Submissions on the Review of Personal Grievances 31 March 2010 Review of Personal Grievances Workplace Policy Group Department of Labour P.O. Box 3705 Wellington 6140 By Email – ERconsultation@dol.govt.nz Submitter’s Personal Information Name [PRIVATE] Address [PRIVATE] Email [PRIVATE] Telephone [PRIVATE] Occupation [PRIVATE] Public Record [PRIVATE]

1 Introduction 1.1 I welcome this opportunity to provide my personal submissions on the review of the

personal grievance system established under Part 9 of the Employment Relations Act. 1.2 I am currently an Employee Relations Advisor of a large employer in the tertiary education

sector. I previously represented both employers and employees in personal grievances as a solicitor.

2 Summary 2.1 Employment law needs to be stable and sustainable. Constant change has caused and will

continue to cause uncertainty and unnecessary transactional costs. The rights and obligations of employers and employees under Part 9 of the Act should be allowed to settle. Changes may however be desirable in the administrative provisions of the Act.

3 Operation of the Personal Grievance System 3.1 I have been involved in the process of resolving personal grievances as a representative

for employers and employees. The personal grievances that I was involved in were either: (a) resolved privately between the employer, employee and their representative(s); or (b) settled after mediation had taken place (but before the Authority was involved).

4 Cost of Problem Resolution 4.1 It is very difficult to assess whether the average cost of resolving an employment

relationship problem is too costly, given the extremely wide range of factual situations involved. However, the costs involved are likely to be lower than in other civil and legal disputes for several reasons. The institutions are less legalistic and less formal. Disputes are usually settled before reaching the Authority. There are also plenty of precedents and hence less uncertainty about liability.

4.2 The average cost of settling a personal grievance is not necessarily helpful to determine

whether to proceed to the Authority. The remedies awarded against large employers are more likely to be higher than for small employers.

4.3 From the employers’ perspective, there are other important considerations in determining

whether to settle or to litigate. How strong is the case? What are the “flow-on” effects and costs? How many employees does it affect? Is there an important point of principle involved? Are the relevant witnesses and evidence still readily available? Will an Authority decision provide clarity going forward? What are the effects (if any) on the image and reputation of the business? Is there an ongoing employment relationship to salvage?

5 Employment Advocates

Summary: There is no basis to conclude that employment advocates and “no-win no-fee” arrangements have contributed to more unmeritorious or hopeless claims, or that the standards among employment advocates and the quality of their advice vary more than other forms of representatives. Employment advocates are still subject to general and consumer protection laws. A no-win no-fee facilitates the access to justice for those who cannot afford costly representation on other payment arrangements. This is particularly important where an unjustified dismissal has rendered the employee financial impecunious. It is open to the Authority and the Courts to monitor, manage and control how proceedings are conducted before them. They also have a wide discretion to impose greater cost awards for vexatious claims or to recognise that a party’s behaviour has resulted in increased time and costs.

5.1 No-win no-fee is not the only arrangement that enables a party to raise a claim without

paying upfront for the advocacy services. Employers and employees often appear themselves without representation; arguably they may be more likely to persist with unmeritorious claims or over-estimate the merits of their claim due to the lack of objectivity. Employees may be legally aided; this may give some employees incentive to prolong proceedings. Employers may be represented by an in-house advisor or manager, and they may even have some form of litigation insurance to contribute to their legal cost. Some parties may be fortunate enough to be represented on a pro bono basis.

5.2 There is no empirical evidence to suggest that employment advocates and “no-win no-fee”

arrangements have contributed to more unmeritorious or hopeless claims. It will not be in the interests of advocates who operate on a no-win no-fee basis to accept cases where the employee is not looking for money, or to waste time pursuing cases that are hopeless or entirely unmeritorious. It should not be assumed that an advocate is driving a case hoping for a positive result against the odds and potential cost awards. There is also no evidence to suggest that the standards among employment advocates and the quality of their advice vary more than other forms of representatives. Despite the anecdotes, there is no reason to single out employment advocates and “no-win no-fee” arrangements.

5.3 Although there is no professional regulatory and disciplinary body for employment

advocates, they are still subject to consumer protection laws such as the Consumer Guarantees Act. This means that service provided by employee advocates must be provided with reasonable care and skill within a reasonable time and must be fit the stated purposes. Further, under the Fair Trading Act, employment advocates cannot engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

5.4 Consumer choice and access of justice are important considerations to keep in mind when

reviewing the personal grievance system. It should be strictly a matter for each party to determine how s/he wishes to be represented in an employment matter, whether by a friend, family, lawyer, advocate, union officer, association representative or director. This is consistent with the object of encouraging the resolution of employment relationship problems at lower levels without adherence to rigid formal procedures.

5.5 Regulation of a particular class of advocates based on bare anecdotes will only

detrimentally affect those who cannot afford to pay in advance. Employees who have been unjustifiably dismissed may be forced into financial hardship and may not be able to advance lump sums for a legal claim. It will be extremely unfair if an employee is prevented from challenging a wrongful act by that very same wrongful act. A no-win no-fee arrangement may be the only avenue for them to enforce their right. They remain exposed to payment of costs in favour of a successful opponent. Further, it is already open to the Authority and the Courts to monitor, manage and control how proceedings are conducted before them. They also have a wide discretion to impose greater cost awards for vexatious claims or to recognise that a party’s behaviour has resulted in increased time and costs.

6 Balance of Fairness in the Personal Grievance System Summary: In my view the personal grievance system generally provides a fair balance between

employers’ and employees’ interests. Employees’ rights and security should not be further eroded. The Authority, with guidance from the Courts above, is well-placed to balance the rights of employers and employees under the current standard of justification under the ERA. The enactment of section 103A has not changed the process or outcome of personal grievance cases in any material way.

At times, there may appear to be too much focus on procedural fairness, however, this must be viewed in context of the Court’s willingness to defer judgment on substantive matters to employers, particularly in dismissals arising from redundancy and performance concerns. Fairness in process is inextricably linked with the fairness in outcome. Procedural fairness should also be viewed as an integral part of good faith. An employer cannot be said to act fairly, reasonably and in good faith where it does not conform to procedural fairness.

6.1 Some employers may genuinely perceive that process is being regarded as more important

than substance. However this perception is not an accurate one. Under section 103A the employer’s actions and how it acted are both assessed against what a fair and reasonable employer would have done in all the circumstances at the relevant time. It is axiomatic that a fair process ensures a fair outcome is reached with the necessary input. This is true for courts, for law makers, for schools, for conducting due diligence, and it should be no different for employers and employees.

6.2 Fairness in process is inextricably linked with fairness in outcome; they should not be

artificially divorced from each other. One is designed to lead to the other. It does not accord with reality to suggest that a fair and reasonable outcome can be readily ascertained in a vacuum without a proper process. The management of employee relations can be very complex at times. There are always biased / self-serving motivations, multiple perspectives from various stakeholders and misunderstandings in the workplace, and there are rarely any open and shut cases. The purpose of a fair process is to enable an employer to be informed of the relevant circumstances and reach a considered decision. As the Court has repeated from time to time, “it is often said that if an employer gets the process right, the employer will get the result right.”1

6.3 At times it is easy to dismiss some personal grievances as amounting to nothing more than

defects or irregularities in the process. This wrongly assumes that the process is simply a pre-determined route to a known or obvious outcome. The process of consultation or seeking input is alive and dynamic; it allows employees and employers to mould the outcome for the particular situation. Process cannot be relegated so easily when one appreciates that it is critical to both employees and managers.

6.4 Procedural fairness involves access to relevant and sufficient information; notice of the

potential consequence; a real opportunity to provide input before a decision is made; and an unbiased consideration of the input provided. These steps are integral to address the inherent inequality in employment relationships, which is recognised as a key objective of the ERA.

6.5 It should be noted that process had occupied a similar level of prominence in cases

decided prior to the enactment of section 103A. The Court and Authority are in most cases applying and adapting long-standing principles distilled from case law, including those from the Court of Appeal. These principles have survived and continued to evolve despite

1 Allen v Transpacific Industries group Ltd (2009) AC20/09 Colgan CJ para 44

numerous changes to employment legislation. They should not be readily disturbed at a political whim.

6.6 Fairness in process is also a fundamental element of good faith, a cornerstone which

permeates all employment relationships. Good faith requires employers and employees to be active, constructive, responsive and communicative. Indeed section 4(1A) of the ERA reflects some of the most important elements of procedural fairness – access to relevant information and opportunity to comment before a decision is made. It should be noted that good faith obligations apply to both employers and employees. For example, the case of Craig v Carter Holt Harvey2 confirms that employers are entitled to expect employees to be open and act in good faith, and where an employee has failed to disclose information on an issue of importance, this may give the employer grounds for taking disciplinary action, including dismissal in appropriate cases.

6.7 The Employment Court has generally taken a very pragmatic and practical stance on

various types of dismissal. Further there is no requirement for employers to adopt a perfect or flawless process. The case of Tauhore 3 confirms that:

In assessing whether an employer has acted as a fair and reasonable employer, the Court is not to subject the employer's conduct of the disciplinary process to pedantic scrutiny. Any deviation from ideal procedures must be treated proportionately to the gravity of the allegation against the employee. As Chief Judge Goddard said in Unilever 4:

What is looked at is substantial fairness and substantial reasonableness according to the standards of a fair-minded but not over-indulgent person.

6.8 Where dismissal arises due to a redundancy, the Court has confirmed the applicability of

long-standing principles established prior to the enactment of section 103A.5 This means a Court will not interfere with a business decision to disestablish positions, provided the employer genuinely considers the position to be superfluous to the business needs. In such dismissals, employees are left to contest only the fairness of the process leading to the dismissal and any ulterior motives held by the employer.

6.9 Some employers may perceive this emphasis on process to be undesirable. However the

focus on process is appropriate and beneficial for employers because it allows businesses to make business decision based on commercial drivers without being subjected to close scrutiny of their substantive decision. This means businesses can continue to account to shareholders rather than to the Court or Authority. Put in this context, employees should be entitled under law to be ushered through a redundancy with a consultation process that meets procedural fairness requirements. Otherwise, the law would be one-sided and unbalanced.

6.10 Where dismissal arises due to performance concerns, the Court has also taken a pragmatic

and practical stance to accommodate employers’ substantive decision. The case of Bagchi 6 is a recent case where the employee had been dismissed due to performance concerns. This case also confirms long standing principles established in case law 20 years ago. The Court once again confirmed its limited role in assessing the performance standards set by employer and the employer’s judgment on whether the employee had met the expected standards.

2 Craig v Carter Holt Harvey AC30/08 Colgan CJ 3 Tauhore v Farmers Trading Company Ltd (2008) 5 NZELR 278 Shaw J 4 NZ Food Processing IUOW v Unilever New Zealand Ltd [1990] 1 NZILR 35 5 See Simpsons Farms Ltd v Aberhart [2006] ERNZ 825 Colgan CJ 6 Bagchi v Chief Executive of the Inland Revenue Department (2008) 5 NZELR 767

6.11 The Court confirmed the principle that significant latitude should be allowed to an employer for the exercise of judgment in cases of dismissal for poor performance. Employees can only expect employers to be held accountable for the process of managing an employee’s performance. Although some employers may also complain about the focus on process, however this is an appropriate and proper approach that allows employers to dictate the level of performance, productivity and efficiency expected in particular organisations.

6.12 Focus on the procedural aspect of a personal grievance is proper and tends to indicate that

the Authority and the Courts are deeply reluctant to interfere with the substantive judgment that employers regularly exercise. This is desirable from an employer’s perspective as it allows some leeway to make decisions in the workplace. Given the importance of a proper process to reaching informed decisions and the scheme of the ERA, employee rights should not be further eroded. The Authority, with guidance from the Courts above, is well-placed to balance the rights of employers and employees under the current standard of justification under the ERA.

7 Ensuring Access to Justice 7.1 There are barriers particularly for migrant and foreign workers to raise their personal

grievances. Many of these workers do not even know their employment rights and obligations. Language is often a significant barrier. One potential way to address this is to translate a range of publications and fact sheets into other languages and making these available on the Department’s website.

7.2 Many employees are also deterred from raising personal grievances for fear (real or

perceived) of compromising their chance of being employed elsewhere. I have personally seen job application forms that ask applicants whether they had raised any personal grievances with their current or previous employer. The question is completely irrelevant, unnecessary and very likely to unfairly prejudice an applicant’s employability, particular since the term personal grievance is defined very broadly.

7.3 The employee is within their rights to raise a personal grievance and it is unfair to hold it

against those who had raised genuine grievances. I note that an applicant may legally suppress minor crimes after 7 years, but there is no time limit on questions about past personal grievances. The prospect of a personal grievance “history” would deter an employee from raising a personal grievance. Workers are most vulnerable in the pre-employment stage and they cannot raise a personal grievance until they become an employee. Any prohibited or unethical discrimination is likely to go unchecked.

7.4 One potential way to address this is to prohibit employers and their agents from asking

whether an applicant had raised a personal grievance, and to allow the Authority jurisdiction to hear alleged breaches of such prohibition.

8 Impact on Small or Medium Enterprises – Trial Periods Summary: The current law on trial period should not be extended, either in the length of the trial

period or the size of the business to which it applies. A trial period fundamentally and detrimentally affects the rights and security (actual or perceived) of new employees in a critical phase. In reality, it is highly unlikely for many employees to engage in real and meaningful negotiations on the terms of a trial provision due to inequality of power in most employment relationships.

8.1 Although trial periods were intended to expand opportunities for job applicants who would not otherwise find employment without an agreed trial period, it can also apply to many other new employees hired in smaller businesses to their disadvantage.

8.2 A trial period fundamentally affects the actual or perceived security of employment of new

employees in a critical phase where they are expected to make new connections and adjust in a new workplace with different underlying cultures, politics, duties, expectations and rules.

8.3 Although a trial period only applies where both parties have agreed to a trial provision,

however in reality, employment agreements are often negotiated in an environment where there is inequality of power between the parties. This means it is highly unlikely for many employees to engage in real and meaningful negotiations on the terms of a trial provision. Indeed, the Act acknowledges the existence of inequality of power in employment relationships and one of the express objects of the Act is to address the inequality in building productive employment relationships. This object needs to be recognised and given some weight in making any further changes.

8.4 The prospect of facing a possible trial period also has the ability to adversely affect the

labour mobility of employees and the incentives to move onto more suitable job opportunities. It is important for employees with dependents to be able to seek alternative employment that provides better work-life balance without having to sacrifice their security of employment. Further, in the current recession many more people are employed in jobs that under-utilise their qualifications, experience or abilities. When the economy and employment opportunities improve, employees should not be discouraged from going to jobs that offer better opportunities to further develop on their past and current experience and abilities.

8.5 During a trial period under sections 67A and 67B, an employer may give notice to dismiss

an employee for any reason whatsoever or for no reason at all, and the employee cannot bring a personal grievance or any other legal proceedings in respect of the dismissal.

8.6 The current law is already much wider than the Government’s election policy of allowing

employers to “terminate the employment relationship for performance” during a 90-day trial period.7 This policy was reinforced in two press releases by Kate Wilkinson MP in September 2008, which stated “personal grievance provisions would still apply for matters not related to performance”. 8

8.7 However, it is clear that the current law on trial period reaches much further than

performance matters. It does not preclude an employer from taking advantage of a trial period to dismiss an employee for non-performance reasons such as minor misconduct, temporary absence due to illness or injury, minor breach of policy, or personal differences with a manager or colleague. In these situations, the employer is not required to provide the employee a reason for the dismissal or an opportunity to comment before giving notice to dismiss the employee during the trial period.

8.8 Further, the trial period amendment was passed in less than a week using parliamentary

urgency. This precluded any public participation and consultation through the select committee process and short-circuited opportunity for a fuller considered debate in Parliament. The Equal Employment Opportunities Commissioner noted that the amendment Bill was “a fundamental change to employment law which requires serious consideration”. 9

7 National’s Employment Relations Policy July 2008 - http://www.national.org.nz/Article.aspx?ArticleID=28271 8 Embarrassed EPMU seeks to mislead – http://www.katewilkinson.co.nz/index.php?/archives/89-Embarrassed-EPMU-seeks-to-mislead.html, and CTU joins Labour in misleading scare campaign – http://www.katewilkinson.co.nz/index.php?/archives/90-CTU-joins-Labour-in-misleading-scare-campaign.html 9 http://www.hrc.co.nz/home/hrc/newsandissues/commissionrequestsselectcommitteeon90daybill.php

8.9 It is also somewhat surprising that in the third reading of the trial period amendment Bill

Hon Kate Wilkinson, Minister of Labour, said the amendment Bill retains the provisions of good faith under section 4 and continued:

“Good faith requires an employer to provide to affected employees access to information relevant to the continuation of their employment and the decision, and to give an opportunity to comment. This bill expressly protects and is subject to that overriding provision of good faith.” 10

8.10 What she said was consistent with the Government’s election policy, which assured the

voters that “good faith provisions will still apply”.11 However what Hon Kate Wilkinson said above was directly contrary to section 67B (5)(a), which includes the following provision:

“the employer is not required to comply with section 4(1A)(c) in making a decision whether to terminate an employment agreement under this section”

This confusion would have easily been clarified through a select committee process. 8.11 There are also numerous deficiencies and ambiguities in the current legislative provisions

on trial periods. These are discussed by Professor Paul Roth in the Employment Law Bulletin published shortly after the rushed amendment Bill was enacted. 12 Again, many of those deficiencies and ambiguities would have likely been resolved after public consultation by the relevant stakeholders through the select committee.

8.12 In short, the current trial period law, which was passed under urgency without public

scrutiny, is flawed and much wider than the Government’s election policy, to the detriment of certain new employees, and even the Minister misunderstood the effects of the amendment Bill. The current law on trial period should not be extended, either in the length of the trial period or the size of the business to which it applies.

9 Raising a Personal Grievance 90 Day Period Summary: Under the current legislation, personal grievances have to be raised within a period

of 90 days from the date the grievance arose or came to the employee’s notice. This should not be reduced for 4 main reasons. In summary, employees should not be unduly rushed to make a hasty decision on whether to raise a personal grievance.

9.1 Firstly, the 90-day period has existed since at least the commencement of the Employment

Contracts Act 1991. It has become well-known and generally accepted by most employers and employees. Therefore it should not be disturbed. Further, all employment agreements (whether individual or collective) are currently required to contain a reference to the period of 90 days within which personal grievances must be raised. There is no compelling need to require all parties to amend their employment agreements.

9.2 Secondly, a period of 90 days is quite a short period of time, providing only a brief window

of opportunity for employees to fully consider and decide whether to raise a personal grievance. Employees can be perceived by management and colleagues as “trouble-makers” for “speaking up”. Hence, the decision whether to raise a personal grievance can be agonising for many employees, especially if employment is ongoing. Within the 90-day

10 Third reading speech – Hansard 9 December 2008 (http://www.parliament.nz/en-NZ/PB/Debates/Debates/Daily/e/4/4/49HansD_20081212-Volume-651-Week-1-Tuesday-9-December-2008-continued.htm) 11 National’s Employment Relations Policy July 2008 - http://www.national.org.nz/Article.aspx?ArticleID=28271 12 Employment Law Bulletin [2009] ELB 7

period, the employee may need to seek independent advice. This may require making time outside of work for appointments and time for the advisor to undertake research and prepare an opinion. Employees are also likely to adopt a “wait and see” approach to allow the situation to settle and see whether the situation improves or deteriorates.

9.3 Thirdly, actions taken by employers can deeply affect and unsettle employees and their

family. The loss of employment may be accompanied by the loss of pride, self-esteem, confidence and security. Employees may feel pity, shame, embarrassment, panic, anxiety and depression. In the midst of dealing with the effects of the personal grievance, employees do not necessarily contemplate the need to promptly raise a personal grievance. Immense loss suffered by employees will take time to sink in, and employees will go through stages of grief. Employees may also need to seek medical assistance, process a claim under an income insurance policy, apply for social welfare / assistance and make financial arrangement to support current levels of debt. All these will take time.

9.4 Under section 120 of the ERA, if an employee has been dismissed s/he may, within 60

days after the dismissal, request his/her employer to provide a statement in writing of the reason for the dismissal. The employer must provide such statement within 14 days after receiving such request. The 90-day limitation period for raising a personal grievance is inclusive of the period for requesting the reason for dismissal and the period for the employer’s response. Taking into account the wider scheme of the Act, it is apparent that the 90-day period only serves to provide a brief window of opportunity for employees to fully consider and decide whether to raise a personal grievance. It should not be further shortened.

Eligibility to Raise a Personal grievance Summary: All employees should be equally protected from being unjustifiably dismissed,

regardless of their level of salary. A “salary cap” would draw an arbitrary line that does not take into account various elements of an employee’s total remuneration package. It cannot be assumed that those who earn more are in a better position to negotiate individual customised termination provisions, particularly employees recruited from overseas.

9.5 If employees need to be employed for a specified minimum period before they are eligible

to raise a personal grievance, this would essential provide for a de-facto trial period for all new employees, except there may no longer be a requirement for the trial period to be mutually agreed in writing. The current law on trial period should not be extended, either in the length of the trial period or the size of the business to which it applies. I reiterate my above submissions on trial periods.

9.6 All employees should be equally protected from being unjustifiably dismissed, regardless of

their level of salary. It is unsatisfactory for some employees to be subject to a default employment-at-will regime. It is also unsatisfactory to require the Authority and the Court to interpret potentially lengthy and complex termination provisions that will need to be negotiated individually in the absence of coverage under the Act.

9.7 Many employers operate a total remuneration package for their highly paid executive and

managerial staff. This may include a private motor vehicle allowance, share ownership and options plan, performance bonuses, accommodation subsidy, international travel, overtime payments, health insurance, gym membership and professional association membership. Further, it is envisaged that the remuneration of some highly paid employees will comprise a significant commission or piece-rate component.

9.8 Using a salary cap to separate those who are automatically eligible to protection from

unjustified dismissal and those who are not would draw an extremely artificial line,

especially given the fact that the non-salary component (such as performance bonus) can be significant for many executive and salary employees.

9.9 Although some highly paid staff in NZ are arguably be in a better negotiation position than

other employees, many of NZ’s highly paid staff are recruited from overseas – this include healthcare professionals, tertiary academic staff, senior scientists / researchers, senior management staff, engineers, architects and senior ICT professionals. Many of these applicants are not familiar enough with the specific employment laws in NZ to be able to negotiate individual customised termination provisions. The law should protect these staff and should not discriminate against those who receive a salary in excess of a “salary cap”.

Three Year Limit 9.10 Currently, a personal grievance cannot be commenced more than 3 years after it is raised

with the employer. For all other actions (such as breach of contract, recovery of wages and penalty for breach), the limitation period is 6 years, a significantly longer period.

9.11 The time between raising a personal grievance and commencing an action can be

attributed to efforts by both parties attempting to resolve a personal grievance. The law must allow ample time for the parties to be able to take all steps towards working out their differences before a party has to contemplate filing a statement of claim.

9.12 It is rare for employees and employers to unduly delay the commencement of an action. It

is simply not in their interest to drag the matter out. Both the employers’ and employees’ case can also be prejudiced by the passage of time. Most employees prefer to promptly resolve their personal grievance so they can move on.

10 Effectiveness of Remedies

Reinstatement Summary: Reinstatement should continue to be a primary remedy where the employee has a

personal grievance and wishes to be reinstated. The fact that reinstatement may be infrequently claimed or infrequently awarded does not render it unnecessary or ineffective. Where there is a wrong, there must be an adequate remedy. In some situations, reinstatement can be the only effective remedy. These include employees whose terms and conditions are unilaterally altered (such as a demotion) and employees who have very little employment opportunities elsewhere at an equivalent level in his/her town or anywhere else in NZ.

10.1 Section 125 provides that if the employee has a personal grievance and wishes to be

reinstated, reinstatement of the employee must be provided as a remedy if it is practicable to do so. The fact that reinstatement may be infrequently claimed or infrequently awarded does not render it unnecessary or ineffective. On the contrary, it provides an indication that the practicability of reinstatement is given proper consideration and awarded sparingly in appropriate situations.

10.2 To deprive employees of reinstatement as a primary remedy will effectively weaken the

availability of reinstatement, which will risk conveying the message that treating employees unfairly and unreasonably is merely a business costs to be factored into employers’ decision. As Chief Judge Goddard acknowledged in Ashton v Shoreline Hotel13, to award only compensation for the job loss instead of reinstatement “is to create a system for

13 Ashton v Shoreline Hotel [1994] 1 ERNZ 421

licensing unjustifiable dismissal”. This case was decided under the Employment Contracts Act which did not provide reinstatement as a primary remedy.

10.3 In some situations, reinstatement can be the only effective remedy. Where an employee

had been unjustifiably dismissed, the employer should not be entitled to deprive that employee of their employment without good reason.

10.4 NZ is a small country with some specialised employers operating in niche sectors. A

specialised employee who has been unfairly dismissed may have very little employment opportunities elsewhere at an equivalent level in his/her town or anywhere else in NZ. Monetary compensation simply cannot remedy an employee’s loss of a job.

10.5 Long-serving employees, particularly those in their later stages of their working life, may

have spent many years building up company-specific and product-specific knowledge and experience that are irrelevant or not transferable to other workplaces and industries. They are very unlikely to be re-employed elsewhere at a similar level in his/her town or anywhere else in NZ.

10.6 Under section 123(1)(a), it is clear that reinstatement may be ordered where an employee

has a personal grievance, and this is not limited to unjustified dismissals. By way of example, if an employer demotes an employee without any justification, the Authority may order reinstatement of the employee to his/her former position if it is practicable to do so and if reinstatement is sought by the employee. In such cases, reinstatement is absolutely necessary to remedy the wrong. Otherwise the employee may be forced to work in a demoted position and no amount of money will be able to effectively compensate for the full extent of the employee’s true loss – a job or position that s/he should not have lost.

Monetary Compensation Summary: The rights established under the Act must be accompanied with effective remedies,

including monetary remedies and reinstatement; otherwise those rights become ineffective. Loss suffered by an employee as a result of an unjustified action by the employer should be fully compensated. The employee should be no better or worse off than if the employer had not taken the unjustified action. This is a fundamental principle of compensation. Generally speaking, the current levels of compensation are too low. The cost of enforcing a right has in many cases has rendered any compensation nugatory, especially given the low levels of cost awarded to the successful party. The Court of Appeal guidelines on the upper limits for compensation awards have resulted in considerable level of inertia and very little movements in compensation levels over a sustained period of time.

10.7 The Employment Relations Act and the institute created under it must not lose sight of the

traumatic experience, human suffering and profound financial effects on the employees, their family and their livelihoods that result from unjustified actions, dismissal and other serious breaches of obligations towards employees. Loss suffered by an employee as a result of an unjustified action by the employer should be fully compensated. The employee should be no better or worse off than if the employer had not taken the unjustified action.

10.8 For many employees today, their job is likely to be their most significant asset and source

of income, economic security, pride, status and identity. The loss of employment in many cases will destroy an employee’s self-esteem, affect their ability to meet mortgage payments and affect the standard of living of the employee and those who depend on them.

10.9 The previous Chief Judge of the Employment Court had noted that levels of compensation were too low.14 Similarly, a Court of Appeal judge said that “having regard to the costs and expenses of litigation, the right to compensation for humiliation, loss of dignity and injured feelings has become an empty right.” 15 He went to comment that a combination of the passage of time tends to freeze awards at a level that becomes inadequate while “innate judicial conservatism and the doctrine of precedent” combine to preclude any effective review. These comments are relevant then and they are still relevant today.

10.10 The practice of the Court of Appeal has been to issue guidelines on the upper limits for

compensation awards, and to promote the principles of moderation and consistency. Although the upper limits set by the Court of Appeal do not operate as a mandatory cap, they attract from the Authority a considerable level of inertia and reluctance to deviate.

10.11 It is clear from available statistics that around 85% of the employment relationship

problems are resolved before reaching the Authority. Many of those settlements will involve cases that are simply uneconomic to proceed beyond mediation. However even the remedies awarded in most cases that do reach the Authority are extremely modest. And in some cases, the remedies appear to be inadequate to compensate for the employee’s profound economic and non-economic loss (distress anxiety, depression etc).

10.12 The Act accords employees the right to fair and reasonable treatment. The good faith

obligation permeates the employment relationship. The rights established under the Act must be accompanied with effective remedies, including monetary remedies and reinstatement; otherwise the rights under the Act become a form of window dressing, which is accessible only by particular classes of employees with the means and ability to pursue their individual interests. Further, remedies must also be effective to achieve an appropriate level of deterrence for employers.

11 Assistance to resolve Problems at an Early Stage 11.1 Mediation is often understood as, or assumed to be, a forum for employment relationship

problems to be ‘settled’. However, parties who feel aggrieved want justice to be done, and justice must be seen to be done. The objectives of achieving justice and a focus of actually resolving problems need to be more prominent in the informal dispute resolution process. My observation is that some of the trivial cases heard by the Authority should not proceed beyond mediation. This occurs because one or more of the parties did not feel “vindicated” during mediation. Parties to dispute have many interests; money is not the only thing of interest. Too often, those other interests (other than money) are not met.

11.2 In my observations, some mediators tend to be too averse to conflict and too often they

proceed to using “shuttle diplomacy” too soon. Shuttle diplomacy is a practice where parties are directed to separate rooms, and the mediator simply moves back and forth between the parties to act as a conduit. There is very little value in this practice because it only facilitates the exchange of settlement positions. It cuts off any real discussions that could lead parties to understand each other more or appreciate each others’ interests and frustrations, and understand why they feel aggrieved and disenfranchised. Reaching better understanding of each others’ interests and perception is not just helpful in actually resolving immediate problems; it serves as a useful education tool for future behaviours.

14 T G Goddard, “A Right Without a Remedy? Compensation and Costs in Personal Grievance Cases” – Paper delivered to the Employment Law Institute, 2002 15 New Zealand Fasteners Ltd v Thwaites [2000] 2 NZLR 565 Thomas J