The Employment Court recently held that a dismissal for "incompatibility" based on an employee's confrontational and belittling behaviour at work was justified (Walker v ProCare Health Limited [2012] NZEmpC 90). The Court accepted that Ms Walker's "uncompromising and largely irrational behaviour" was the substantial cause of an irreconcilable breakdown of trust and confidence in the employment relationship.

While the requirements to lawfully dismiss on the grounds of incompatibility are still onerous, the decision is a welcome one for employers.

Generally, it is very difficult for an employer to justifiably dismiss an employee for incompatibility, for example, because their face does not "fit" with company culture, or their personality clashes with others. Incompatibility issues often develop over a period of time, through a snowballing effect of a number of seemingly minor incidents, as opposed to significant one-off incidents of misconduct which independently warrant disciplinary action.

Incompatibility can be a serious issue for employers, especially if it causes the work environment to become toxic. The Court's ruling in Walker provides employers with useful guidance on the seriousness of incompatibility required to justify a dismissal and the process an employer should follow.

Dismissal for incompatibility – what the law says

The test for determining whether a dismissal is justified (on or after 1 April 2011) is contained in s103A of the Employment Relations Act 2000 (ERA): "whether the employer's actions and how it acted were what a fair and reasonable employer could have done in all the circumstances at the time".

In order to justify a dismissal on the grounds of incompatibility, the onus is on the employer to establish that:

  • there was irreconcilable incompatibility; and
  • the irreconcilable breakdown in the employment relationship was attributable wholly or substantially to the employee; and
  • the employer effected the dismissal in a procedurally fair manner.

Practical tips for employers

Walker is a helpful case for employers dealing with serious incompatibility in the workplace, but should not be taken as a green light to dismiss an employee who is simply not well liked.

Before considering dismissal for incompatibility, an employer would be well advised to raise the concerns with the employee first and assess and implement any possible remedial steps that might resolve the disharmony. Possible options include:

  • Offering assistance, support and training to alleviate workplace stress.
  • Offering counselling and/or mediation, either through a private mediator or the Ministry of Business, Innovation and Employment, to assist with re-building relationships; and
  • Engaging an independent consultant, such as a workplace psychologist, to assess the cause of disharmony and provide recommendations for resolving it.

Should remedial steps fail, as part of any process for assessing incompatibility, the employer should inform the employee that it is considering termination for incompatibility and ask the employee to comment (having provided the employee with all relevant information). The employer is required to consider the employee's response before deciding the matter. Throughout the process, the employer should also provide the employee with an opportunity to have a support person present at all meetings.

Facts of the Walker case

ProCare employed Ms Walker for approximately two years initially as the management accountant and subsequently as the financial controller before terminating her employment for incompatibility.

The Employment Relations Authority upheld Ms Walker's unjustified dismissal claim, and awarded her $3000 for lost wages and $11,500 as compensation for hurt and humiliation. However, she subsequently filed proceedings in the Court challenging the Authority's determination and seeking $80,000 in lost wages and compensation.

ProCare employees attested that Ms Walker was "unpleasant and quite hostile" and "quite confrontational", and that she had "a very strong personality". They complained that her behaviour created conflict and tension in the workplace. Specifically, they referred to her:

  • making unnecessary rude and derisive remarks to and vitriolic comments about other staff members;
  • belittling other staff members to the point they were afraid of her;
  • behaving erratically and flying into rages;
  • sending undermining and offensive emails to other staff members, including "shouting emails" in red font with a series of exclamation marks; and
  • being uncooperative with the company's auditors.

ProCare attempted to resolve the issues by implementing a remedial action plan which was designed to address the breakdown of communication and re-establish relationships, reduce pressures and provide training. When these steps failed, ProCare initiated a formal process to review Ms Walker's employment on the grounds of incompatibility. ProCare met with Ms Walker and put the issues to her, however, she refused to accept that there was any incompatibility problem. Procare concluded that she was not going to change and decided to terminate her employment.

Judge Ford commented that the employment relationship had become "seriously incompatible" and that "the existence of irreconcilable incompatibility was quite overwhelming".

Such extreme cases involving a breakdown of the employment relationship as a whole are rare and unusual. Ultimately, an employer must be able to show that there has been an irreconcilable breakdown of trust and confidence as a result of the employee's behaviour in order to justify a dismissal.