Please note, this is a script from Episode Four of our video series, Employment Law: What to look out for in 2023, which you can access here.
Welcome to the fourth instalment of 'What to look out for in Employment Law in 2023'. Today, we will cover Personal Grievance Remedies.
A lot of the work we do involves assisting employers and responding to personal grievances raised by employees or former employees. That could include grievances regarding dismissals, disadvantages, or discrimination.
Having an understanding about how much employees are being awarded for personal grievances by the courts can help assess risk, and also strategies for resolving personal grievances amicably. So, we thought we'd spend a little bit of time running through recent trends and remedies in New Zealand.
There are three main types of personal grievance remedies we're going to cover today:
- Compensation for lost remuneration
- Compensation for hurt and humiliation
As many of you will be aware, reinstatement is the primary remedy in New Zealand. That means if an employee wins their grievance and seeks reinstatement, the authority or the court is required to order reinstatement if it's both practicable and reasonable.
While there are always those genuine cases, I do think it would be incredibly difficult to return to a workplace from which you've been fired, and in my experience, where reinstatement is claimed, it is often done for strategic reasons to increase settlement amounts.
We are seeing reinstatement ordered less frequently at the moment. I'd say that's a combination of a buoyant job market and long waits from when a matter is filed - perhaps up to 12 months before you can get a hearing date. That makes looking for alternative employment and moving on with your life more attractive for an employee with a grievance.
Compensation for Lost Remuneration
Turning now to financial remedies, and starting with compensation for lost remuneration and benefits. The starting point is that it isn't just wages or salary, it's a financial award of all losses to the employee that are monetary.
Second main point to note is that the employee receives their actual loss if they establish a grievance. That's something that is difficult for an employer to control or assess as it does come down to how long the employee has been out of the workforce.
In saying that, an employee does have an obligation to mitigate their loss. That means they can't just sit at home and wait for the hearing and will in a hearing need to establish how they've actively searched for work if they hope to receive compensation.
There is a series of cases which gives rise to the argument that if an employee would have lost their job in any event, even if a good process was followed, that a low award of remuneration or no remuneration should be ordered. That's because the employer didn't cause the employee's loss. For example, if an employee is caught taking money from the till, even if a good process was followed, it's likely they would have lost their job.
Compensation for Hurt and Humiliation
The second type of financial compensation is compensation for humiliation, loss of dignity, and injury to feelings. This is commonly called hurt and humiliation compensation, but it's actually broader than that.
So, the quantum is based entirely on the harm experienced by the employee as a result of the termination or the disadvantage. The court takes a banded approach to assessing compensation:
- $0 - $10,000 for low harm
- $10,000 - $40,000 for medium harm
- $40,000 plus for high harm
The authority takes a less formulaic approach to assessing quantum and awards tend to be lower.
Compensation for hurt and humiliation is tax-free and tends to be paid out as part of a settlement. When you're engaging with an employee in relation to settling a dispute it's important to bear this in mind in terms of the likely cost or potential cost of going to litigation in terms of assessing settlement quantum.
It's important to be mindful of these thresholds when assessing compensation in a settlement. The amount of any agreed compensation should be a round figure and should not be taxable income in disguise to avoid any questions from the IRD.
Thanks for watching the final instalment of our series 'What to look out for in Employment Law in 2023'. Hope to see you again soon.