Can I fire an employee for incompatibility?


The three most common reasons for dismissing an employee are:

1. Poor performance

2. Serious misconduct

3. Redundancy

The courts have, however, long recognised another ground for dismissal which is incompatibility. For example, there is the recent case of an otherwise highly competent accountant (see Walker v ProCare below) who was justifiably dismissed for incompatibility after causing tremendous conflict with her work colleagues. 

Where the incompatibility is between an employee and their employer, the incompatibility is framed as an “irreconcilable breakdown of trust and confidence”. For example in the case of Mr Reid, a competent firefighter who had worked for the New Zealand Fire Service Commission for 22 years. During the latter years of his employment, Mr Reid brought numerous court proceedings against the Fire Commission. He was ultimately dismissed. The Employment Court agreed that the nature and volume of Mr Reid's court proceedings were unequivocal evidence of conflict.  The Court held that while it is unusual for an employer to justify dismissal on the grounds of the irreconcilable breakdown of trust and confidence in the employment relationship, this was such a case.

Where the incompatibility is between work colleagues or between an employee and their manager, one or both of them may claim they are being bullied by the other. This triggers the employer’s obligation under the Health and Safety in Employment Act 1992 to investigate whether bullying is taking place.

In cases of incompatibility between employees, many issues arise:

• What steps does the employer have to take to manage and resolve the conflict before it can fairly cry halt and dismiss an employee for incompatibility?

• Does the dismissed employee have to be more to blame than the other employee?

• Does the employer need to engage an independent investigator or can it investigate the incompatibility in-house?

• What must the employer do to keep other employees safe from the effects of the conflict?

One thing is for sure, the incompatibility must be serious and the employer must act in a fair and reasonable manner.

A recent case on incompatibility is Walker v ProCare Health Limited:

Ms Walker had worked for ProCare Health Limited for two years as their Financial Controller when she was dismissed in December 2007 for “incompatibility”.  She sued ProCare and won in the Employment Relations Authority. She was awarded $2,600 lost wages and $11,500 compensation for hurt feelings.  Ms Walker was not happy with her win so she challenged the decision in the Employment Court.  She sought lost earnings of $30,000 and hurt feelings compensation of “not less than $50,000”.  After a 10 day hearing, the Employment Court dismissed Ms Walker's claim and accordingly she lost the awards that had been made to her in the Employment Relations Authority.

The Court found that during Ms Walker's employment with ProCare she criticised senior staff and her colleagues in long and offensive emails.  Her manner in dealing with staff was found to be abrupt and belittling.  Auditors carrying out ProCare’s annual audit found her to be “uncooperative” and another staff member raised a personal grievance against ProCare citing bullying and harassment by Ms Walker.

ProCare went to extraordinary lengths to manage Ms Walker's communication style and, after she complained of suffering stress and other symptoms, ProCare offered her time off and assistance to have the nature of her illness ascertained.  ProCare also participated in a mediation over five days and paid for the mediator’s involvement – a sum of $10,000.  The mediation unfortunately did not resolve the situation.  Ultimately, ProCare dismissed Ms Walker for incompatibility and the Court had to assess whether ProCare’s actions were what a fair and reasonable employer would have done in all the circumstances.

Before the ProCare case there had been cases which suggested that the incompatibility must, to some extent, be the “fault” of the employee (see Maybry v West Auckland Living Skills Homes Trust Board (Inc)) although other cases suggested that there was no need to apportion blame between the parties (see Ngata-Aerengamate v Attorney-General).

In the ProCare decision the Employment Court held that the employer had to be able to establish that the employee was substantially responsible for the irreconcilable breakdown that had developed in the employment relationship. This is a lower hurdle than proving serious misconduct.  The Employment Court took a holistic view of the case rather than going through the numerous individual incidents and conflicts between Ms Walker and ProCare.  The Judge asked: Was there irreconcilable incompatibility?  The Judge looked at all the evidence and said he was “satisfied that the employment relationship had become seriously incompatible and that incompatibility was irreconcilable”.  He agreed with ProCare’s lawyer’s submission that “No organisation could withstand this type of disharmony”.

The Judge then asked: Was Ms Walker substantially responsible for the irreconcilable breakdown? His conclusion was: “In my view, it can fairly be said that Ms Walker alone was substantially responsible for the irreconcilable breakdown in her employment relationship with the company”.  The Judge then asked: Was Ms Walker treated in a manner which was procedurally fair?  The Judge looked back at the steps ProCare took (appointing a senior HR person to assist the organisation's culture and leadership, convening a mediation by a professional mediator and commissioning an independent review of the finance function by an outside accountancy firm).  The Judge found that each of the steps implemented by ProCare to reduce conflict were “proactive and responsible” but that they were “not seen that way by Ms Walker who continued to take an aggressive and uncompromising approach to any action taken or recommended by management”.

In his conclusion, the Judge held:

“For the reasons I have referred to at some length, I have concluded that ProCare has succeeded in establishing that there was an irreconcilable breakdown of trust and confidence in the employment relationship which was substantially caused by Ms Walker's uncompromising and largely irrational behaviour.  No organisation could function efficiently against the background of such a sustained level of conflict.  The initiatives taken by ProCare to try and resolve the impasse and the procedural processes followed were in my view reasonable and fair.  I am satisfied that in terms of the s 103A test of justification, the dismissal in this case was justified.  Accordingly, Ms Walker fails in her claim.”

It is important to note that a company does not necessarily have to go to the lengths that ProCare went to to resolve conflict. Nor does a company have to be brought to its knees before it can justifiably dismiss an employee for incompatibility.  There does, however, need to be serious incompatibility.  The employer must have taken reasonable steps to manage and supervise the situation.  There must be some apportionment of blame to the employee (although not necessarily sole blame or primary blame), Ultimately the test is whether the decision to dismiss was one that a fair and reasonable employer could have taken in the circumstances.

ProCare’s extraordinary efforts to manage the conflicts surrounding Ms Walker can be contrasted with the utter failure of Toby’s Restaurant to take any steps at all in the case of Fa’amoe v Nielsen T/A Toby’s Restaurant.

In this case, Ms Neilsen (who owned and operated Toby’s Restaurant) told her new employee, Ms Fa’amoe, that the chef was a “difficult man”. She was right. In her first and only week of work at the restaurant the chef swore at Ms Fa’amoe and treated her in a rude manner.  After just one week’s work, Ms Neilsen texted Ms Fa’amoe saying that the conflict between Ms Fa’amoe and the chef was getting worse and that “It is not going to work”.  Ms Neilsen praised Ms Fa’amoe for the wonderful job she had done.  Ms Fa’amoe asked Ms Neilsen if a resolution could be reached, but Ms Neilsen replied promptly by text stating that the previous week at work had been a “battle zone” and that the chef and other staff had become upset.  Ms Fa’amoe replied that she was willing to do whatever she could to “put it right” but Ms Neilsen responded by text stating that the chef was not happy, that she needed him to be happy to produce the food, “end of story”.

Ms Fa’amoe took a case to the Employment Relations Authority which held that her dismissal was procedurally and substantively unjustified.  Ms Fa’amoe was awarded $13,000 in lost wages and was also awarded $3,000 compensation for hurt feelings. The Authority found that Ms Neilson had not taken any steps to investigate and resolve the conflict, and that she did not act as a fair and reasonable employer.

The cases demonstrate that incompatibility is a recognised and justified ground for dismissal but the employer must make reasonable attempts to resolve the incompatibility and cannot just throw up its hands and say “this is not going to work”.

If you need advice on employee dismissal, because of incompatibility or any other reason, contact Workplace Law on 09 631 5553.