When a Flawed Employment Investigation Led to Injustice
Introduction
The story of Mr Thomas P is a reminder that even well-meaning employers can make serious mistakes if they don’t follow a fair and impartial process when investigating misconduct.
Mr P was a loyal and hardworking employee at Coin Total Wellington Limited. When stock went missing, he suddenly found himself accused — and later dismissed. The company acted quickly, relying too heavily on internal information without ensuring that the process was fair or that the investigation was independent.
Tragically, Mr P was arrested in front of his children, an event that deeply affected him and his family. The Employment Relations Authority (ERA) found that he had been unjustifiably dismissed and disadvantaged, and awarded him compensation for lost wages and injury to feelings.
Procedural Fairness When Investigating Misconduct — And Why It Matters
When serious allegations arise in the workplace, employers must do more than simply seek the truth — they must ensure the process used to find it is fair, transparent, and impartial.
Procedural fairness means:
– Gathering information objectively;
– Giving the employee a real chance to respond;
– Avoiding bias or conflicts of interest; and
– Keeping an open mind until all evidence is heard.
In this case, Coin Total’s internal inquiry fell short. The manager leading the process had their own involvement in the stock control issues, which created a conflict of interest. The employer did not realise this at the time, but by allowing a potentially compromised person to investigate, the fairness of the process was lost. Even unintentional procedural failures can lead to unjust outcomes — and to findings of unjustified dismissal.
The Coin Total Story — How It All Went Wrong
Stock discrepancies were discovered, and the company moved quickly to identify who was responsible. Mr P became the focus of the investigation. Unfortunately, the process was led internally and without proper checks or oversight.
He was suspended and later dismissed without a genuine opportunity to explain or challenge the evidence. Only later did it become clear that the situation was more complex than first believed, and that another employee’s actions had heavily influenced the decision to dismiss. By then, the damage was done — to Mr P’s livelihood, reputation, and emotional wellbeing.
What Are an Employee’s Legal Rights?
New Zealand employment law provides every employee with the right to:
– Be treated fairly and respectfully;
– Be given clear information about any allegations;
– Have a genuine opportunity to respond before decisions are made; and
– Expect an impartial investigation, free from personal conflicts of interest.
These rights arise from two key parts of the Employment Relations Act 2000:
– Section 4 — The Duty of Good Faith, and
– Section 103A — The Test of Justification.
Together, they form the backbone of fairness in any disciplinary process.
Why Good Faith Matters
Under section 4, both employers and employees must act in good faith, meaning they must be active, open, and constructive in their dealings.
Good faith goes beyond honesty — it requires employers to communicate clearly, seek facts objectively, and take steps to ensure the process is fair from start to finish. Coin Total did not act maliciously, but by relying on incomplete and biased information, it failed to meet this standard. Good faith requires diligence as well as decency.
The Section 103A Test — What a Fair Employer Would Do
Under section 103A, the ERA considers whether the employer’s actions were what a fair and reasonable employer could have done in all the circumstances.
A fair employer would have:
– Ensured the investigation was independent;
– Taken time to gather all relevant facts;
– Given the employee a meaningful chance to respond; and
– Considered whether there were other explanations before deciding on dismissal.
Coin Total’s process, while perhaps well-intentioned, fell short of this legal standard.
What Coin Total Got Wrong
The ERA found that Coin Total’s investigation and dismissal process did not meet the requirements of fairness or good faith. The company:
– Relied on conflicted internal information;
– Failed to properly test the allegations;
– Did not provide Mr P with adequate opportunity to respond; and
– Made a premature decision to dismiss.
Because of these failings, Mr P was found to have been unjustifiably dismissed and disadvantaged, entitling him to lost wages and compensation for humiliation and injury to feelings.
Lessons for Employers
The lesson for employers is clear:
✅ Always ensure independent and impartial investigations.
✅ Don’t rush decisions — take time to gather the facts.
✅ Follow a fair and transparent process, even when emotions run high.
✅ Document every step and check for conflicts of interest.
Procedural fairness protects not only employees but also the reputation and integrity of the business.
Get Expert Advice from Resolve Legal
If you’re an employer facing misconduct or theft by employees in your workplace, don’t go it alone. Get advice before you act.
At Resolve Legal Employment Law, we help employers carry out investigations that are fair, lawful, and defensible — protecting your people and your business.
Call 021 242 3200 or emails us direct info@employmentlaw.co.nz
