What is good faith in employment law?

Back to basics: What is good faith?

If you’ve been involved in any form of employment dispute, you will have heard the words “good faith” bandied around a fair amount. But what does it actually mean?

Good faith obligations are enshrined in section 4 of the Employment Relations Act. This section states that good faith:

“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”.

It is important to remember that these obligations flow both ways in an employment relationship – meaning they fall upon both the employer and the employee. All aspects of an employment relationship are informed by good faith. Parties should always be communicative, responsive and constructive in all interactions with one another.

 

The consequences of a breach of good faith

The Employment Court in Johnson v Chief of the NZ Defence Force made it clear that a breach of these obligations can be grounds for a personal grievance, stating that “a failure to comply with good faith obligations could found a disadvantage grievance where a fair and reasonable employer could be expected to comply with the law.” This means that it is more than just dealing nicely with one another – a failure to act in good faith can have serious ramifications.

 

The Court further noted that:

 

[78] “There are many ways in which disadvantage may arise. In my view, such a conclusion is reinforced by the overarching obligations of good faith which may fall for consideration when assessing whether a disadvantage grievance is established.”

and

[82] “The primary obligation is contained in s 4(1) which emphasises that parties to a relevant employment relationship must deal with each other in good faith; and goes on to state, without limiting that obligation, that parties must not – directly or indirectly – mislead or deceive each other or do anything likely to do so.”

 

If you have any questions or queries in relation to this topic, please get in touch with the Watermark team directly. We are happy to advise you.

Erin Drew

Solicitor