Investigació Zara i H&M

The Employment Relations Act 2000 (“ER Act”) applies to every employment relationship within New Zealand. The ER Act expressly recognises a duty of good faith.

107

See Justin Smith, ‘Good Faith’ in, The Law of Obligations – “Contract in Context” (New Zealand Law Society Intensive, 2007), at 34. Cf Geoffrey Kuehne, ‘Implied Obligations of Good Faith and Reasonableness in the Performance of Contracts: Old Wine in New Bottles?’ (2006) 33 University of Western Australia Law Review 63, at 102-106.

This obligation is the cornerstone of the legislative framework.108 The requirement for good faith extends not only to a concluded individual or collective employment agreement, but also the bargaining process.109

The ER Act does not provide an exhaustive definition of good faith. However, s 4 does contain some definitional elements:

(1) The parties to an employment relationship specified in subsection (2)— (a) must deal with each other in good faith; and

(b) without limiting paragraph (a), must not, whether directly or indirectly, do anything—

(i) to mislead or deceive each other; or

(ii) that is likely to mislead or deceive each other. (1A) The duty of good faith in subsection (1)—

(a) is wider in scope than the implied mutual obligations of trust and confidence; and

(b) requires the parties to an employment relationship to be active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive and communicative; and

(c) without limiting paragraph (b), requires an employer who is proposing to make a decision that will, or is likely to, have an adverse effect on the continuation of employment of 1 or more of his or her employees to provide to the employees affected—

(i) access to information, relevant to the continuation of the employees' employment, about the decision; and

(ii) an opportunity to comment on the information to their employer before the decision is made.

108

See Geoff Devenport and Judy Brown, Good Faith in Collective Bargaining (2002), at 1.

109

See s 4(4) Employment Relations Act 2000. In respect of bargaining for an individual employment agreement, the Employment Relations Act 2000 applies only to employers and employees who have attained that status such that there will be no statutory cause of action for breach of good faith in the bargaining process if there has been no offer and acceptance. See generally Lexis Nexis, Mazengarb’s Employment Law, (at 4 March 2008) Employment Relations Act 2000: Part 1/Key Provisions/Good Faith Employment Relations, at [4.16A].

The obligations under s 4(1A) requiring open dialogue and consultation engender a requirement of contractual cooperation.

The prohibition against misleading or deceiving the other party under s 4(1)(b) is founded on the policy that the contracting parties must be honest with each other.110 However, it seems that an obligation not to mislead or deceive can extend past subjective honesty and perhaps even objective honesty in some cases. The wording under the ER Act is based on the terminology within ss 9 and 12 of the Fair Trading Act 1986 (“FTA”).111 It is not necessary for a person engaging in misleading or deceptive conduct to intend to mislead or deceive under the FTA.112 There is no element of culpability.113 This would at least

110

In National Distribution Union Inc v General Distributors Ltd [2007] 1 ERNZ 120 the full Employment Court noted (at 140) that ‘[a]lthough not doing so exhaustively, the definitions of good faith dealings given in s 4 address what might be referred to as the honesty or transparency of dealings between parties so that deceiving and misleading, whether intentional or consequential, are prohibited…Those attributes of good faith dealing address how relationships are to be conducted rather than constraining the substance of them including, for example, the lawfulness of acting in one's self-interest. So, albeit simplistically, s 4 does not constrain an employer from engaging in otherwise lawful bargaining tactics with a union but does require the employer to do so transparently and truthfully and to open and maintain channels of communication with the union in so doing.’

111

See Mazengarb, above n 109, at [4.6].

112

Bonz Group Pty Ltd v Cooke (1996) 5 NZBLC 104,193.

113

Comite Interprofessional du Vin de Champagne v Wineworths Group Ltd [1992] 2 NZLR 327. Thus, in Premium Real Estate Ltd v Stevens (2008) 12 TCLR 133 Arnold J, delivering the judgment of the Court of Appeal, found (at [43]) that ‘whether deliberately or not, [the defendant] created a false impression in the minds of the [plaintiffs] by telling them only part of the story…In these circumstances we consider that the Judge was correct to conclude that [the defendant] was in breach of s 9 of the Fair Trading Act.’ The Court did however go on to recognise, in obiter dicta, that the state of mind of the defendant may have to be examined where an expression of an opinion is alleged to amount to misleading and deceptive conduct. Arnold J opined (at [54]) that it ‘is difficult to see why an honestly held, reasonably based opinion should be actionable under s 9 simply because it is not borne out by subsequent events. The person expressing the opinion may have done all that could sensibly be done to reach an informed view but would still be liable, even if the subsequent events or circumstances were unforeseeable.’ The comments certainly indicate that the impugned conduct should be examined with reference to the circumstances at the time it is carried out and not with the benefit of hindsight. On appeal to the Supreme Court, liability under the Fair Trading Act

suggest that the good faith obligations under the ER Act are not confined to subjective honesty.

In Auckland City Council v New Zealand Public Service Assn Inc the Court of Appeal suggested that the obligation of good faith under the ER Act does not mandate a wholly objective definition of good faith because:

That would be to exclude consideration of honesty or lack of it which can be an important element in the concept of good faith. To suggest that conduct, undertaken honestly, that has an adverse effect for reasons completely unforeseen, is to be held to have been undertaken other than in good faith would be a significant departure from the natural meaning of those words. To judge conduct solely by reference to effect in this way would be to invoke hindsight and to disregard the influence of the circumstances in which conduct is undertaken. We think a broader and more balanced approach is called for...114

Clearly the Court of Appeal is correct in noting that good faith cannot be defined solely by reference to the effect of the conduct. However, to use the example given by the Court, it is difficult to conceive of situations where a contracting party who engages in honest conduct, whose adverse consequences are reasonably unforeseeable, would be deemed to have acted inappropriately even on a strict objective standard. Further, too much concentration on subjective intention and motives could lead to a narrow focus on bad faith behaviour rather than the positive good faith behaviour the ER Act is designed to promote.115 Conceivably a more objective test for breach of good faith by an industrial participant might be appropriate where there is no evidence of subjective intent.116

1986 was upheld and Blanchard J reaffirmed that misleading and deceptive conduct for the purposes of s 9 ‘need not have been advertent’ : (Supreme Court, SC 23/2008, 6 March 2009), at [92].

114

[2004] 2 NZLR 10, at 15 per Gault P.

115

See Mazengarb, above n 109, at [4.5D]. Canada has adopted an objective test. See Royal Oak Mines Inc v Canada (Canadian Labour Relations Board) (1996) 133 DLR (4th) 129. The United States is more reluctant to require objectively reasonable conduct in industrial bargaining. See generally NLRB v American National Ins Co, 343 US 395 (1952); White v NLRB, 255 F2d 564 (1958, US App); Chevron Oil Co & Standard Oil Co of Texas Division v NLRB, 442 F2d 1067 (1971, US App); NLRB v United Clay Mines Corp, 219 F2d 120 (1955, US App).

116

In the context of employment contracts it has been noted that it ‘not possible to lay down rules or protocols defining what may or may not constitute dealing in good faith.’117 As a result of the lack of an exhaustive definition under s 4, the Court is obliged to assess good faith on a case by case basis.118 Such comments bear a close resemblance to observations often made in the debate concerning a universal contractual doctrine of good faith.

The circumstances in which the ER Act obligation of good faith may be breached are vast. An analysis of the recent case law reveals the wide ranging application of good faith. For example, an employer will breach the obligation when it fails to provide the grounds for dismissal of an employee119, or it pre-determines that it will effect redundancies and merely purports to consult with employees120, or it communicates with unionised employees without reference to the union.121 An employee may be found to have breached good faith where he or she uses the confidential information of the employer to set up in competition against the employer.122 Likewise, a union might breach the obligation by failing to discuss alternative working arrangements with an employer during a proposed strike123, or failing to comply with an undertaking to re-enter negotiations.124

117

Auckland City Council v New Zealand Public Service Assn Inc [2004] 2 NZLR 10, at 16 per Gault P.

118

Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486, at 497 per Tipping J.

119

X v Auckland Hospital Board (Employment Court, Auckland, AC 10/07, 23 February 2007, Chief Judge Colgan).

120

Funnell v Bruce A Short Ltd (Employment Court, Auckland, AC 12/06, 14 March 2006, Chief Judge Colgan).

121

Christchurch City Council v Southern Local Government Officers Union Inc (2007) 4 NZELR 63; New Zealand Amalgamated Engineering Printing and Manufacturing Union Inc v Energex Ltd (Employment Court, Auckland, AC 48/06, 28 August 2006, Judge Shaw).

122

BDM Grange Ltd v Parker [2006] 1 NZLR 353.

123

Service and Food Workers Union Nga Ringa Tota Inc v Spotless Services (NZ) Ltd (Employment Court, Auckland, AC 43/07, 11 July 2007, Chief Judge Colgan).

124

Professor Graeme Fogelberg, Vice Chancellor of the University of Otago v Association of University Staff (Employment Court, Christchurch, CC 23/02, 16 February 2002, Judge Palmer).

It is evident that the diverse application of the statutory duty of good faith is heavily dependent on the particular nature of the employer and employee or employer and union relationship. Accordingly, the utility of drawing on the various applications of good faith within the context of employment contracts for the purposes of defining a general contractual doctrine must be doubted. In Wellington City Council the Court of Appeal said it would be a mistake to equate the good faith reasoning in the employment relations arena with ordinary contract cases.125 Tipping J contended that:

The employment relationship itself immediately provides a degree of contextual objectivity…The problematic element of subjectivity attaching to good faith negotiations in the law of contract is therefore significantly reduced in the case of the good faith obligations referred to in s 4 of the Employment Relations Act.126

An additional hindrance to comparing good faith under employment law with a conceptualisation under the subject doctrine is that, within industrial contracts, good faith is broader than the obligation of trust and confidence. Section 4(1A)(a) of the ER Act expressly recognises this to be the case.127 Every employment agreement is subject to an implied duty of trust and confidence under common law128 and the statutory provisions clearly impose wider obligations. It would be an illogical step to determine that every contracting party in any arms length transaction is entitled to repose trust and confidence in the other contracting party. The duty of good faith under the ER Act is likely to impose 125 [2002] 3 NZLR 486, at 497 per Tipping J. 126 Ibid. 127

Section 4(1A)(a) was inserted as an amendment to the original Employment Relations Act 2000 to counter the majority Court of Appeal decision in Coutts Cars Ltd v Baguley [2002] 2 NZLR 533, which held to the effect that the duty of good faith did not differ significantly from the implied common law term of trust and confidence.

128

Walden v Barrance [1996] 2 ERNZ 598; Woods v WM Car Services (Peterborough) Ltd [1981] ICR 666. The meaning of trust and confidence at common law is also vague and has often been linked with duties of good faith. Lord Nicholls has said that the ‘trust and confidence implied term means, in short, that an employer must treat his employees fairly. In his conduct of his business, and in his treatment of his employees, an employer must act responsibly and in good faith.’: Eastwood v Magnox Electric plc [2004] 3 All ER 991, at 997.

standards of conduct which are far more stringent than those that would be expected in a non-relational contract. Accordingly, the understanding of good faith in employment contracts, which extends even further than a duty of trust and confidence, is likely to be an inappropriate comparator for a definition of good faith under a general contractual doctrine.