The ERA 2000 Good Faith Obligation: What Every NZ HR Manager Needs to Know

The good faith obligation under the Employment Relations Act 2000 (ERA 2000) is the most important — and most misunderstood — concept in New Zealand employment law. For HR managers running a restructure, understanding it is not optional. Failure to meet the obligation is the most common basis for unjustified dismissal claims, even where the restructure itself is entirely genuine.

What Does Good Faith Mean Under the ERA 2000?

Section 4 of the ERA 2000 defines good faith as being:

Active and constructive in maintaining a productive employment relationship

Responsive and communicative about information relevant to the employment relationship

Honest and open with each other

These are not vague aspirations. They are statutory obligations that courts and the Employment Relations Authority (ERA) take seriously.

The Obligation Is Mutual

Good faith runs both ways. Employers and employees both owe each other the good faith obligation. In practice, however, most disputes arise from employer conduct during restructures, because the employer is the party initiating the change.

Section 4(1A): The Information Obligation

Section 4(1A) of the ERA 2000 goes further for restructures specifically. Before making a decision that may affect employees, employers must:

Provide information about the proposed decision

Give employees a reasonable opportunity to comment on that information

Consider those comments before making a final decision

This is not a tick-box exercise. The ERA has been clear that employers must genuinely consider employee feedback. A consultation process where the decision is already made before consultation begins is not good faith — it is what the courts call "sham consultation."

Common Good Faith Mistakes in Restructures

1. Announcing the Decision Before Consulting

The most common mistake HR managers make is announcing the outcome of a restructure before consulting with affected employees. Statements like "we are making your role redundant" or "we will be disestablishing the marketing team" before a consultation period are almost always treated as evidence of predetermined outcomes.

The correct approach: inform employees that *the organisation is considering* changes that *may affect* their roles, explain the rationale, and seek their feedback before finalising anything.

2. Setting Consultation Timelines Too Short

There is no statutory minimum consultation period in New Zealand, but the ERA has found short consultation periods problematic where employees did not have enough time to:

Understand the proposed changes

Seek advice from a union representative or employment lawyer

Formulate a meaningful response

As a practical guide, allow at least 10–15 working days for a straightforward role redundancy. More complex restructures affecting many employees, or where collective agreement provisions apply, warrant longer.

3. Not Genuinely Considering Feedback

The obligation is not just to receive feedback — it is to actively consider it. Good documentation matters here. Your consultation records should show:

What feedback was received from each employee

How you considered that feedback

Why you accepted or rejected specific points raised

How (if at all) the feedback changed your decision

If your final decision is identical in every respect to your initial proposal, you should be able to explain why employee feedback did not lead to any changes. If you cannot, that is a red flag.

4. Failing to Disclose Relevant Information

The ERA 2000 requires employers to proactively share information relevant to the employment relationship. In a restructure context, this typically means:

The business rationale for the restructure (financial pressures, strategic direction, etc.)

The proposed new structure (where roles are being created, disestablished, or changed)

The selection criteria if roles are being pooled and selected from

Any redeployment opportunities available

You are not required to disclose commercially sensitive information that would cause genuine harm. However, the bar for withholding information is high, and you must be able to justify any non-disclosure.

5. Ignoring Union Obligations

Where affected employees are union members and the union has coverage for their role, you have additional obligations:

Notify the relevant union before or at the time you notify affected employees

Provide the union with an opportunity to participate in the consultation process

Comply with any additional consultation requirements in the applicable collective agreement

Failing to notify a union, or treating union involvement as a formality, is a distinct breach of the ERA 2000 from the individual good faith obligation.

What Happens When Good Faith Is Breached?

A breach of the good faith obligation can result in a personal grievance under section 103 of the ERA 2000. The key grounds most relevant to restructures are:

Unjustified dismissal (section 103(1)(a)): Even where redundancy is genuine, dismissal may be unjustified if the process was unfair

Unjustified disadvantage (section 103(1)(b)): Applies where employment continues but conditions have worsened

Remedies available from the Employment Relations Authority include:

Reinstatement to the previous role (rare in genuine redundancy situations, but not impossible)

Lost wages for the period of unjustified disadvantage

Compensation for humiliation, loss of dignity, and injury to feelings (up to $30,000 and above in serious cases)

Costs awards against employers who act in bad faith

The ERA has signalled that it takes process seriously. An employer who can demonstrate a well-documented, genuine consultation process is in a much stronger position even if the outcome of the grievance is unfavourable on other grounds.

Practical Steps for Good Faith Compliance

Before the Restructure

Define the business case clearly — document the genuine reasons for the restructure in writing before beginning the process

Map the affected roles — identify which positions are being disestablished, changed, or created

Identify redeployment opportunities — even if there are none, document that you looked

Understand your collective agreement obligations — check any collective agreements for enhanced consultation requirements

During Consultation

Provide a written proposal to each affected employee explaining:

- The proposed change and why it is being considered

- The potential impact on their role

- The timeframe for consultation

- How they can provide feedback

Hold individual consultation meetings with each affected employee

Invite a support person or union representative to be present

Record the meeting and any written responses received

Genuinely consider feedback and document your analysis

After Consultation

Document why you did or did not change the outcome in response to feedback

Issue provisional decision letters before making a final decision

Allow a further response period to the provisional decision

Issue final decision letters after the further response period

How Restructured Helps

Restructured guides you through each of these steps with pre-built templates and checklists designed around ERA 2000 requirements. The platform tracks your consultation timeline, flags potential compliance gaps, and generates the documentation you need at each stage — from the initial proposal letter through to the final decision.

The org chart feature allows you to visualise your current and proposed structures side by side, making it clear to both you and your employees exactly what is changing and why.

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*This article provides general information about New Zealand employment law and does not constitute legal advice. Employment law is fact-specific — if you are considering a restructure, consult a qualified NZ employment lawyer. Employment NZ also provides free guidance for employers and employees.*