Employees who take their employer to court often face a lot of stigma and can find it difficult to get another job.  This acts as a disincentive to employees pursuing personal grievance claims and is therefore a significant barrier to justice. For this reason, the ability to seek reinstatement is an important remedy and is often far more valuable to an employee than a payout which may be exhausted long before they find new employment.

Reinstatement has always been part of the package of remedies available to employees under the Employment Relations Act and predecessor legislation, and in 2018 the Labour led government amended the law to again make it a “primary remedy”.  This means that if an employee establishes that they were unjustifiably dismissed and are seeking reinstatement, the authority or court must award it “wherever practicable and reasonable”.

Now the ACT party want to remove the ability of the authority or court to unilaterally reinstate an employee and instead make this the employer’s decision.  Their policy release justifies this on the basis that “if a matter has made it to the ERA, chances are the employment relationship is irreparable.  Forcing the employer to retain an aggrieved employee is almost certainly not in the best interest of the employer, nor is it necessarily healthy for wider workplace relations”.

In reality, making this a matter of employer choice is a nonsense because most employers who go to the lengths of firing an employee are not about to turn around and re-employ them.  Therefore, the effect of ACT’s policy is more likely to be to remove reinstatement as a remedy available to employees altogether. 

Further, without the risk of the authority ordering reinstatement, employers are likely to be more inclined to dismiss employees in questionable circumstances because the worst that can happen is that they will have to pay some compensation.

It will also likely drive down what employees can negotiate by way of out of court settlements.  In this regard the threat of reinstatement is currently a significant lever that employees have in negotiations, and without this it becomes a simple financial equation with employees often not being in a position to pay legal fees or adequately represent themselves in litigation and having to accept whatever is offered.

Given all of this, the effect of the law change that ACT is campaigning on should not be underestimated.  It is not just about people who are unjustifiably dismissed being able to get their jobs back, but also about the flow on impact on an employer’s willingness and confidence to dismiss and the compensation employees may expect to receive.  Suffice to say, the outcome will not be in favour of employees.

Before making this significant change to the law, therefore, consideration needs to be given to how much of an issue this really is.  Despite reinstatement being made a primary remedy in 2018, there are very few cases where it is actually ordered.  Since 2020 there have been only 31 cases where permanent reinstatement has been sought and the employee was successful in just 5 of these.

When assessing whether reinstatement is “practicable and reasonable” the authority and court consider a range of factors including whether the employee could return as a harmonious and effective member of the team, whether the relationship of trust and confidence is still intact and the potential for the reimposition of the employment relationship to be successful. 

Further, the Court of Appeal has said “practicability cannot be narrowly construed in the sense of being simply possible irrespective of consequence”. In this regard, whilst reinstatement is currently a primary remedy, it also has to be workable.

Whilst I act mainly for employers, I cannot support this policy. The authority and court can and do make sensible decisions about the practicability of reinstatement.  They do not generally force employers to take employees back in circumstances where the relationship is genuinely broken.  Conversely, effectively removing reinstatement as an option for employees will have a significant negative impact on their employment rights and bargaining power.

This article was originally published on thepost.co.nz 9 August 2023