Compensation awards for employees who have suffered emotional harm in the workplace have traditionally been low, which has been favourable for employers facing claims by employees.

Recently, however, compensation amounts have increased and are achieving greater consistency for employees. Employers now, more than ever, need to treat their employees properly to ensure they do not face significant compensation awards for personal grievance claims.

The law

The Employment Relations Act 2000 allows the Employment Relations Authority (ERA) or the Employment Court to award compensation for humiliation, loss of dignity and injury to feelings, where an employee has a personal grievance. This is almost always claimed by employees who say they have been unjustifiably dismissed or otherwise disadvantaged in their employment.

The power to compensate an employee for this type of emotional harm exists alongside that to compensate them for lost wages and benefits resulting from their dismissal. Emotional harm has always been difficult to measure as it is subjective and it relates to the employee’s feelings.

Historically low awards

Most awards over the past 25 years have been for under $10,000. Although a few higher awards have been made (such as $35,000, $40,000 and $50,000), these were rare and generally involved well-resourced public sector and large corporate employers.

Change in the air

There is now, however, a change in the air. In a 2015 case, the Employment Court said that although there needed to be consistency across awards, there was danger in keeping them at an artificially low level[1]. In 2016, the court said that while awards should not be over-generous, they should nevertheless be fair, realistic and not miserly[2].

Then, in an October 2017 case[3], the court introduced the assessment of compensation in terms of three bands:

  • Band 1 – low level loss/damage
  • Band 2 – mid-range loss/damage, and
  • Band 3 – high level loss/damage.

This case involved a nurse, whose conditions of work had changed without proper consultation, and she was required to spend up to 30% of her time travelling. When the nurse refused to accept the new requirements she was made redundant. The court awarded her $20,000, saying that her level of harm fell within the middle of Band 2.

The court did not specify the amounts that would apply for each band. In one subsequent case[4], however, the ERA interpreted the decision as theoretically justifying awards of between $1 to $13,333 for Band 1, $13,334 to $26,666 for Band 2, and $26,667 to $40,000 for Band 3.

The bands approach is now being used by the ERA and the Employment Court and has resulted in a number of awards within the range of $15,000 and $25,000. Recent examples are:

  • A taxi driver who had her hours changed from a day shift to a late shift without proper consultation and without her consent. She was awarded $15,000[5].
  • An employee who was constructively dismissed from her job as a head chef was assessed as being entitled to an award of $20,000. This award was reduced to $8,000, however, because of contributing behaviour on her part[6].
  • A cleaner who was unjustifiably dismissed was awarded $15,000[7].
  • A sales consultant who was unjustifiably dismissed was awarded $20,000, even though she had only been employed for six weeks. Her employer had also posted adverse comments about her online following the dismissal; this had continued and escalated the harm[8].
  • A store manager who was constructively dismissed from her job was assessed as being entitled to an award of $25,000. However, as she had only claimed $10,000, the award was limited to that amount[9].
  • An employee who worked for a funeral business was unjustifiably dismissed by her employer who used a 90-day trial period clause in her employment agreement (which was held to be invalid). She was awarded $15,000[10].

Looking ahead

Emotional harm awards of about $20,000 may become the new normal. It’s also worth noting that over and above the compensation award given, an employer may face possible penalties and legal costs, as well as additional awards for lost wages and benefits for unjustified dismissal cases. Only time will tell if this will increase the number of employment claims.

We recommend that all employers should ensure their actions and processes with their employees pass muster. If you’re in any doubt, don’t hesitate to contact us – it’s better to be safe than sorry.

[1]    Hall v Dionex Pty Ltd [2015] NZEmpC 29 at [88]

[2]    Wikaira v Chief Executive of Department of Corrections [2016] NZEmpC 175 at [237]

[3]    Waikato District Health Board v Archibald [2017] NZEmpC 132

[4]    King v Café Allwood Ltd [2018] NZERA Christchurch 33

[5]    Anderson v Blue Star Taxis (Christchurch) Society [2018] NZERA Christchurch 41

[6]    Ibid, #4 above

[7]    Atkinson v Trinity’s Cleaning Services Ltd [2018] NZERA Christchurch 18

[8]    Cheng v Richora Group Ltd [2018] NZERA Auckland 28

[9]    Dawber v Church Lane NZ Ltd [2017] NZERA Christchurch 211

[10]   Stojanovich v Remembrance Funerals Ltd [2017] NZERA Christchurch 201

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