Many personal grievances in the Employment Relations Authority or Employment Court aren’t worth that much money. That is especially when compared to the amounts involved in commercial litigation in the District Court or High Court. While the Authority and Court can hear very significant claims worth many millions of dollars, most of their work is concerned with personal grievances.
If a person wins an unjustified dismissal claim, the Employment Relations Act 2000 says the Authority should ordinarily award the lesser of 3 months’ ordinary time remuneration or actual lost wages in personal grievances where employees have lost wages. While the Authority has a discretion to award more, this is a typical award. And in addition to this, the other most common remedy, is compensation for humiliation, loss of dignity and injury to feelings. The most recent compensation tables from the Authority show most awards for are still between $5,000 and $5,999. Having said that, there are recent decisions from the Employment Court indicating such awards should increase, so it may be that awards of $10,000 or more are becoming more common.
What this means is that for a worker on the New Zealand average (not median) salary of $49,000 per annum, a successful personal grievance might result in an award of around $17,750. Once you’ve been to mediation and the Authority, however, much of that award might be eaten up in legal fees. Similarly, employers may find themselves spending a lot in legal fees defending claims that aren’t worth that much money.
One approach that we understand it going to happen in the Authority are “fast track” hearings. This is where the Authority will just get the employee and the relevant managers into a hearing room and – without requiring any written evidence, and with limited documentation – just getting on and asking questions and making determinations. This is what the Authority was originally intended to do; and we support this new practice. It is likely to mean lower costs, but easier access to justice.
In terms of costs, the Authority awards costs on a daily tariff system. This means that the successful party in the Authority is entitled to an award of $4,500 per hearing day in normal circumstances.
There are pros and cons to this approach. A simple and relatively low tariff means employers are often put to the expense of defending unmeritorious claims without the ability to recover their legal costs if they succeed. Similarly, employees may find that much of their award is eaten up in legal fees, and they do not get much in return.
On the other hand, the tariff approach brings certainty and predictably, and the knowledge that you won’t be able to recover all of your legal costs. This encourages settlement at an early stage. Most personal grievances don’t need to be ventilated in a courtroom, and can be sorted out without litigation.
However, sometimes parties can’t be reasonable, reinstatement might be genuinely sought, or there may be a genuinely complex legal issue involved, so it is inevitable some personal grievances will head to the Authority to a full-on hearing. While parties can represent themselves in the Authority, they are often very reluctant to do so in what can be an alien environment. The involvement of lawyers also assists parties to put their best foot forward, as well as focusing the Authority’s mind on relevant points and assisting it to reach the right decision.
But in terms of costs, for those that don’t follow this type of “fast track”, why not just increase the legal costs that parties can recover in the Authority? Policy-makers and judges are concerned that this might act as a barrier to justice to ordinary employees. Employees might be put off bringing claims for fear of an adverse costs award. This is particularly the case for unjustified dismissals, as it is very hard for a person who has lost their job and is out of work to afford legal fees and court fees.
In other jurisdictions, hearing fees alone may act as a barrier to justice. A recent judgment of the Supreme Court of the United Kingdom has highlighted these issues.
In R (on the application of UNISON) v Lord-Chancellor  UKSC 51, a large trade union challenged the legality of the fees individuals had to pay to bring a claim in the Employment Tribunal, a judicial body roughly equivalent to New Zealand’s Employment Relations Authority. The fees were either £390 or £1200 depending on the type of claim, and had to be paid unless the claimant was impoverished. The Court heard evidence that since the introduction of the fees, the number of claims in the Employment Tribunal had dropped dramatically. By way of comparison, the filing fee for the Authority in New Zealand is $71.56, and in the Employment Court the filing fee for challenging a decision of the Authority is $204.44.
The Supreme Court of the United Kingdom unanimously held the filing fees imposed by the Employment Tribunal were unlawful, as they were unaffordable for most people and acted as a barrier to access to justice. The fees were also disproportionate to the value of most claims brought before the Employment Tribunal and needed to be affordable in a real sense, as opposed to a theoretical sense. The Court found the constitutional right of access to the courts is inherent in the rule of law: it is needed to ensure that the laws created by Parliament and the courts are applied and enforced.
A similar principle operates in New Zealand, and costs awards in the Authority are modest to reflect its informal procedures, and to avoid oppressive costs orders that may prevent parties (whether employers or employees) from accessing the courts.
Parties can give themselves something of a costs insurance policy by making offers of settlement “without prejudice save as to costs”. An offer without prejudice save as to costs is “off the record” unless the Authority has to make a costs decision. Parties who turn down offers without prejudice save as to costs and who don’t do any better in the wash up run the risk that they’ll have to pay costs or increased costs to the other party. These sorts of offers encourage parties to settle matters without the need for court intervention, although whether these offers are effective and can be taken into account depends on the circumstances.
So, while costs in the Authority are modest, there are tactics parties can employ and new processes on the way to get the best bang for their buck.