What's 'ya problem?
Updated: Jun 21
Employment relationship problems happen and its important that you know some key pieces of information.
First of all, there are some key timeframes to be aware of.
An employee has 90 days to raise a personal grievance. This is 90 days from the problem arising or from the date it came to their attention. In some situations, the Employment Relations Authority will accept a PG out of time (for example, if it's not in the employment agreement and the employee didn't know about the timeline this will be a good reason to consider their claim).
An employer has 14 days to respond to the PG.
What's the process from here?
It's always best to refer to your employment agreement for the process if you are ever unsure. Check your policies and procedures too, you must make sure you know your own detail.
Parties must attempt to resolve the problem themselves first. This might be done easily without help or with a representative. If parties haven't been able to resolve the problem then they will need to attend mediation.
If parties cannot settle at mediation then one of the parties can file their problem with the Employment Relations Authority (ERA).
If one of the parties wants to appeal the decision that has been made at the ERA they can take this to the Employment Court.
It is important to note the key differences between mediation and the ERA.
Confidential to the parties who attend
Free from bias and is without prejudice - you can be free to speak without it being held against you (although caution is advised - you can ask me why)
You do not pay to attend (aside from the cost of representation)
You and your employee (with the help of a mediator) will work to resolve the issue
The mediator does not decide who is right and who is wrong
It is kept away from public attention.
Some employers will successfully settle at mediation or outside of mediation through what becomes a negotiation process. This can save time and cost and thus it is common for a Calderbank offer to be made during this process. A Calderbank offer is an offer made by one party, normally a respondent, to settle the claim on terms. The offer is marked “without prejudice save as to costs”. The purpose of a Calderbank offer is to not only to attempt to settle a claim but by using the stated words the offering party is reserving the right to bring the offer to the Court’s (or in this case the Authority’s) attention if the claim is not settled. This is so that the offer can be used for assessing costs once the claim has been determined.
If parties settle themselves they should always sign an MBIE settlement document that is verified by an MBIE mediator to ensure that it becomes full and final so no further action (except for reinforcement purposes) can be taken against the other party.
Employment Relations Authority (ERA)
This is a public forum – anyone can watch the day unfold
Cases are available for anyone to read – it is not confidential
The Authority member decides the merits of the case and will award costs.
It can take up to 3 years to have your day at the ERA
It costs to file at the ERA – as of March 2020 this was $71.56
It can be an expensive exercise from both a financial and reputational aspect - especially if the decision is not in your favour
Costs vary from case to case. A case at mediation should settle faster with less cost. When it comes to actual costs all we can do is review past cases with the ERA to help predict future cases.
The first thing to consider is the compensation award an employee might receive if you (as the employer) has done something wrong (this might include unjustified dismissal, disadvantage at work etc). Employment.govt.nz releases statistics often. The July-December period for 2019 showed that out of 68 cases at the ERA:
12 cases were awarded compensation between $1-5000
11 cases were awarded compensation between $5000-$10,000
17 cases were awarded compensation between $10,000-$15,000
12 cases were awarded compensation between $15,000-$20,000
10 cases were awarded compensation between $20,000-$25,000
6 cases were awarded compensation for over $25,000.
These awards take into account any reduction for contributory conduct. For example, if the employer hasn't followed a reasonable process the employee could receive compensation for:
humiliation, loss of dignity, and injury to the feelings of the employee; and
loss of any benefit, whether or not of a monetary kind, which the employee might reasonably have been expected to obtain if the personal grievance had not arisen.
But if the employee has acted in a way to contribute to the employment relationship problem then the award for compensation will be lowered.
The second cost to consider is lost wages. If an employee can prove that, due to the employers' actions, they have not been able to find subsequent employment they may be awarded payment for lost wages. This cost is usually capped at 3 months. There have been situations where the ERA has extended this threshold so it pays to be careful.
Thirdly, an employer might also be up for paying the employees legal costs. The ERA can also determine the cost - and sets a daily tariff for this. At present, it is $4500 for the first day and $3500 for each day after.
Finally, the employer will always have to pay any outstanding wages and holiday pay that is owing to the employee. Things like annual leave, alternative days, notice periods etc will be taken into account.
In conclusion, the cost of getting it wrong can be extreme. High costs can be avoided if you follow a fair and reasonable process to address your concerns, notwithstanding your obligation to provide full information and an opportunity for the employee to comment before you make a decision. This can be fraught with risk so seek professional help to go about this the right way.