10% above or 10% below a market reference point are considered at market”. The plaintiffs in this case were being
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