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High compensation awards worrying for employers

Unprecedentedly high compensation awards have been made in the employment jurisdiction in recent months. Not only are greater amounts are being awarded, an entirely new approach of awarding compensation on the basis of low, mid-range, and high level loss or damage to the employee is being applied.

compensationWhile these changes look promising for potential employee claimants, it is certainly a worrying trend for employers.

The Employment Court case of Waikato DHB v Archibald was the real start of this new approach. In 2016 the Waikato DHB carried out a restructure and disestablished the role of a Health Promoter, Mrs Archibald, who had been with the DHB since 2003. She was put in new position which required her to travel nearly 3 hours each day (approximately 30% of her working time). Mrs Archibald felt that this excessive travel would “destroy” her but the DHB felt it was a reasonable arrangement as the travel would only be for 9 months.

Mrs Archibald brought her claim to the Employment Court which found she was unjustifiably dismissed. Waikato DHB was required to pay Mrs Archibald her severance pay and $20,000 in compensation for humiliation, loss of dignity, and injury to feelings.

In determining the compensation to be awarded, the Chief Judge adopted a banding approach, which allows similar compensation to be awarded within bands of similar level loss and damage. The Employment Court implemented a broad analytical framework of three bands:

• Band 1 involving low level loss/damage;

• Band 2 involving mid-range loss/damage; and

• Band 3 involving high level loss/damage.

The Court considered Mrs Archibald’s loss to fit in the “mid-range” band and the $20,000 awarded was considered a moderate amount of monetary compensation.

The Human Rights Review Tribunal uses a similar “banding approach”. If the employment jurisdiction continues to harmonise with the Human Rights Review Tribunal, the following levels of compensation from the Tribunal might be adopted:

• Band 1 – nil to $10,000;

• Band 2 – $10,000 to $50,000; and

• Band 3 – $50,000 and over.

A few weeks ago the Employment Relations Authority applied the new banding approach in deciding Maday v Avondale College. Mrs Maday was a classics teacher at Avondale College. Mrs Maday was struggling with student disruption which resulted in a review of her competency. The College’s processes were prolonged, extensive and Mrs Maday was never given clear details of the allegations against her or the identities of the complainants. Ultimately she was dismissed.

The Education Council investigated the matter after Mrs Maday’s dismissal. The Council did not find that Mrs Maday was incompetent.

The Employment Relations Authority heard Mrs Maday’s claims for unjustified disadvantage and unjustified dismissal. The Authority was satisfied the events had a profound effect on Mrs Maday’s health, self-esteem, and general wellbeing. Considering the new approach set by the Employment Court, the Authority granted two $25,000 awards for each of the two grievances proven ($50,000 total).

These cases show a marked upward swing in the quantum of compensation awards and a new framework for awarding compensation. This is certainly good news for employees. However, the stakes have been raised for employers taking any action against an employee. Crossing the t’s and dotting the i’s has never been more important. Employers must take care to follow the rules as the consequences just became much more expensive.