Fair Play at Work: What "Good Faith" Actually Means (and What Happens When You Break It)

https://youtu.be/3VVm4sEA05g

Under the Employment Relations Act 2000 (ERA), the duty of good faith is the absolute bedrock of New Zealand employment law. It goes far beyond simply "following the letter of the law" or avoiding blatant lies.  

Good faith requires both employers and employees to build and maintain a productive, honest, and communicative working relationship.  

What Does "Acting in Good Faith" Mean?

Section 4 of the ERA defines good faith as requiring both parties to be active and constructive in establishing and maintaining a productive relationship. It means being responsive and communicative, and strictly avoiding any conduct that is misleading or deceptive.  

It applies throughout every stage of employment, from hiring, daily duties, and performance reviews, to disciplinary actions, restructures, and dismissals.  

What Employers Must Do

1. Share Relevant Information: Before making any decision that could adversely affect an employee’s job (such as a restructure, performance concern, or disciplinary issue), the employer must provide all relevant information to the employee.  

2. Consult Genuinely: Employers must give employees a real opportunity to provide feedback on that information before making up their mind.  

3. Be Transparent and Timely: Communicate directly and avoid withholding key details or keeping staff in the dark.

   
   

   

What Employees Must Do

1. Be Honest and Upfront: Provide truthful information about qualifications, attendance, illness, and work performance.

2. Raise Issues Promptly: Express concerns, grievances, or safety issues directly to the employer rather than undermining the business.

3. Maintain Loyalty and Trust: Avoid doing things outside or inside work that directly undermine the employer’s business interests, trust, or dynamic.

   
   

   

Practical Examples Across Industries

Industry	Acting in Good Faith	NOT Acting in Good Faith
Construction	Employer: Giving 2 weeks' notice of a proposed site closure and asking for worker input on reallocation. Employee: Immediately reporting a site safety incident or broken gear rather than hiding it.	Employer: Cutting a worker's hours suddenly without consultation. Employee: Calling in sick to go work a cash job at a competing residential build.
Nursing & Healthcare	Employer: Providing shift schedule proposals early and accommodating nurse feedback on fatigue management. Employee: Transparently reporting a medication administration mistake immediately to the charge nurse.	Employer: Unilaterally altering patient to nurse ratios without consulting nursing staff or unions. Employee: Falsifying patient vitals records to cover up a missed check.
Teaching	Employer: Informing a teacher of student progress complaints and giving them a fair chance to respond before acting. Employee: Following curriculum guidelines honestly and raising classroom challenges with leadership.	Employer: Deciding to remove a Head of Department behind closed doors, then inventing performance complaints later. Employee: Taking sick leave to run a private paid tutoring business during school hours.
Retail	Employer: Consulting rostered staff before changing core roster hours or store opening times. Employee: Notifying management as early as possible if unable to cover a shift due to sudden illness.	Employer: Reducing an employee’s hours down to zero as a passive way to push them into resigning. Employee: Giving friends unauthorised staff discounts or taking store merchandise.
Administration	Employer: Providing full written details and context if software upgrades might make a role redundant. Employee: Maintaining client confidentiality and accurately logging working hours.	Employer: Restructuring an admin team under the guise of "cost cutting" when the real goal is firing a specific staff member. Employee: Claiming overtime hours while doing personal online shopping.

What are the Legal Penalties for a Breach?

Under Section 4A of the Employment Relations Act, the Employment Relations Authority (ERA) or Employment Court can order financial penalties against a party that breaches the duty of good faith.  

Maximum Statutory Penalties for Good Faith Breaches:Up to $20,000 for a company.  Up to $10,000 for an individual (e.g., an individual employee or individual employer).  

How Penalties Work in Practice

• Payment Allocation: The Authority or Court decides who gets the penalty money. Often, a portion is paid to the Crown and a portion is awarded directly to the aggrieved party to compensate for the breach.  

• Personal Grievance Disadvantage: Beyond formal Section 4A penalties, a breach of good faith by an employer almost always grounds a Personal Grievance for Unjustifiable Disadvantage or Dismissal. This can result in further awards for loss of earnings, plus compensation for humiliation, loss of dignity, and injury to feelings (under Section 123(1)(c)(i)).  

Real-Life Case Analysis

Case 1: Employee Fraudulent Sick Leave and Social Media Evidence

The Scenario: An employee claimed a workplace injury, obtained a medical certificate under false pretences, took paid sick leave, and was subsequently caught on social media participating in strenuous physical exercise and working another job.

Why This Breaches Good Faith:

1. Deception and Dishonesty: Good faith requires absolute honesty. Misleading both the Doctor and the employer to obtain medical leave destroys the core duty of trust and confidence.  

2. Fraudulent Claim of Work Injury: Claiming a non existent work injury falsely exposes the employer to health and safety obligations, ACC claims, and increased levies under false pretences.

3. Dual Employment / Incompatible Activity: Engaging in alternate employment and heavy exercise while declaring oneself medically incapacitated for work is a direct conflict of interest and deceptive conduct.

Practical Outcome: This constitutes serious misconduct and a severe breach of Section 4. An employer facing this must still follow a fair procedure (presenting the social media evidence to the employee and giving them a chance to explain), but if unsubstantiated, it warrants immediate summary dismissal and potential penalty claims against the employee.

Case 2: Employer Running a "Sham" Disciplinary Process

The Scenario: An employer wanted to reduce headcount quickly. Instead of conducting a genuine redundancy consultation process, they concocted or exaggerated performance issues to run a sham disciplinary process to dismiss the employee.

Why This Breaches Good Faith:

1. Pre determination and Ulterior Motive: Good faith requires an employer to act openly, honestly, and with an open mind. Fabricating or rushing a disciplinary process to bypass redundancy rights is deceitful.  

2. Denial of Information and Genuine Consultation: If a role is genuinely redundant, the employer is legally obligated to consult, share financial/operational rationale, and consider alternatives to job loss.

3. Breach of Natural Justice: Using disciplinary procedures as a smokescreen denies the employee a fair hearing or a legitimate opportunity to defend their record or address performance goals.

Practical Outcome: The Employment Relations Authority will see straight through "sham" disciplinary. The employee would easily win an Unjustifiable Dismissal Personal Grievance, receiving lost wages, substantial compensation for emotional distress, and the employer could face additional Section 4A good faith penalties.