What Does 'Good Faith' Mean in an Employment Relationship?

Good faith is one of the most important principles in New Zealand employment law. It shapes how employees and employers must treat each other every day at work, from hiring and performance discussions to disciplinary meetings, restructures, resignations, and dismissals.

What Is Good Faith?

Good faith means being active and constructive in maintaining a fair employment relationship.  The law requires both employers and employees to:

• Be honest with each other;

• Communicate openly;

• Not mislead or deceive each other;

• Raise concerns in a timely way;

• Work cooperatively where decisions affect the other party.

Good faith goes beyond simply avoiding lies. It requires genuine fairness in conduct. Good faith is about transparency, fairness, and proper process.

What does this mean for employees?

Employees owe a duty of good faith to their employers throughout their employment.  This means employees should:

Be truthful with important information

Provide truthful information in workplace matters, including timesheets and leave requests, explanations during investigations, medical certificates, and expense claims. Dishonesty can seriously damage trust and may justify disciplinary action.

Comply with instructions from their manager

Employees are expected to comply with instructions that are lawful, safe, and within their role.  For example, if a manager reasonably asks an employee to attend a meeting or complete assigned duties, refusing without proper reason may breach good faith obligations.

Raise concerns appropriately

If an employee has concerns about bullying, unpaid wages, unsafe conditions, or unfair treatment, they should raise them honestly and respectfully.  Good faith does not require silence. Employees are entitled to challenge unfair treatment, but they should do so constructively.

Respect confidentiality

Employees must not misuse confidential business information, client data, pricing information, or internal documents.  Even after employment ends, some confidentiality duties may continue.

Avoid undermining the employment relationship

Employees should not deliberately damage trust in the workplace through misconduct such as spreading false accusations, sabotaging operations, harassing co-workers, or deliberately refusing cooperation.

What Should Employees Expect From Their Employer?

Good faith is mutual. Employees are entitled to expect the same standard from their employers.  Employers must also act honestly, fairly, and transparently.  Employees should expect employers to:

Communicate Openly About Important Decisions

If an employer is considering a decision that may affect employment, such as restructuring, dismissal, or role changes, they must share relevant information and consult properly.

Not Mislead or Deceive Employees

Employers cannot give false reasons for dismissal, hide key facts in investigations, misrepresent pay entitlements, or make promises they never intended to follow through on.  Misleading conduct may amount to breach of good faith.

Follow Fair Process Before Discipline

If misconduct is alleged, employees are entitled to know the allegations, see relevant evidence, have time to respond, and bring support to meetings.  A rushed or secretive disciplinary process may breach good faith.

Pay Correct Entitlements

Employers must correctly pay wages, holiday pay, sick leave, and other legal entitlements.  Repeated payroll errors without correction may reflect poor faith conduct.

Treat Employees With Respect and Dignity

Humiliation, bullying, intimidation, or retaliatory behaviour may violate good faith obligations.  Employers must maintain a respectful workplace culture.

Good faith applies throughout employment, but some situations make it especially important.

• Recruitment and Hiring: Employers must be honest about job duties, pay, hours, and conditions.  Employees should also be truthful about qualifications and experience.

• Performance Management: If performance issues arise employers must clearly explain concerns and employees should engage honestly in improvement discussions.  Hidden agendas or surprise dismissals often breach good faith.

• Disciplinary Investigations: Both sides must act fairly.  Employers must investigate properly and employees must cooperate honestly.

• Restructuring and Redundancy: Employers must consult before making final decisions. A ‘fake consultation’ where the outcome is already decided may breach good faith.

• Resignations and Notice Periods: Employees should give proper notice unless serious circumstances justify immediate resignation.  Employers should not pressure employees into resigning unfairly.

• Medical Incapacity or Return-to-Work Issues: Good faith requires honest communication about medical limitations, accommodations, and realistic work options.

What Happens If Your Employer Does Not Act in Good Faith?

When employers breach good faith, you may have legal remedies.  Possible consequences include:

Personal Grievance Claims

An employee may raise a personal grievance for unjustified dismissal, unjustified disadvantage, or constructive dismissal.

Penalties Against Employers

The Employment Relations Authority may impose financial penalties including compensation. Employees may receive compensation for lost wages, emotional distress, and/or humiliation or loss of dignity,   In some cases, employees may be reinstated into their role.

What Happens If an Employee Does Not Act in Good Faith?

Employees can also face consequences if they breach good faith.  These may include:

• Disciplinary Action: Depending on seriousness, consequences may range from warnings to dismissal.

• Loss of Trust and Confidence: Dishonesty often damages the employment relationship beyond repair.

• Misconduct or Serious Misconduct Findings: Examples include fraudulent leave claims, theft, deliberate dishonesty, and false accusations against colleagues.

• Reduced Legal Remedies: If an employee later brings a claim, their own bad faith conduct may reduce compensation.

Why Does Good Faith Matter?

Good faith protects trust in workplaces.  Without it employees may feel unsafe, employers may lose confidence in staff, disputes can escalate, meaning legal claims become more likely. Strong good faith relationships create healthier, more productive workplaces where problems are resolved earlier and more fairly.

FAQs

Is good faith the same as being nice?

No. Good faith is not about always agreeing or avoiding conflict. It means acting honestly, fairly, and transparently, even during disagreements.

Can my employer discipline me without telling me the evidence?

Usually no. Good faith requires employers to share relevant information before making disciplinary decisions.

Can I refuse to answer questions in a workplace investigation?

You should cooperate honestly in most investigations, although you may seek advice or representation first.  Refusal without good reason may create separate employment issues.

Does good faith apply after resignation?

Yes, sometimes. Duties like confidentiality, honest notice periods, and respectful exit conduct may continue during departure.

What if my employer lies to me about why I was dismissed?

That may be a serious breach of good faith and could support a personal grievance claim.

What if I make an honest mistake?

Good faith does not require perfection. Genuine mistakes are different from deliberate dishonesty.

Can both employer and employee breach good faith at the same time?

Yes. In many disputes, both sides may have acted poorly. Courts and tribunals assess each party’s conduct separately.

Good faith is the foundation of every employment relationship in New Zealand.  Employees must act honestly, cooperate reasonably, and protect trust in the workplace. In return, they are entitled to expect openness, fairness, proper consultation, and respectful treatment from their employers. When either side fails to act in good faith, legal consequences can follow. But, just as importantly, trust can be broken in ways that are hard to repair. 

Understanding good faith helps employees protect their rights and navigate workplace issues with confidence.  If you believe your employer has failed to act in good faith in your employment relationship, leaving you disadvantaged or dismissed, get in touch with Mathews Walker today for a free consultation.  Our advocates are ready to help you with your personal grievance and are only a free phone call away.  MathewsWalker.co.nz | 0800 612 355

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