Good faith in practice: how to keep restructures and ER issues out of the ERA

Employers know they have to act in “good faith”. In practice, restructures, performance management and disciplinary processes still go wrong because steps are rushed, poorly documented, or not genuinely consultative. The result is a high risk of personal grievances, cost and distraction. Most employers don’t lose at the Employment Relations Authority (ERA) because their decision was unreasonable; they lose because of how they got there. What matters is whether you can show you acted in good faith at every step. Good faith is not a vague legal concept; it must inform how employers approach and design Employee Relations (ER) processes to dramatically cut personal grievance (PG) risk. 

What does case law say about good faith?

One of the most often cited cases on what ‘good faith’ requires is Carter Holt Harvey Ltd v National Distribution Union Inc [2002] 1 ERNZ 239 (CA).  The Court found that good faith is an essential component of employment relationships.  This duty underpins the entire Employment Relations Act, and the obligations it places on both employers and employees. Good faith includes concepts of cooperation, honesty, openness, and an absence of ulterior purposes.  

Good faith is a process, not a feeling

In practice, whether you have acted in good faith can come down to a few things: 

• Good faith is judged on process. This includes the information you share, the time you give people to respond, genuine consultation and openness to feedback. Process matters as much as the outcome. 

• A lot of mistakes happen because managers improvise under pressure, rather than following a clear, documented ER playbook. 

• A modest investment in templates, training and early HR advice is far cheaper than the time, cost and disruption of a PG or ERA hearing. 

Where the same mistakes keep showing up

The same mistakes show up again and again in restructures, performance processes and disciplinary cases:

• Proper process gets skipped or shortened. Formal meetings don’t happen, required notice periods are ignored, or people aren’t given a genuine chance to respond before a decision is made.

• Decisions get rushed and corners get cut under time pressure. A restructure proposal arrives looking like a done deal, and staff are asked to comment on something that’s already decided.

• Similar cases get treated inconsistently, often because a manager handles a situation their own way, without checking in with HR first. 

Take a typical restructure: a manager decides internally that a role is going, holds one meeting to "consult", and confirms the decision two days later. The employee raises a personal grievance. The employer had a genuine business reason for the change, but loses anyway, because the consultation was too short and nothing was documented. Contrast that with an employer who shares the full proposal in writing, gives a real timeframe to respond, records each step and genuinely considers the feedback before deciding. Same business problem, same outcome, but one holds up at the ERA and the other doesn't. 

What to do in the next three to six months

If you want your ER processes to hold up: 

• Map your current processes for performance, misconduct and restructures against good faith expectations. Look for gaps in consultation, timeframes and documentation.

• Update your core ER templates, including letters, meeting scripts and consultation documents, and train your managers to use them before an issue lands, not while it’s already underway.

• Give managers a clear escalation point for tricky calls, so questions go to HR before a decision is made, not after it. 

For some organisations, the quickest way to de-risk ER is to run a targeted HR audit over your existing processes and templates, then update your handbooks and policies accordingly. From there, our investigations and ER specialists can support you on complex cases and, if matters escalate, provide expert evidence on your processes and decisions.  

If you’d like to check whether your current ER processes would stand up to a good faith test, book a free HR audit focused on restructures and performance management.