Court of Appeal confirms unjust dismissal of employees without proper consultation

Employer's failure to consult before service transfer breached good faith, court rules

Court of Appeal confirms unjust dismissal of employees without proper consultation

The Court of Appeal affirmed the Employment Court's ruling that a birthing centre had unjustifiably dismissed its employees without proper consultation or redundancy payments. 

In Birthing Centre Limited v Matsas [2024] NZCA 139, Birthing Centre Ltd (BCL) has sought leave, challenging an Employment Court ruling that upheld a decision by the Employment Relations Authority (ERA). The original decision involved compensation claims made by former employees of BCL, following the transfer of birthing services at the Te Papaioea Birthing Centre (TPBC) to the MidCentral District Health Board (MDHB). 

TPBC was previously operated by BCL and owned by the Wright Family Foundation. However, in April 2019, BCL approached MDHB for increased funding, and by August 2019, the possibility of transferring TPBC’s services to MDHB emerged. Confidentiality was crucial to MDHB's plan.  

On 11 December 2019, a memorandum of understanding between the Wright Family Foundation and MDHB confirmed that MDHB would manage the birthing services while leasing the premises from BCL. BCL employees learned of the transfer through their union and later received employment offers from MDHB. 

Despite transitioning to employment with MDHB, five midwives filed grievances, claiming unjustified dismissal. They argued that BCL had breached the duty of good faith under s. 4 of the Employment Relations Act 2000 and had failed to provide redundancy compensation or payments in lieu of notice. 

The Employment Relations Authority (ERA) ruled in favour of the midwives, finding that BCL had terminated their employment without proper consultation. It concluded that BCL’s failure to consult before the transfer breached the good faith provisions of s. 4(1A)(c). Moreover, BCL did not give formal notice of termination or offer redundancy compensation, which violated the employees' contracts. 

BCL was ordered to compensate the midwives for emotional harm and provide additional wages. The ERA rejected BCL's defence that confidentiality justified its actions, finding that the obligation to consult should have taken precedence. The Employment Court upheld the ERA’s findings, confirming that BCL had breached good faith obligations and was required to provide notice of termination or compensation. 

BCL’s appeal focused on critical interpretations of "good faith" obligations under s. 4(1A) and 4(1B) of the Employment Relations Act. The primary contention revolves around whether BCL had a duty to consult its employees about the transfer of TPBC’s operations to MDHB, despite the confidentiality required by MDHB. The Employment Relations Authority and Employment Court concluded that BCL breached the duty of good faith by not consulting the employees earlier, despite the confidentiality clause. They pointed out that BCL's failure to provide early disclosure was unjustified, setting a precedent for balancing confidentiality with the obligation to inform and consult employees in significant employment decisions. 

The Court of Appeal was tasked with determining whether the questions raised by BCL significantly impact the broader legal landscape and warrant further examination. This involved assessing whether the Employment Court’s decisions were based on a correct understanding and application of the law or if a significant misinterpretation affected the outcome of the case. 

Ultimately, the Court of Appeal dismissed Birthing Centre Ltd's application for leave to appeal, concluding that the Employment Court had correctly applied the relevant provisions of the Employment Relations Act 2000. The Court of Appeal agreed with the Employment Court's interpretation and rejected BCL's challenges on questions of law. The court found that the Employment Court's decisions were well-grounded in law and evidence. Thus, it upheld the previous ruling that BCL had unj

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