When an employer and employee enter into an employment agreement, there is a required duty of good faith that must exist between the parties. This means that both the employee and employer must act in a positive and constructive manner during the employment relationship. Let’s dig deeper into the duty of good faith and consider some situations when it’s necessary to follow it.
What Is The Duty of Good Faith?
The duty of good faith is at the heart of employment relations. It’s the unspoken understanding that both the employer and employee are working towards the same goal: a happy and productive working relationship. At its core, acting in good faith is about being honest and upfront with each other, being responsive and communicative, and not doing anything that would mislead or deceive each other. Acting in good faith means being transparent about any decisions and information that might impact an employee’s future with the employer. It also means giving employees a chance to provide feedback on that information before making a decision that may affect the employee’s employment.
Without good faith, the employment relationship can quickly degenerate into a power struggle, with each side looking out for its own interests rather than working together for the common good. Of course, there will always be disagreements and conflicts in any workplace – that’s just part of life. But when both sides keep good faith in mind, they’re more likely to resolve their differences constructively.
3 Common Circumstances In Which The Duty of Good Faith Must Be Carried Out
Section 4(4) of the Employment Relations Act 2000 outlines a non-exhaustive list of circumstances in which the duties of good faith must be carried out. Here’s a closer look at a few of them:
1- Collective bargaining
A collective bargaining process is when an employer and a group of employees/unions negotiate working conditions. To act in good faith, both parties have to bargain in a fair and reasonable way, with the intention of reaching an agreement. The duty of good faith is there to make sure that the terms and conditions of the employee’s working arrangements are negotiated efficiently and effectively and to prevent one party from taking advantage of the other. A breach of this duty can result in serious consequences, such as a loss of trust and confidence between the parties, delays in negotiations, and even legal action.
2- Consultation between employers and employees about an individual employee
When it comes to consultation between employers and employees about matters that affect an individual employee, for example, a variation in an employee’s duties or hours of work, good faith is essential to ensure that the consultation process is constructive and meaningful. Both parties should be active, constructive and productive in their discussions about the matter, and should not act in a way that could be seen as deceptive or misleading. If the parties do not act in good faith during a consultation process, their relationship is likely to suffer and it may lead to frustration and mistrust. It’s not always easy to have good faith in the workplace, but it’s essential so that healthy employment relationships can be maintained.
3- Making employees redundant
Letting employees go is never an easy task, but it’s important to remember that employers still have a duty of good faith when making redundancies. Before any decision is made, employees affected by the proposed decision should be provided with the information that is relevant to the continuation of their employment and must have an opportunity to comment on it. Failure to do so could lead to personal grievances for unfair dismissal. Of course, this doesn’t mean that you should keep people in jobs that no longer exist – but as an employer, you do need to be careful with the restructuring processes you follow and how you go about making redundancies. This is why it’s always a good idea to seek professional legal advice from an NZ employment lawyer before taking any action.
The Duty of Good Faith Is The Backbone of Every Employment Relationship
All good employment relationships are built on the duty of good faith, which not only helps maintain a healthy working environment but also improves the employer’s organisation as a whole. So, it’s important to keep the duty of good faith in mind always.
Have a read of Edwards Law’s ‘The Ultimate Guide To Employment Law’ blog post or contact their friendly team of experienced NZ employment lawyers if you are looking to discuss what the duty of good faith means for your business.