Smoke, Mirrors, and employment at will

While right-wing libertarians won most battles in the 1990-1991 Employment Contracts Act reforms they lost the one that was perhaps most central to their version of labour law – employment at will. Not only did they lose that battle, they saw the right to take a personal grievance significantly extended to cover all employees, rather than only union members.

This setback, to put it mildly, made the libertarian right apoplectic. “Flexibility” of labour (or more accurately the ability of employers to hire and dispense of workers without restraint) was at the heart of the libertarian vision and the failure to achieve this goal was not taken well. The mouthpiece for the new-right, the Business Roundtable, published numerous papers that sought to justify employment-at-will, and among others the libertarian law and economics professor, Richard Epstein, then at Chicago, became a frequent visitor to Aotearoa New Zealand. He was particularly critical of “The Judges Who Chip Away at the Freedom of Employment Contracts” (as one seminar was entitled). This broad theme is of course a somewhat constant if misguided, theme from the New Zealand Initiative (NZI).

Attacks on the specialist Employment Court for allegedly not properly re- applying the unchanged personal grievance provisions verged on the unhinged. Unhinged in that the critics seemed to think the courts should do the job that Parliament had failed to do – get rid of personal grievances. This attack had some impact over time with the increasingly conservative and law and economics influenced Court of Appeal taking an increasingly narrow and conservative approach to the personal grievance provisions from the mid-1990s.

The current attack on personal grievances, heavily influenced by the successor to the Business Roundtable, the NZI, should come as no surprise. Indeed the proposal to strip higher paid employees of any job security was foreshadowed in a paper by the NZI’s current chair, Roger Partridge, written in 2021. In Nothing Costs Nothing: Why unjustified dismissal procedures should not apply to the highly paid Partridge argued that highly paid managers should not enjoy employment security essentially because "economic theory" regarded the inability to dismiss as negatively affecting productivity: He stated: But nothing costs nothing. Unjustified dismissal protection comes at a cost. Employees receive lower incomes. Work is put at risk. And society is poorer due to the adverse effects of unjustified dismissal laws on productivity.

Partridge did concede that No one wants vulnerable workers being unjustifiably dismissed.

Before moving on the meaning of “employment-at-will” should be made explicit. It is largely a United States concept that means that an employer is free to dismiss an employee for no or any reason and without notice. The employee’s job security literally depends on the will of the employer. Its impact has recently been illustrated by the mass of dismissals of employees who dared to make negative comments about Charlie Kirk or who made negative comments relating to Israeli actions in Gaza.

English common law supported a modified version of this principle – an employer was free to dismiss without reasons but a contractual period of notice had to be observed or payment in lieu of notice given.

Somewhat helpful if the notice period was three months, less so if an hour or a day as was far from uncommon.

This was the situation in New Zealand prior to 1973. The major remedy for an unjustified dismissal before that time was industrial action – indeed the main reason for introducing personal grievances was the number of strikes over dismissals, not any particular concern about employees.

Which brings us to the amendments proposed in the current Employment Relations Act Amendment Bill. While not introducing employment-at-will per se, which politically would have been a highly contentious step, the Coalition is attempting to achieve the same result by smoke and mirrors. 

First the reforms will strip higher paid employees (those earning over $180,000) of job protection. This will affect many beyond managers including significant numbers of skilled professionals. Such employees clearly will soon have no legal expectation of fair treatment, or indeed be able to do anything else that might irritate an employer.

Second the legal risk associated with bringing a personal grievance will increase significantly. More on this in a later post but it might be noted that in 2013 unfair dismissal claims in the United Kingdom declined dramatically, by 66-70 percent. This was not due to a change in the law or an epiphany by British employers who ceased treating employees unfairly. Rather it was caused by a political decision to substantially increase Employment Tribunal fees. A Minister could, with hand on heart, could declare that workers still had clear and unchanged protection against unfair dismissal. Workers could see their rights – but they had become illusory - the cost of utilising them had become unaffordable.

The tactic of raising the costs of access to justice is of course nothing new, it is a standard procedural technique by deep-pocketed litigants. What is concerning is the use of such tactics as a matter of government policy.

Thirdly the Minister has begun to replace members of the Authority to ensure “that the right people are appointed.” A cynic might see this as stacking the Authority especially given the Minister’s expressed wish to see a reduction in the value of awards given her claims that Employment Relations Authority members believed “money grows on trees”. A comment that earned her a rebuke from the Attorney-General.

I will return to the problems posed by the Bill in a future post but it should be clear that the Bill marks a major attack on the economic security and other rightd of all working people.