INTOUCH : Recession boosts employment claims

When the job market is tight, employees are more likely to fight dismissal and that’s helping push up employment claims.
Employment law specialist Margaret Robins, from Workplace Law, told recent Liability Symposium that mediations were up 26 percent in two years, and employers were more likely than ever to be on the receiving end of an employment dispute. However, because of the potentially high costs of such disputes for both parties, 80 percent are resolved at, or before mediation.
Robins noted that although there was definitely perception in the business world that employers get rough deal in employment disputes, she believed the awards to employees for compensation in standard cases were not outrageous and that because of litigation costs, employers were better to settle at mediation than go to hearing.
“The costs of both the process and the awards made, mean that even if successful, an employee will be out of pocket after standard hearing before the Employment Relations Authority which is one step beyond mediation.
“This means that most disputes, for both the employee and the employer are settled at mediation and both parties walk away grumpy. success all round.”
Typical legal costs for the employer to defend the dispute at mediation are between $2500 and $7500, compared with between $10,000 and $30,000 in the Employment Relation Authority (ERA), and $10,000 to $50,000 for the Employment Court.
While there’s perception employers get rough deal in disputes, Robins believed awards to employees for compensation were not outrageous and because of litigation costs, employers are better to settle at mediation.
She said that generally higher earners (those earning over $100,000), were awarded higher awards for hurt feelings. “There seems to be an assumption by the ERA and the Employment Court that higher earners have finer feelings.”
Factors which increase risk and costs include such things as claim of workplace bullying, claim for reinstatement, and very senior employee or specialised employees whose prospects of new employment are small.
Other speakers at the Lumley-sponsored symposium, including Philippa Fee, partner in law firm Jones Fee, suggested that New Zealand had changed in the past two years, and the shift in social behaviour was reflected in greater demand for accountability, less tolerance, deeper acrimony and growing appetite for legal action. She said these behaviours were evident in businesses, consumers, employees and even agencies of government, with implications for all forms of public and professional liability.
Alex Tan, director forensic services, PWC, told the symposium that survey run by his company suggests fraud is fact of business life in New Zealand.
“New Zealand respondents indicated that almost 67 percent of businesses have experienced some type of economic crime, almost twice the global and regional level for Asia Pacific.”
The most prevalent type of crime is asset misappropriation – essentially, stealing. The total loss from economic crime over the past two years from New Zealand respondents was $69.5 million (to 2007), and the average loss was $1 million, with 20 percent of the losses between $1.35 million and $13.5 million.
“In 53 percent of cases the perpetrators were dismissed, but very revealing figure is that in over 16 percent of cases, the business did nothing, as they were too embarrassed about what happened and they didn’t want any potential adverse publicity. In only 45 percent of cases were criminal charges laid.”
A common theme of speakers at the symposium was while the larger corporates could fund liability problems in New Zealand’s more litigious environment, small to medium enterprises (SMEs) certainly could not, and were the most at risk.
Lumley hosts the symposium to highlight trends in legal liabilities, and this year it covered range of topics including professional indemnity, D&O insurance, employment issues, health and safety, product liability, manufacturers’ liability and technology and emerging risks.