Compensation Awards in the Employment Relations Authority: An Update

A few weeks ago we published an article about the banding approach to assessing compensation awarded to successful employees in the Employment Relations Authority.

Since then, the Employment Court has released its decision of Richora Group Ltd v Cheng [2018] NZEmpC 113, and provided more guidance on the banding approach.  

In this case Wai Ying (Melody) Cheng  (Cheng) claimed she was constructively dismissed from her employment with Richora Group Ltd (Richora) and was due unpaid wages. Cheng was successful in the Employment Relations Authority (ERA) and Richora appealed to the Employment Court (EC).

Cheng, and the owners of Richora, were part of a small Chinese community in Rotorua. When Cheng began working for Richora she was in a fragile emotional state and suffered from depression. She began working with Richora on a work experience basis and an employment relationship developed.

During the course of her employment, Cheng was expected to work long hours and was required to be available on demand to respond to questions from Richora. She was not paid for a period of time she worked for Richora.

A draft employment agreement was eventually prepared but Richora thought that Cheng had reported the company to IRD about wages and tax issues, and the agreement was never finalised. Cheng denied ever contacting the IRD.

Following this, a series of events happened that the Court could not piece together, however it was determined that the locks were changed at the Richora office whilst Cheng went out for lunch one day. Cheng was then invited to a “serious meeting”, which she was given no information about. At the meeting, Cheng was offered $3000.00 if she signed an employment agreement and resigned.

Ms Cheng suffered an acute stress reaction and suffered significant mental health issues as a result.

Following her dismissal, one of the owners of Richora took to the Rotorua Chinese Community of Commerce online chat group to discuss the entire scenario. The owner named Richora and himself, but did not name Cheng.

Unsurprisingly the EC held that Cheng was unjustifiably dismissed. Rochera was ordered to pay unpaid wages,  three months lost wages and $20,000.00 compensation pursuant to section 123(1)(c)(i) of the Employment Relations Act 2000 (Act).

With respect to the section 123(1)(c)(i) compensation awarded to Cheng, the EC stated that, “It is a truism that what may be devastating to one employee may be ‘water off a duck’s back’ to another” and that such evidence was key in determining whether an employee was hurt. “

The evidence in this case showed that Cheng was significantly hurt, and “the losses she suffered as a result of the plaintiff’s breach were acute, and manifested in a dramatic decline in her physical and mental health …  and medical intervention.” Medical records supported these conclusions.

Although Cheng did not seek an increased remedy as a result of Richora’s posts on Facebook, the EC discussed, in some detail, whether an employee’ actions post termination can increase or decrease an award under section 123(1)(c)(i) of the Act. The EC concluded that they would not consider that a compensation award can be increased due to an employer’s post termination conduct:

If I had been required to decide the point I would have approached the issue, absent further, fuller submissions, on the following basis. The Act provides that where the Court has determined that an employee has a personal grievance, it may provide remedies. The remedy is directed at addressing losses sustained as a result of the breach giving rise to the grievance. Those losses may be more or less depending on the circumstances, including the way in which the harm was inflicted. Losses which otherwise arise, such as those occurring in this case, may give rise to relief via a separate action but ought not to inflate an award of compensation under s 123(1)(c)(i). Accordingly I would not have had regard to any harm suffered as a result of Mr Li’s post-termination communication.”

The EC concluded that due to the level of harm suffered by Cheng, her hurt fell within the high end of the Archibald bands at band 3.  Looking at the assessment of bands in other cases, the EC considered the bands to be: “$0-$10,000 (band 1); $10,000-$40,000 (band 2); over $40,000 (band 3).

However, Cheng was only awarded $20,000 because that is the figure she had requested.

The EC also stated that the type of grievance the employee suffers, length of employment, and the awards given in the Human Rights Review Tribunal were generally irrelevant in setting the quantum of an award.

Looking at other comparable cases in the employment jurisdiction the EC commented that there has been a notable “upswing in quantum” and as a result, “older judgments need to be considered through an up-to-date lens so as to avoid a distorting effect.”

Workplace Law Team

If you have any queries in respect of the above, or any other workplace law issues, please contact a member of Lane Neave’s Workplace Law Team:

Employment: Andrew Shaw, Fiona McMillan, Kathryn McKinney, Siobhan Rastrick, Hannah Martin; Holly Struckman; Anna Needham
Immigration: Mark Williams, Rachael Mason, Nicky Robertson, Hetish Lochan, Daniel Kruger, Julia Strickett, Rita Worner, Lavinia Shanks, Winnie Chen, Ken Huang, Sally Stone, Mary Zhou, Sarah Kirkwwood, Lingbo Yu
ACC: Andrew Shaw
Health and Safety: Andrew ShawFiona McMillan

Contact

Andrew Shaw
Partner, Lane Neave

t +64 3 353 8014
m +64 29 244 9001
e andrew.shaw@laneneave.co.nz

Fiona McMillan
Partner, Lane Neave

t +64 9 300 6264
m +64 27 351 2000
e fiona.mcmillan@laneneave.co.nz

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