Insight New Zealand 2007 Ltd v Johnstone is, at first glance, an ordinary unjustified dismissal case. A long-serving residential support worker is dismissed for serious misconduct after a vulnerable resident has a bad morning. The Employment Relations Authority finds she was unjustifiably dismissed. The employer challenges that finding in the Employment Court. Judge K G Smith dismisses the challenge.

What makes the case worth a closer look is its timing. Judgment was delivered on 20 May 2026, three months after the Employment Relations Amendment Act 2026 came into force. That Act inserted a new section 123B into the Employment Relations Act 2000, and section 123B does something the old law never did: it makes the label “serious misconduct” the on/off switch for the entire remedies regime. If the label sticks, the employee gets nothing – no reinstatement, no lost wages, no compensation. If it doesn’t, full remedies are back on the table.

That puts pressure on a definition that, for decades, was treated as workmanlike rather than load-bearing. Johnstone shows why.

The facts in short

Gay Johnstone had worked at Insight for almost 21 years, supporting people with intellectual disabilities in residential care. On the morning of 27 April 2023, a resident referred to as X – non-verbal, with limited vision and a known choking risk – ended up on the floor while sitting down at the breakfast table. Ms Johnstone was in the kitchen. Her colleague Robin Penman saw most of what happened and got to X first. Between them, they ran the basic health checks: response, grip strength, eye signs, questions about pain. X seemed to return to his normal morning routine. He shaved, had coffee, said he wanted to go to work at his marae. Ms Johnstone made a doctor’s appointment for him later that day and spoke to a practice nurse familiar with his file.

About two hours after arriving at the marae, X collapsed. He was hospitalised and eventually received a pacemaker.

Insight investigated. Mr Penman received a final written warning. Ms Johnstone was summarily dismissed for serious misconduct.

The new statutory framework

The Employment Relations Amendment Act 2026 reshaped the remedies landscape. The key provisions:

• Section 123B: if an employee’s action contributed to the personal grievance and that action amounted to serious misconduct, the Authority or Court “must not provide for any remedy”. Nothing at all.
• Section 123C: if the employee’s action contributed but fell short of serious misconduct, reinstatement and compensation for hurt feelings are unavailable, though lost wages remain in play.
• Section 124: surviving remedies can be reduced by up to 100% for contribution.

The old position – where an employer who had bungled the process could still face significant liability even when the employee had committed real misconduct – is gone. Under the new section 123B, if the misconduct was serious and contributed to the dismissal, the employer’s procedural failures are irrelevant to the remedy.

That makes the threshold question — when does conduct cross from being merely contributory into “serious misconduct”? — far more consequential than it used to be. Johnstone engages with that definitional question directly, even though the case itself was decided under the old framework because the events occurred in 2023.

The Court’s restatement of “deliberate”

Judge Smith adopted the long-standing formulation from the 1992 BP Oil case:

Serious misconduct is generally regarded as a deliberate action that is inimical to the employer’s interests… conduct that deeply impairs or is destructive of the basic confidence or trust essential to the employment relationship.

The formulation has two components: a state of mind element (“deliberate”) and a consequence element (destructive of trust and confidence). Both have to be present.

In the old world this was largely academic. The “serious misconduct” label affected justification and contribution, but remedies were elastic. In the new section 123B world, the word “deliberate” is doing real work. It is the gatekeeper between full remedies and no remedies at all.

How “deliberate” applied to Ms Johnstone

Insight’s case was that Ms Johnstone had chosen not to call an ambulance, chosen not to phone her manager, and chosen not to file a timely incident report. On the employer’s framing, those choices endangered X and damaged the business. The dismissal letter went so far as to record as established fact that X had been unconscious – which would have transformed the morning’s events from “resident missed his chair” into “resident lost consciousness and was sent to work anyway”.

Judge Smith dismantled that picture on several fronts, and the analysis carries forward usefully into a section 123B context.

The unconsciousness finding had no proper basis. Insight’s letter quoted Mr Penman’s early text message (“rigid and unconscious for around ten seconds”) and treated it as established fact. But Mr Penman had explained in his disciplinary interview that X was not unconscious, and Ms Johnstone had said throughout that she was never told X was unconscious and never saw him in that state. Mr Penman was interviewed after Ms Johnstone, and the question was never put back to her once his evidence shifted. The Judge accepted that an employer is entitled to prefer one account over another, but not without an explanation for why a witness’s later, softer account was rejected in favour of his earlier, harder one – particularly when the harder version was the foundation for finding deliberate concealment.

The “ambulance policy” was not really a policy. There was no written rule about when to call an ambulance. The unwritten policy, as described by Insight’s director and manager, required staff to apply “common sense” and call an ambulance for unexplained events. The Judge noted that this approach “leaves significant room for a range of responses”. An employee cannot deliberately breach a rule whose content is, at the time of action, a matter of judgment. The decision not to call an ambulance was a judgment call by two experienced support workers, both first-aid trained, one of whom had just refreshed that training. Their judgment was reinforced by a call to a nurse familiar with X’s file. The Judge held that Ms Johnstone did not fail to comply with the policy at all.

Hindsight was doing the work. The Judge observed that Insight’s decision-making bore “the hallmark of relying on the benefit of hindsight because of the adverse health event X experienced later the same day”. There was no medical evidence connecting the breakfast incident to the later cardiac problem. Hindsight is the enemy of “deliberate”: an action looks deliberate in retrospect partly because we now know the outcome the actor did not.

The manager-contact complaint dissolved on the facts. Mr Penman texted Ms Stewart, then phoned. The two support workers had agreed a division of labour. No policy required Ms Johnstone personally to phone.

The incident report point was the only one with any traction, and the Judge treated it as a delay rather than a refusal. Ms Johnstone believed Mr Penman would file the report; when she learned he had gone on leave without doing so, she filed hers. The 24-hour timeframe in the policy had no stated consequence and was tied to monthly reporting cycles. The delay did not impair Insight’s ability to respond to what happened. None of this rises to “deliberate” in any meaningful sense.

There was also a disparity issue – employment law requires similar conduct to be treated similarly, and Mr Penman walked away with a written warning for substantially the same incident. The Judge found Insight could not justify the difference. The factor the employer leaned on – that Mr Penman was contrite in the investigation while Ms Johnstone “stood her ground” – was not a difference in workplace conduct but a difference in posture during the disciplinary process. An employee who maintains, on reasonable grounds, that she did nothing wrong does not thereby commit serious misconduct. That point has obvious application under section 123B: contrition in the disciplinary process is not a proxy for the absence of “deliberate” wrongdoing in the workplace.

What this means for employers going forward

A few practical observations

Section 123B will not let employers walk away simply by labelling conduct “serious misconduct”. Johnstone is a useful counterweight to that narrative. The Court’s analysis shows how much heavy lifting the word “deliberate” can be made to do. Conduct that is reactive, judgment-based, performed under pressure, or coloured by hindsight is not deliberate misconduct, however convenient the label.

The factual foundations of a “serious misconduct” finding matter more than ever. Where the finding rests on a fact the employer has not properly established – the unconsciousness finding in Johnstone is a textbook example – the label cannot survive challenge. Under the old framework, an employer who got the label wrong faced procedural-fairness consequences but might still see remedies trimmed for contribution. Under section 123B, the same labelling error is binary: if “serious misconduct” cannot be sustained, full remedies come back. Employers cannot afford to be sloppy about the evidence underlying the label.

Vague workplace expectations are now a liability. The “unwritten policy” in Johnstone is common across the care sector and many others – a general expectation, reinforced at staff meetings, that staff will use “common sense”. Where the rule itself leaves room for a range of responses, breach of the rule cannot easily be characterised as deliberate. An employer who wants the protection of section 123B needs rules that are clear enough to be deliberately broken. Now is a good time to audit policies – particularly safety, escalation and reporting policies – for ambiguity that would not survive the new threshold.

Unjustified dismissal still exists; what’s changed is the consequence. Section 103A – the test for whether a dismissal was justified, asking whether the employer’s actions were what a fair and reasonable employer could have done – has not changed. An unjustified dismissal remains unjustified. What section 123B does is sever the link between unjustified dismissal and remedies in cases where serious misconduct is properly established. Johnstone is a reminder that “unjustified dismissal for alleged serious misconduct” is a familiar category, and the new regime makes the distinction between alleged and established serious misconduct more consequential than ever.

A closing observation

Ms Johnstone kept her remedies: $25,000 in compensation for hurt feelings, three months’ wages, and costs. Under the new section 123B she would have kept them too, because her conduct was not serious misconduct on any view of the evidence. The case is not authority on section 123B; it predates the new regime. But it is authority on the meaning of “deliberate” – and that meaning is now the difference between a remedy and nothing.

The 2026 reform was framed politically as a shift in the balance between employers and employees. In practice, it has shifted the importance of a single adjective in a 1992 case. BP Oil is now load-bearing in a way no-one then could have anticipated. Johnstone shows the Employment Court taking the word “deliberate” seriously – which, in a section 123B world, is exactly what employers, employees and their advisers should hope to see.

Insight New Zealand 2007 Ltd v Johnstone [2026] NZEmpC 101 (Judge K G Smith, 20 May 2026).

Need advice on what constitutes serious misconduct? Get in touch with the team at Copeland McAllister. Phone 03 211 0153 or email admin@cmalaw.co.nz.  

Disclaimer: This update provides commentary on employment law, health and safety and immigration topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.