Time for a Check-Up How to give your enterprise a clean bill of health

Internal policies and procedures don’t need to be complex, legalistic and bureaucratic, in fact this can be self-defeating. They are most effective if they are clear, able to be understood by the people affected by them, genuinely intended and widely disseminated. It may well be that simple diagram in the lunch room or above the photocopier is much more effective than 10-page legal document given to new staff when they join the firm but never referred to again.

This article details three situations in which internal policies might prove to be invaluable for your business.


A whistleblower is person who discloses information, usually in the belief that their actions are in the public interest. Good examples are Jeffrey Wigand, who disclosed information about the tobacco industry (as depicted in The Insider) and, closer to home, Neil Pugmire, who disclosed his concerns about the release of psychiatric patients from Lake Alice hospital. While whistleblower will not necessarily be an employee, this is most likely to be the case because employees are often in the best position to learn of sensitive information.

In 2001, New Zealand enacted the Protected Disclosures Act to protect people who wish to blow the whistle from the negative consequences of their actions – such as being victimised, fired or sued for breach of contract (most likely breach of confidentiality clause). While the merits of this legislation can be debated and its ability to achieve the stated aims questioned, what cannot be doubted is that business with an internal complaints procedure is in much better position than one without.

The Act requires employees to comply with their employer’s internal complaints procedure if one exists and, provided that procedure is reasonably effective, eliminates the employees right to disclose information to those outside the business thereby securing, within reasonable limits, confidentiality of business information. It should be noted that an internal complaints procedure is, in this regard, more effective than confidentiality clauses in employee contracts to protect business from external whistleblowing.

Apart from the legal advantages, internal procedures to receive and deal with employee complaints provide commercially valuable opportunity for business owners and managers to consider, investigate, explain and solve sensitive issues away from the glare of public attention.

When this opportunity is frustrated, the chance of the issue playing out in the public arena – either through external whistleblowing or the intervention of third party – with all its consequent dangers, increases dramatically. Research indicates that most employees who blow the whistle externally have repeatedly tried to raise the issue internally but have been ignored or “fobbed off” by management.

The ultimate cost of refusing to deal with such issues has been high, as was graphically illustrated in the Enron debacle.

Personal grievance procedures

The Employment Relations Act 2000 aims to build productive employment relationships through the promotion of mutual trust between employers and employees. The Act makes it compulsory for both collective and individual employment agreements to contain clauses giving plain language explanation of the services available for the resolution of employment relationship problems, thereby reducing the need for judicial intervention.

Developing an internal personal grievance procedure, which is adequately described in employment agreements, has many advantages.

Personal grievance issues involving discrimination, sexual and racial harassment and duress can hamper productivity because of employee dissatisfaction. If no internal procedure for employee complaints and assistance exists, business runs the risk of underlying problems not being dealt with but continuing to exist. In many cases complaint is only made to the relevant authorities (either the Human Rights Commission in terms of the Human Rights Act or the Employment Relations Services in terms of the Employment Relations Act) after period of years, with the business having suffered the consequences of absenteeism, labour turnover and employee dissatisfaction for that period of time without being aware of the underlying cause(s}.

Robust and well-documented internal procedures can also protect an employer from liability in the case of sexual or racial harassment complaints made by an employee on the basis of client, customer or co-worker’s behaviour. If an employer in this situation cannot show that they have taken practical steps to prevent repetition, the employee may lodge personal grievance claim against the employer. If successful the employer will potentially be liable to compensate the harassed employee for humiliation, loss of dignity, injury to feelings or loss of any other benefit. An internal procedure, which is known and understood by employees and which is appropriate and effective can prevent such liability.

Disciplinary procedures

Employers may only dismiss employees on particular grounds. These fall into three broad categories: the economic situation of the employer (redundancy); misconduct by the worker, or incompetence of the worker.

In addition to an acceptable reason for dismissal, the employer must also follow procedure which meets minimum requirements of fairness.

For example, dismissals based on the behaviour of the employee (ie, misconduct or incompetence) will only be valid if the employee has been given notice of the specific allegation, had genuine opportunity to refute the allegation and had an unbiased forum in which his or her explanation was heard.

If these requirements are not complied with the dismissal will be unjustified, and can give rise to personal grievance claim resulting in employee reinstatement and/or requirement for the employer to pay compensation.

These three examples show the potential costs to your business, in practical terms, of not having fair and effective internal procedures to receive and effectively process employee complaints.

In each of these three instances employees are required to follow internal procedures if they exist (provided they meet certain minimum criteria) and this requirement is designed to balance the interests of employer and employee. An absence of such procedures may tip this balance away from employers and prove extremely costly.

By the time the need for procedures becomes evident it is almost always too late to do anything, so take effective action now.

Louise Taylor and Dr Teresa Schwellnus are senior lecturers in law at the Christchurch College of Education.
Email: [email protected] ; [email protected]

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