Part 3: Principles for the Relationship

Managing the Relationship Between a Local Authority's Elected Members and its Chief Executive.

The Legal Framework

There are three aspects to the legal framework governing a local authority’s employment relationship with its chief executive.

First, every employment relationship is:

  • underpinned by an employment agreement; and
  • subject to the Employment Relations Act 2000.

Secondly, the powers of a local authority to employ staff (including its chief executive) are contained in, and governed by, Part VIA of the Local Government Act 1974.

Thirdly, other generic legislation (for example, the Fair Trading Act 1986 and the Privacy Act 1993) can also affect an employment relationship.

General Employment Law Principles

An employment relationship is fundamentally governed by the common law of contract. Under the common law, the parties to an employment agreement have mutual obligations of trust and confidence in their dealings with each other. These obligations are an implied term of any employment agreement.

But the special nature of the employment relationship means that an extensive body of additional rules and procedures also governs it. Most of these are found in the Employment Relations Act. That Act makes an employment agreement the central vehicle for defining the employment relationship. It also requires the parties to the relationship to deal with each other in good faith.

The duty of good faith is a reciprocal duty, owed by each party to the other. The Act does not define what it means to act in “good faith”. However, in the context of individual (as opposed to collective) employment agreements, it says that “good faith behaviour” is consistent with the implied term of mutual trust and confidence.3

The Employment Relations Act also encourages parties to maintain good relationships and voluntarily resolve any disputes that arise during the employment relationship. An employer must observe certain requirements of procedural fairness when dealing with a dispute or any other employment issue.

Part VIA of the Local Government Act

Part VIA of the Local Government Act governs the employment of all local authority staff. It empowers a local authority to appoint such staff as are necessary to assist the authority in the performance of its functions and the exercise of its powers.4

Appointing a chief executive officer (or a group of senior executive officers) is a function of the local authority itself.5 All other staff are appointed by the chief executive, unless the local authority has decided that particular appointments are to be made by a specified senior executive officer.6

“Good Employer” Obligations

Part VIA was inserted into the Local Government Act in 1989. It contains provisions which are very similar to those in the State Sector Act 1988 relating to the employment of staff in the public service and the education sector.

In particular, section 119F of the Local Government Act requires a local authority (and those responsible for selecting and managing employees) to operate a personnel policy that complies with the principle of being a “good employer”. An employer can satisfy “good employer” obligations by complying with generally accepted employment practices. These include:

  • a fair and transparent recruitment and appointment process;
  • a clear and comprehensive employment agreement – with express provisions regarding termination and redundancy;
  • regular reviews of performance against measurable benchmarks; and
  • a clear and well-documented process for resolving disputes.

Further discussion of these practices can be found in our May 2002 report Severance Payments in the Public Sector.7

The Five-Year Advertising Requirement for Chief Executives

The “five-year advertising requirement” refers to the combined effect of sections 119E and 119I of the Local Government Act.

Section 119E says:

Every officer appointed under section 119C of this Act8 shall be appointed for a term of not more than 5 years; but shall be eligible for reappointment from time to time.

Section 119I says:

Where it is proposed to fill a position that is vacant or is to become vacant … the local authority shall, wherever practicable, notify the vacancy or prospective vacancy in a manner sufficient to enable suitably qualified persons to apply for the position.

Until 1999, it was generally thought that a local authority could reappoint its chief executive before the expiry of a five-year term without having to advertise the position. In 1999, we became concerned that this understanding may have been incorrect because of the relationship between section 119E and sections 119H and 119I. The latter sections require a local authority to make appointments on merit and, wherever practicable, to notify vacancies in a manner that enables suitably qualified persons to apply.

We asked the Solicitor-General for an opinion on the matter. The Solicitor- General concluded that the combined effect of the relevant sections means that a local authority must notify the position of chief executive when it becomes vacant at the expiry of a term of appointment or when the chief executive is being replaced (e.g. as a result of resignation).

Validating legislation was necessary to address the problem of chief executive appointments which had been renewed, in accordance with the previous understanding of the law, without advertising. The Local Government (Validation of Reappointments) Act 2000 validated:

  • any appointment that had been renewed before 8 September 1999 without having been advertised; and
  • the appointment of any chief executive who had held the position for more than 5 years.

Other Relevant Legislation

Fair Trading Act 1986

The Fair Trading Act 1986 makes it unlawful to engage in misleading or deceptive conduct in relation to offers of employment. Misleading advertising of a position may therefore breach the Act. A council should have regard to the implications of the Act when advertising a chief executive position.

Privacy Act 1993

The purpose of the Privacy Act 1993 is to promote and protect individual privacy and – in particular – to establish principles on:

  • the collection, use and disclosure of information relating to individuals; and
  • individuals’ access to, and correction of, information held about them by an agency.

A council should ensure that it complies with the Act when it collects, uses, or discloses information relating to the employment of staff. A breach of the Act can result in legal action including (in some cases) an award of damages.

In particular, a council is likely to have access to confidential information when it recruits, or reviews the performance of, its chief executive. Such information must be treated with special care.

Human Rights Act 1993

The Human Rights Act 1993 makes it unlawful (with certain exceptions) to discriminate in employment matters.

The Act lists a number of circumstances in which discrimination in employment can occur. It is also unlawful to advertise a position in a manner that indicates an intention to discriminate on any of those prohibited grounds.

3: Section 60(c)(ii), Employment Relations Act.

4: Section 119B(1), Local Government Act.

5: Section 119C(1), Local Government Act.

6: Section 119B(4), Local Government Act.

7: ISBN 0 477 02895 0.

8: Section 119C deals with the appointment of a chief executive or a group of senior executive officers.

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