Protecting the privileged

Dr Eric Crampton
5 June, 2019

It used to be the case that the question of firing of public sector chiefs never even came up. Senior civil servants would themselves tender their resignations for catastrophic failures, and Ministers could accept or reject those resignations as appropriate.

But when a resignation is not offered for performance this far off the norm, and the appointee continues in the position, something is manifestly wrong - either employment law as it relates to senior executives, or the government’s willingness to put up with exceptionally poor performance.

Treasury has not had a good week.

Parts of the 2019 Budget were made public early by the Opposition. Maintaining Budget confidentiality is far less important now than it was in the days when Budgets contained rather more market-sensitive material. But it is still a core Treasury job – and they failed by putting Budget documents in a place where they could be indexed by a web crawler.

Rather than come clean directly about how the Opposition learned the contents of the Budget, Makhlouf misled the public by suggesting systematic hacks. Treasury waited for 36 hours to correct the misperceptions created by the Secretary’s public statements.

Some computer security law experts may argue that if material is mistakenly available through normal searches on a web search bar, it is illegal to access and use that information if it is obviously not meant to be there.

But that seems sufficiently disjoint from any common-sense interpretation of ‘systematic hack’ to constitute misleading the public – and possibly the Minister of Finance if he were provided the same story. Secretary Makhlouf’s colourful analogy about attacking the bolt on a locked door led us to expect something like the elegant art heist from The Thomas Crown Affair; instead, the art gallery seems to have put its valuable originals among the prints in the discount bin at the gallery shop.

But the Minister cannot fire the Chief Executive, even if he wanted to. Chief Executives in the New Zealand Public Sector are appointed by the State Services Commission and can be removed only by the State Services Commissioner.

Section 39 of the State Sector Act 1988 states that the Commissioner of the State Services Commission may remove the Chief Executive of a department or departmental agency from office, with the agreement of the Governor-General in Council (in other words, Cabinet), for just cause or excuse.

This past week would seem to constitute just cause or excuse on a simple, normal English reading of the term.

But few things in employment law are ever simple. Employment law and case law around it has developed to ensure workers’ due process rights. Whatever your view on appropriate process protections for dismissal of junior staff, highly paid Chief Executives need to be able to be dismissed quickly, easily and without payoffs.

It seems absurd to view senior executives in the private or public sector as being in a vulnerable position in relation to their employer and needing the same protections as less privileged workers. But that is where the law seems to sit. A 2017 Members’ Bill from National’s Brett Hudson would have made it somewhat easier to dismiss senior employees, but was voted down by the Coalition Government.

And it may be prolonging Treasury’s misery.

The State Services Commission may fear that if it does not follow a lengthy due-process investigation prior to dismissing Secretary Makhlouf, it could be subject to even lengthier legal challenges. While that may be moot if Makhlouf takes up his offer of appointment with the Central Bank of Ireland, things could change if his being dismissed under just-cause provisions led the Bank to rescind its offer.

A spokesperson for the Irish Minister of Finance last week indicated the Bank had no plans to rescind its offer of employment to Secretary Makhlouf. But we do not know whether Makhlouf being dismissed in his last weeks on the job would change things.

That leaves the Government in a sticky spot.

If Minister Robertson were to indicate extreme displeasure with the Secretary, or to categorically state he had been misled by the Secretary, he could be viewed as prejudicing the outcome of a due process investigation. If he does not, National will continue to attack him as complicit with Treasury in last week’s allegations about National’s so-called hacking.

The State Services Commission may wish for a tidy and quick investigation, but advertising timelines at the outset could also be considered prejudicial where he may need to demonstrate, for employment law purposes, that he has investigated the issues thoroughly and with an open mind. But without an announced timeline, we might fear that the State Services Commission is simply kicking the can until Makhlouf is safely ensconced in Ireland.

All this extends the stench of Wellington unaccountability. Just how bad does a public sector Chief Executive’s performance have to be before accountability kicks in? And what does it say about employment law in New Zealand when it comes to the most privileged?

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