Value of compensation increasing in workplace claims

Rochelle Farmer, a lawyer at Cullen – The Employment Law Firm, discusses new developments in employment law, including an increase in amounts of compensation and the use of tiers when determining compensation. 

Higher compensation amounts have been awarded in the employment jurisdiction in recent months. A new approach of considering compensation in three bands of low, mid-range, or high level loss or injury is also being used.

Chief Judge Inglis of the Employment Court recently noted an apparent upswing in terms of quantum of awards for non-monetary loss over the past two years.[1] Between 2016 and 2018, such awards at the Employment Relations Authority have increased by 72 per cent on average. Between 2013 and 2016 the median compensatory award was $4,138, whereas between 2016 and 2018 it was $7,111.[2]

While the upward trend in compensation for compensation under s 123(1)(c) of the Employment Relations Act 2000 may look promising for potential employee claimants, employers are likely to be less enthused.

Waikato District Health Board v Archibald [2017] NZEmpC 132

The Employment Court case of Waikato DHB v Archibald introduced the new approach of compensation bands. In 2016 the Waikato DHB carried out a restructure and disestablished the role of a Health Promoter, Mrs Archibald, who had been with the DHB since 2003. The DHB gave Mrs Archibald the stark option of taking up a new position which required her to travel nearly 3 hours each day or having her employment terminated.

Mrs Archibald was 67 years old, in a fragile physical state, and felt the excessive travel would “destroy” her. She elected to have her employment terminated because she could not face the travel. The DHB said she was not entitled to a severance payment as she had been offered redeployment.

Mrs Archibald brought her claim to the Employment Court which found she was unjustifiably dismissed. Waikato DHB was required to pay Mrs Archibald her severance pay and $20,000 in compensation for humiliation, loss of dignity, and injury to feelings.

In determining the compensation to be awarded, Chief Judge Inglis identified three broad bands to assist in the analytical process:

• • Band 1 – involving low level loss or injury
  • Band 2 – involving mid-range loss or injury
  • Band 3 – involving high level loss or injury

The Court considered Mrs Archibald’s loss would fit within the “mid-range” band and the $20,000 awarded was considered a moderate amount of monetary compensation. It is worth noting that while the popular view is that Waikato DHB v Archibald instituted a banding approach, the Chief Judge said she found the bands helpful in the particular case.[3]

The Employment Relations Authority has applied the banding approach in deciding a number of recent cases, including Maday v Avondale College Board of Trustees.

Maday v Avondale College Board of Trustees [2018] NZERA Auckland 131

Mrs Maday was an English and Classics teacher at Avondale College. She struggled with student disruption which resulted in a review of her competency and whether she had failed to meet appropriate professional standards. The College’s processes were prolonged, extensive, and Mrs Maday was never given clear details of the allegations against her or the identities of the complainants. Ultimately she was dismissed.

The Employment Relations Authority heard Mrs Maday’s claims for unjustified disadvantage and unjustified dismissal. The Authority was satisfied the events had a profound effect on Mrs Maday’s health, self-esteem, and general wellbeing. Considering the new method of considering broad bands of loss or injury, the Authority granted two $25,000 awards for each of the two grievances proven ($50,000 total).

Avondale College is challenging the Authority’s decision to award $50,000 compensation in the Employment Court. In the interim the Court has granted a stay of execution for payment of the $50,000.[4]

What are the monetary limits for the bands?

In 2016 Chief Judge Inglis co-presented a paper to the Employment Law Conference and introduced the notion of applying “bands”.[5] The bands referred to for discussion purposes were:

• • Band 1 – nil to $10,000;
  • Band 2 – $10,000 to $50,000; and
  • Band 3 – $50,000 and over.

These figures reflected the bands of the Human Rights Review Tribunal.[6]

In Lloyd v Healthy Business Investments Ltd the Authority member considered that, on the basis of the compensation awarded in Waikato DHB v Archibald the three bands would theoretically be:[7]

• • Band 1 – $1 to $13,333
  • Band 2 – $13,334 to $26,666
  • Band 3 – $26,667 to $40,000

The monetary range applying to each band is still unsettled. While there is no statutory limit on what may be awarded as compensation, the highest award made by the Employment Court has been $50,000. It is anticipated that exceptional evidence of harm would be required for the Court to award greater than $50,000.

How much compensation to claim?

Following Waikato DHB v Archibald Chief Judge Inglis has said that unrealistic notions about likely compensatory awards are unhelpful in a jurisdiction in which parties are encouraged to attempt, in good faith, to resolve their differences at an early stage.[8] While this is important to bear in mind, counsel must be careful not to understate the compensation sought in their pleadings. In Dawber v Church Lane NZ Ltd the Authority Member would have awarded $25,000, however only $10,000 had been pleaded so the Authority did not award more.[9]

The bands are essentially a tool to assist with analysing harm and provide a principled framework for compensation awards. As compensation rises employers should be increasingly careful to follow fair processes; the consequences of doing otherwise are becoming more expensive.

Lawyer Rochelle Farmer has an LLB and a BA majoring in Criminology and International Relations from Victoria University of Wellington. Having won the 2015 Client Interviewing competition at Victoria University, Rochelle particularly enjoys meeting clients and working with both employers and employees to see their problems resolved. Email Rochelle via rochelle@cullenlaw.co.nz

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