Employment law change to reduce remedies paid to aggrieved employees who behave or perform badly

Minister for Workplace Relations and Safety Brooke van Velden says employees can be incentivised to “try their luck” raising a personal grievance in the hope of getting a payout. Photo / Mark Mitchell

The Government has unveiled plans to reduce the amount aggrieved employees can be compensated by their employers – to zero in some cases.

Minister for Workplace Relations and Safety Brooke van Velden has detailed proposed changes to the Employment Relations Act, which are aimed at giving egregious employers more power in disputes with employees, who have behaved badly themselves.

She is worried that as it stands, employees can be incentivised to “try their luck” raising a personal grievance (usually at a cost) in the hope of getting a payout.

Both the Employment Relations Authority and Employment Court can make an employer compensate an employee if the employee can successfully argue they’ve been personally aggrieved – unjustifiably dismissed, sexually harassed, or treated unfairly for lawfully refusing to work in certain circumstances, for example.

Remedies can be discounted to reflect the employee’s culpability in the dispute.

For example, the authority might reduce the amount it requires an employer to pay if it finds the dispute stemmed from the employee performing terribly.

Van Velden wants to change the law, so that employees found to have engaged in “serious misconduct” get nothing, even if their employers are found to have acted egregiously and their complaints are upheld.

“I’ve heard of personal grievance cases where employees have engaged in serious misconduct such as violence, fraud and theft, yet their former employer has had to pay them financial remedies or reinstate them into their roles,” van Velden said.

For employees who did something wrong, but didn’t go so far as to engage in “serious misconduct”, van Velden wants the law to clarify that their remedies can also be wiped out completely, or discounted by up to 100%.

She argued remedy discounts to account for employees’ bad behaviour had been reduced following a 2016 court ruling. Meanwhile awards to employees had risen.

Van Velden also wants to remove the ability for an employee to be reinstated in a role, and compensated for “hurt and humiliation”, if their behaviour contributed towards the dispute.

She said she’d heard of a case where a health professional was dismissed for being physically violent toward a patient but got their job back after their personal grievance complaint was upheld.

“Dismissing an employee is often a decision businesses make very reluctantly, given doing so can lower the morale of the workplace, risk harming the employer’s reputation, and because employee turnover is generally costly,” she said.

Council of Trade Unions acting president Rachel Mackintosh believed the proposal would exacerbate power imbalances between employers and workers.

“The personal grievance process is already a tough regime for workers and under the current law, many workers lose their cases, and many workers have their remedies reduced, sometimes by significant amounts,” she said.

“What the Government seems to be saying is that if a worker has been found to have contributed to the problem in any way, then they should not receive any financial remedy. They are trying to tie the courts’ hands and prevent them from establishing justice.”

However, Employers and Manufacturers Association head of advocacy Alan McDonald believed the changes would “help restore confidence in the fairness of the system”.

He believed employers shouldn’t be disproportionately punished for minor procedural flaws in contracts and paperwork if their employees are the ones more seriously at fault.

McDonald said there had been a rise in the number of personal grievance claims, partially thanks to “no-win, no-fee” services offered by legal advocates, which encourage employees to pursue claims with little risk to themselves.

“Unfortunately, this trend has led to a significant strain on employers, who often feel forced to settle rather than fight.”

Van Velden said she would introduce a bill – the Employment Relations Amendment Bill – to Parliament next year to bring about the changes.

She hoped they would give employers more certainty and reduce their costs.

Changing the personal grievance regime is part of Act’s coalition agreement with National.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary press gallery. She specialises in Government and Reserve Bank policymaking, economics and banking.