What does good faith require?
By Sarah Moon
13 November 2023
What do you think about when you hear “good faith obligations”? You have likely heard it applies to all employment relationships and may be thinking of the ideas below, all of which are correct:
- Be completely honest – don’t mislead or deceive;
- Involve people as early as possible in matters that might affect them;
- Keep an open mind and be prepared to change your opinion on things;
- Communicate well (and early), with the right information;
- Work constructively to solve problems; and
- Raise issues quickly – don’t let things fester.
However, in practice, answering the headline question can be difficult – especially when relationships are breaking down and stress levels are high. This is where expert advice is essential to help ensure you stay on the right side of the law.
A recent example
Over the last few years, we have assisted a large local employer with the headline question in the Employment Relations Authority and the Employment Court. The employer had a collective agreement with a union. Legislation imposes good faith obligations on the parties and their bargaining agents. Unfortunately, working relationships between the union and the employer were incredibly strained. The Employment Relationships Authority characterised the situation as a “relationship of mistrust”. This made acting in “good faith” incredibly difficult when everyone had to work together to agree a new collective agreement.
Eventually, as indicated, the Employment Relations Authority became involved. Both the union and the employer alleged the other breached their good faith obligations during negotiations for the collective agreement. The Authority found in our client’s favour, finding the union breached its good faith obligations by:
- raising a pay claim late. This breach was then compounded by the union (wrongly) insisting it was not raised late; and
- refusing to deal with a member of the employer’s negotiating team and trying to choose who it met with to finalise the deal.
Despite the union’s various allegations (over 10 between the two hearings), the Authority agreed that the employer did not breach any of its good faith obligations. This was despite the robust approach the employer used in negotiations. Importantly, the employer did not fight fire with fire – continuing to show good faith, even when the other side didn’t.
As requested by our client, and because of the union’s breach of good faith, the Authority fixed the terms of the collective agreement, imposing contractual obligations between the union and the employer. This was only the second time the Authority had ever fixed an agreement.
Dissatisfied, the union took the matter to the Employment Court. The hearing was held in Nelson in February 2023 over several days. The Employment Court agreed with the Employment Relations Authority. Again, it was found that the union breached its good faith obligations, and the employer did not. The fixed agreement continued to apply.
This example highlights the importance of engaging with professional advisors early. Specialist advisors assist you to ensure that the strategy and methods you are thinking of using will still be considered appropriate later (and even in the objective view of an Authority Member or Judge, should matters escalate).
Still have questions?
Contact Pitt & Moore if you are unsure how to show good faith in a tricky employment situation. We are experts in good faith, with five local specialist employment lawyers who are dedicated to helping Nelson-Tasman people and organisations.
Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
