Monday, March 13, 2006

Leile Sims: High-fidelity in the office

Parliament's privileges committee is considering whether to charge TVNZ with contempt. TVNZ had censured Ian Fraser, then its chief executive, for his alleged serious misconduct in giving evidence critical of TVNZ to a parliamentary select committee enquiry. (TVNZ has since apologised for, and withdrawn, its censure of Fraser.) But TVNZ has also been criticised for interfering with Fraser's freedom of speech, and for trying to keep its internal workings secret.

Under Parliament's Standing Orders, it is a contempt to "intimidate, prevent, or hinder" a committee witness from giving evidence. The Standing Order is similar to the offence of criminal contempt, which is committed by doing anything that obstructs or interferes with the administration of justice. In an employment context, it is a criminal contempt to discipline, or to threaten disciplinary action against an employee, for having given evidence against the employer. And the "whistleblowing" legislation - the Protected Disclosures Act - prohibits employers from taking disciplinary action against employees who make statements under that act.

Have employers any control over what their employees may say about them? Employers can control employees' disclosure of information obtained in the course of their employment. This is useful when it comes to protecting confidential information or trade secrets, but may not provide protection from the employee's more generally critical statements about the employer. The answer instead lies in the implied duty of fidelity that exists in every employment relationship.

Fidelity essentially means loyalty. During employment, employees are required to be loyal to their employers. That extends to employees having an eye for their employer's interests, and not acting contrary to them. Whether employees' criticisms of their employers breach the duty of fidelity is to be determined by the particular factual circumstances of the statement, and the nature of the employment relationship concerned. But a breach of fidelity, as going to the heart of the employment relationship, is likely to amount to conduct that justifies dismissal or other sanction.

Examples are legion. The Employment Tribunal accepted that a local council was entitled to be aggrieved by its employee's newspaper publicity, critical of the council. The tribunal said the employee, a sewer worker, had "attempted to tiptoe through the tulips of [free] expression, but forgot he had his gumboots on".

In another case involving a council employee (this time expressing distaste at the impending demise of her position via statement at a public meeting) the Employment Court commented that it is open for employers to rule that statements in its name can only be made by designated officers. And that a breach of such a rule could legitimately lead to disciplinary action as long as the rule's scope and intent is clear.

The Court of Appeal has held that it is the duty of an employee to report to their employer a third party's approach contrary to the employer's interests, to report any criticisms made of the employer, and to work with the employer to rectify any perceived shortcomings.

Except in circumstances in which the statements are protected (for example, because they are made in evidence, or under the whistleblowing legislation), employers can rely on their employees' duty of fidelity to avoid employees making statements contrary to the employer's interests.

Dishonesty or bad faith is not a necessary element of a breach of the duty of fidelity, so negative statements made by the employee need not be false or malicious to breach the duty. The duty of fidelity is a higher threshold than the good faith obligations imposed on employers and employees under the Employment Relations Act.

However, employees may pursue their own legitimate self-interest, even where that is contrary to the employer's interests. It will be rare, though, that legitimate self-interest permits open criticism of the employer, except in connection with the employee's own case against it. An employer could reasonably expect and require that its employees not lend their support to third parties' complaints against the employer, or otherwise act in a manner contrary to the employer's interests. Indeed, overseas there is a move towards more onerous fidelity obligations on employees exercising a high level of control within the employer's business. Such employees are viewed as having equitable obligations of loyalty, requiring that they positively act with a view to advancing the employer's best interests.

The result is that, except in formal circumstances, employees may not subject their employer's internal affairs to public scrutiny. Employers are entitled to prevent and punish their employees' other public criticisms of them, as being inconsistent with their employees' obligations of loyalty. Employers are entitled to restrict public knowledge of their internal affairs; employers may interfere with their employees' freedom of speech.

* Leile Sims is a solicitor in Chapman Tripp's Wellington employment law team. Her practice also includes wider corporate and commercial litigation.

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