Increasing compensation payments for emotional harm


May 28 2018


People who have suffered emotional harm in the workplace have traditionally received small compensation payments from employers. In recent decisions, there has been a consistent trend increasing these compensation payouts.

Compensation awards have traditionally been low for employees, which has favoured employers facing claims. This new trend signals that employers are going to face paying significant compensation awards if they do not treat employees properly.

 

How the law works

Both the Employment Relations Authority (ERA) and the Employment Court are empowered by the Employment Relations Act 2000 to award compensation where an employee has a personal grievance against their employer for humiliation, loss of dignity and injury to feelings. In the majority of cases, this compensation is claimed by employees who claim they have been disadvantaged, mistreated or unjustifiably dismissed.

Emotional harm is subjective, relating to the employee’s feelings and consequently difficult to measure. Awards have typically been based on providing compensation for lost wages and employee benefits resulting from their dismissal.

 

The value of historical compensation awards

Over the past 25 years, the majority of awards have been under $10,000. There have been exceptional cases where employees have received as much as $35,000 to $50,000, but these are rare and usually occurred within the public sector and large corporates.

 

The future of compensation for emotional harm

Change is coming.  The Employment Court said in the ruling of a 2015 case that awards needed to be consistent, but there was danger in keeping them at an artificially low level[1]. Following that in 2016, they said that awards should not be over-generous, but they should be fair, realistic and not miserly[2].

The definitive turning point happened in a 2017 case[3], where the court introduced a three band compensation assessment: low level, mid-range and high level loss and damage.

The case involved a nurse who had her working conditions changed without consultation from her employer, requiring her to spend 30% of her time travelling. When she refused, she was made redundant. The court ruled her level of harm fell within the mid-range band and she was awarded $20,000.

What remained unspecified was the amounts that would be applied to each band. However, in a subsequent case[4], the ERA specified theoretical values: $1 to $13,333 for the low level band, $13,334 to $26,666 for the mid-range band and $26,667 to $40,000 for the high level band.

 


 

[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

 

These bands are now used by the Employment Court and the ERA, so whereas we were seeing traditional awards of less than $10,000, there have now been a number of awards within the range of $15,000 to $25,000.

  • A taxi driver was awarded $15,000[1] when her hours were changed from a day shift to a night shift without proper consultation or her consent.
  • A head chef who was constructively dismissed was assessed as being entitled to an award of $20,000. The final award was reduced to $8,000 because of her contributing behaviour[2].
  • A cleaner was awarded $15,000[3] for unjustifiable dismissal.
  • A sales consultant was awarded $20,000 for unjustifiable dismissal, even though she had only been employed for six weeks. Her degree of emotional harm[4] was escalated because her employer posted adverse comments about her online following the dismissal.
  • A store manager was assessed as being entitled to an award of $25,000 for constructive dismissal. However, the award was limited to $10,000 as that was the figure she claimed[5].
  • An employee of a funeral business was awarded $15,000[6] for unjustifiable dismissal. Her employer used a 90-day trial period clause in her employment agreement, which was held to be invalid.
What to expect...

It wouldn’t come as a surprise to see the normal award for emotional harm paid out at $20,000. As an employer, you should be aware that over and above this compensation, you could face additional penalties, legal costs, or have to pay lost wages and benefits if the court rules your employee was unjustifiably dismissed. Whether we see an increase in claims or not can only be determined by time.

Your best course of action is to make sure your processes around employees are up to standard. Talk to our business lawyers if you need any advice.

 


 

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

[2] Ibid, #4 above

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

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

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

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

 

 


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