Law: What is good faith?

Right, (*cracks knuckles*) let’s talk about the most important, but vague, but everywhere, concept that comes up every so often in New Zealand employment.   I’ll start with a definition, but get on quickly with what it actually means, most of the time, to people in the workplace.

Definitions and stuff

Good faith means acting honestly, openly and fairly in an employment relationship.  You have to active and constructive towards maintain a production relationship.  It’s about doing the right thing, being honest, and dealing with each other fairly.

or read the Act here.

Basically- It’s about not being an a@#%le.

It’s a relationship, not a contract, nor a short-term deal, nor servitude

Part of the problem explaining it is that it’s been fundamental to how we do things for so long (26 years so far in law, and arguably all the way back to 1894) that we are so used to it, it’s hard to spot.  It’s like trying to explain to you that New Zealand is a green place.

The best way to contrast it, is that employment is not just a contract.  It’s not a strictly business deal, like the one between you and: Apple, Netflix, OneNZ, your vehicle or property leases and so forth.  It’s more, much more, that just a distant exchange of cash for services.

Nor is it a quick deal between hustlers.  Employment is not a temporary arrangement of convenience between shady dealers, dodgy operators or opportunists, who (for the moment) recognise working together suits both parties (but not for long).

Employment used to be servitude; employment in Victorian times were still running on the fumes of serfdom and feudal vassalage, but those days are well gone.  It’s a relationship between people, between peers, between human beings who must treat each other like adults. If you find yourself directing them like you would your children, time for a rethink.

It’s not far off how NZers act anyway

Part of the reason it’s hard to pin down, is that New Zealanders (as a general rule) are reasonable, consensus-building, non-confrontational, and conflict adverse.  We don’t look to swindle, deceive, subjugate, dominate or coerce- any of those things that good faith was trying to stop.  Good faith fits well in NZ because we are pretty comfortable with acting in good faith.  It’s pretty rare that you ever find someone trying to ‘pull a swiftie’ on you at all, let alone in employment.

When does it come up? How does it play out?

Most people will go through their whole career with having to pay attention to good faith- it’s like the power supply- a fundamental of what makes things work in the background, but we don’t pay it any mind- until a power cut.

Accusations of not acting in good faith sometimes come up in disputes- when negotiations, or processes than may result in termination.  Sometimes people accuse each other of not acting in good faith.  Sometimes by the employee, rarely by the employer, often by a lawyer.  

What does this mean?   Are you now in legal risk?  This is a broad question with many different answers due the wide range of things you might (or might not) being doing wrong, but here’s the broad thrust of good faith.  The following are the ways that employers are accused of not acting in good faith, but remember that employees, or unions, can also not act in good faith.

Most of the time is emphasis, or general discontent. 

Emphasis

Emphasis added to a specific thing that the employee thinks is being done wrong.  For example, they think negotiations aren’t genuine, consultation is a shame, the employer is not listening, is not providing enough information.  There is a specific concern on the table, but the lack of good faith is added to emphasize their objection.

In short, you are doing a thing that they think is unfair, and doing this thing is a breach of good faith, a breach of your obligation to be fair.

General discontent

Alternatively, it’s an accusation of unfairness, without a specific concern.  The employee is struggling to put their finger what you should be doing, but they know they don’t like it, so they accuse it’s an act of bad faith.

What to do

If the situation is still ongoing, for either of the above, a good answer is:  pause, and ask, ‘ok, what do you want me to do differently?’  If good faith is an obligation to act to deal with each other fairly, then simply ask, ‘what you would like me to change from here so that you feel I AM treating you fairly?’  It is important to recognise that people may not know what should be happening, what it requires for things to be fair, but they do have an innate sense of fairness. 

If the situation has passed, and they are still employed, again have a dialogue about how things could be done better next time.  This may feel like an admittance, but communication can always be improved, and taking on feedback is evidence of good faith, not bad faith.

If the situation has passed and they don’t work for you anymore-well you’re likely in legal proceedings, so consult your lawyer.

How we can actually fail to act in good faith

The following are ways that employers can break this foundation of employment.  Generally these are not malicious, intentional, choices (‘mmwwahaahaah, I’m going to act in bad faith with this person’) but a failure to recognise the guardrail of good faith, or an indifference to checking. 

• Recklessness:  It suits the employer to just do it and hope it goes okay (better to ask forgiveness than permission).

• Conflict avoidance:  They want to avoid the conflict, they want to rush the outcome. They don’t like giving bad news, they don’t like consultation, they don’t like the accusations, so they’re just trying to through the pain as quickly as possible.

• Assumptions they already know it.  It’s a perpetual problem with management; the manager assuming the person already gets, already sees the situation the way they do.  Maybe if we are talking physical violence, theft, accidents, there’s no grey, no subjectivity.  But if it’s performance, attendance, conduct, most of the time the employee think what they are doing is okay, and the employers assumption that ‘we all know they’re no good at their job’ is unfounded.

So you need to slow down and engage

-          Slow down and take the time to talk,

-          Make it clear what you’re concerned about,

-          Stop and listen to their input with an open mind.

Overall, recognise that good faith is about dialogue between adults.  You don’t need to agree, but you need to hear, listen and think.