Until 1973, the only avenue by which employees could challenge termination of employment was the common law concept of wrongful dismissal. At the time, this provided for a right to damages representing the appropriate notice period under the contract. If the employer had provided contractual notice when dismissing the employee, or if the circumstances warranted dismissal without notice, then no common law action was available. In 1970, a statutory grievance procedure provided for grievance committees to deal with wrongful dismissals where workers were covered by awards, to channel dismissal disputes. Such disputes were becoming a prominent cause of strikes at the time. In contrast to the common law remedies, under the statutory grievance procedure, reinstatement could be ordered.

1973: Beginnings of Modern Employment Law

In 1973, the wording of the statutory grievance procedure was changed, so that workers covered by awards could challenge dismissals which were “unjustifiable”. This change broadened the scope of inquiry for the Court beyond whether proper notice had been given. In particular, the courts construed the word “unjustifiable” as requiring that the employer had demonstrated a good substantive reason for dismissal and had followed procedural fairness in carrying out the dismissal. Remedies were widened to include “compensation”, which came to cover compensation for factors such as distress. At this time, damages for distress arising from dismissal were not recoverable at common law. Because of this divergence in remedies, when the personal grievance provisions were repeated in the Labour Relations Act 1987 it was widely perceived that union members (who had access to the grievance procedure) were in a more favourable position than other employees (who were confined to the common law remedy). During the 1980s the two avenues for challenging termination did grow closer together. Developments in the common law - led by the Court of Appeal - began to parallel the component parts of “unjustifiable dismissal”. In particular, the Court recognised a term implied into all contracts of employment requiring procedural fairness and accepted that damages could be awarded for injury to feelings resulting from breach of an employment contract. However, there remained some significant differences.

Employment Contracts Act 1991

The Employment Contracts Act 1991 then extended the personal grievance procedure to all employees. Parliament left the common law action for breach of contract (including wrongful dismissal) intact as an alternative. Most employees who were dismissed opted for the grievance procedure. Employees who chose the common law action tended to fall into two main sets of circumstances. First, the employee might have missed the strict 90-day time limit for submitting a grievance introduced by the Employment Contracts Act (the common law time limit was 6 years). Secondly, there might have been some other perceived advantage in proceeding through the common law (for example, in Ogilvy & Mather [1995] 2 ERNZ 398, Casey J suggested that those on high incomes would do better to claim for damages at common law than to bring a grievance, although Cooke P disagreed). By this stage, the courts had also developed a separate action for damages for injury to feelings associated with wrongful dismissal. Some of these actions had led to high awards of damages, essentially for breach of the implied term as to “trust, confidence and fair dealing”.

Employment Relations Act

An official review of the Employment Contracts Act in 1998 recommended that the common law action be abolished and that all dismissal cases should be handled through the personal grievance provisions. This proposal was finally implemented in the Employment Relations Act. Under s 113 of the Employment Relations Act, a challenge to any aspect of a dismissal may only be brought as a personal grievance. The effect seems to be that an employee can still sue at common law for damages for breach of an implied contractual term (including damages for distress) so long as that breach is not an aspect of a dismissal. But as soon as a breach of this type can be categorised as being an aspect of a dismissal, it must be dealt with as a personal grievance. The grounds on which a personal grievance may be brought are set out in s 103 of the Employment Relations Act. These are:

• unjustifiable dismissal.
• unjustifiable disadvantageous action affecting an employee’s terms and conditions.
• discrimination on a variety of grounds, including those set out in the Human Rights Act and certain grounds relating to union membership and activity.
• sexual harassment.
• racial harassment.
• duress in relation to union membership. breach of special protection for specified groups of employees (for example cleaners) when an employer’s business undergoes restructuring.
• Disadvantage by the employment agreement does not have agreed hours or being disadvantage for refusing to undertake certain work failing to give appropriate notice of cancelation of a shift.
• engaged in adverse conduct for a prohibited health and safety reason prohibits coercion or inducement.