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Government has work cut out for it in Personal Grievance review

A review is timely.   This is an area of the law where there has been a great deal of tinkering during the previous Labour Government's tenure, and until relatively recently there has been a high degree of uncertainty surrounding the application of the law. 

Fairness - Form over Substance?
Recent Employment Court decisions have now clarified, to a large extent, the test for justification under s103A Employment Relations Act. Nevertheless, there is a perception among employers that the personal grievance provisions are tipped in favour of employees, with form over substance emphasised. It is fair to say that employers are held to a high standard when it comes to the procedural steps required to show that their actions are fair and reasonable. That said, statistics from the Employment Relations Authority indicate that outcomes from Employment Relations Authority proceedings are fairly balanced between employers and employees. This perhaps does not take into account the fact that the vast proportion of personal grievance claims are resolved and settled before an Employment Relations Authority hearing.

Cost of personal grievances
Another area of concern is the cost of personal grievances. A common complaint from employers is that personal grievances can be expensive to resolve. This is not only in terms of compensation paid to employees as a result of successful personal grievance claims, but also the legal costs incurred and the management time and energy spent dealing with these issues. Even where an employer successfully defends a personal grievance, significant costs can be incurred, most of which cannot be recovered.

The commercial reality for many employers is that it is often easier and cheaper to "pay off" an employee instead of addressing a personal grievance claim. This was a feature of the previous personal grievance legislation - and indeed, litigation generally.

From an employee's perspective, the prospect of spending thousands of dollars on representation to pursue a claim against an employer with significantly more resources can be daunting and can mean that potentially genuine claims are not pursued.

Remedies

Remedies for personal grievances are also under the spotlight. The Government is reviewing whether reinstatement should remain as the primary remedy under the legislation. Reinstatement is rarely sought and awarded even more infrequently. There is also a perception among employers that the threat of a reinstatement application is sometimes used as a negotiating tool to obtain an increased settlement payment, when there is no real intention to pursue the remedy.

90 Day Trial Period

One year after its introduction, the "90 day trial period" legislation is being reviewed. The legislation enables small employers (those with fewer than 20 staff) to dismiss new employees within the first 90 days, without fear of an unjustified dismissal personal grievance. Employers must have an appropriate clause in their written employment agreements before being able to rely on the trial period provisions.

The Government is considering whether to extend the trial period to include employers with between 20 and 49 employees. It is also considering whether the trial period should be extended further than the current 90 days for small businesses. Small and medium-sized businesses account for about 97% of all businesses and 31% of total employment.
In undertaking a review of the personal grievance system, there is no question that the Government has its work cut out for it, as balancing employers' and employees' competing interests will be no easy feat.

The Government is seeking submissions on these, and other issues outlined in its discussion document. A copy of the Department of Labour's discussion paper can be found at
http://www.dol.govt.nz/consultation/personal-grievance/discussion-doc/index.asp

Submissions can be made until 31 March 2010.

For more information please contact the Employment Team at Duncan Cotterill.