Unjustified Dismissal NZ: What Every Manager and Employee Must Know

In New Zealand, an unjustified dismissal occurs when an employer terminates an employee's employment without a valid reason or without following a fair process. This is one of the most common personal grievances raised under the Employment Relations Act 2000 (ERA). Understanding the legal tests and time limits is critical for both frontline managers and employees.

What Counts as a 'Fair and Reasonable Employer'?

Section 103A of the ERA 2000 provides the test for justification. The Employment Relations Authority (ERA) and Employment Court ask: “What would a fair and reasonable employer have done in all the circumstances at the time the dismissal occurred?” This is an objective test, not based on what the particular employer thought was fair.

The test includes four mandatory procedural steps under s 103A(3):

• Sufficient investigation: The employer must fully investigate the allegations before making a decision.
• Raise concerns: The employer must clearly tell the employee the concerns and give them a chance to respond.
• Consider the response: The employer must genuinely consider the employee's explanation.
• Provide a reasonable opportunity: The employee must have a reasonable opportunity to be heard, including representation if requested.

Even if the employer fails one of these steps, the dismissal may still be justified if the failure was minor and did not result in unfairness (s 103A(5)). However, this is a high bar — the employer must show that no reasonable employer would have acted differently.

Substantive Justification: The Reason for Dismissal

The reason for dismissal must be one of the following under the ERA and relevant case law:

• Misconduct: Serious or repeated breaches of company policy (e.g., theft, dishonesty, harassment).
• Poor performance: Genuine inability to meet performance standards after proper support and warnings.
• Redundancy: Genuine business restructuring, provided the selection process is fair and not a pretext for targeting an individual.
• Incapacity: Medical or other incapacity that makes the employee unable to perform their role, after reasonable accommodation.

If the employer cannot prove the reason is genuine and sufficient, the dismissal is unjustified.

The 90-Day Time Limit for Personal Grievance

Section 114 of the ERA 2000 requires an employee to raise a personal grievance within 90 days of the dismissal (or the date the employee became aware of it, whichever is later). The grievance must be raised in writing with the employer. If the employee misses this deadline, they can apply for leave to raise it out of time, but the ERA will only grant this if exceptional circumstances exist (s 115).

For managers: ensure you document the date of dismissal and any grievance raised. If you receive a grievance after 90 days, you can object on the basis of the time limit.

Remedies for Unjustified Dismissal

If the ERA or Employment Court finds the dismissal was unjustified, the employee may be entitled to one or more of the following remedies under ss 123–128 of the ERA 2000:

• Reinstatement: The primary remedy. The employee must be offered their job back (or a comparable role) unless it is impracticable (s 125).
• Compensation for humiliation, loss of dignity, and injury to feelings: Up to $50,000 in recent cases, but typically $5,000–$25,000 depending on severity.
• Lost wages: Reimbursement for wages lost as a result of the dismissal, up to a maximum of three months' ordinary time remuneration (s 128).
• Contribution reduction: If the employee contributed to the situation (e.g., by serious misconduct), the remedies may be reduced by up to 100% (s 124).

Mediation vs Employment Court

Most personal grievances are resolved through mediation via the Ministry of Business, Innovation and Employment (MBIE) Mediation Services. Mediation is voluntary, confidential, and free. If mediation fails, the employee can take the case to the Employment Relations Authority (ERA), which is a lower-cost investigative body. Appeals from the ERA go to the Employment Court, and then to the Court of Appeal and Supreme Court on points of law.

For managers: always attempt mediation first. It is faster and cheaper than litigation. If you have a clear case, the ERA can issue a binding determination.

Practical Tips for Frontline Managers

• Always follow your own policies and the ERA's procedural steps.
• Document every step of the process — investigation notes, meeting minutes, warnings.
• Give the employee a genuine opportunity to respond before making a final decision.
• If in doubt, seek legal advice or use a tool like ShiftScript to check your process against your own policies.

Staff can ask ShiftScript questions like this and get the answer cited from their own uploaded policies — shiftscript.nz/portal/

Frequently Asked Questions