Employment Contract Law: Reinstatement to be first course of action considered for unfair dismissals

14 Jan 19

Column written by Dunedin Partner John Farrow, published in the business section of the Otago Daily Times on Thursday 3 January.

The Employment Relations Amendment Act was passed on 5 December. Most changes will take effect over two stages, on 12 December 2018 and on Monday, 6 May 2019.

One of the changes which came into effect on 12 December is that reinstatement will be the first course of action considered by the Employment Relations Authority for employees who are unjustifiably dismissed. However, it will only be ordered if it is practicable and reasonable for both employer and employee.

Reinstatement used to be the primary remedy, prior to its removal in 2011 by the then National government. Irrespective, it seems to have little effect on how often it is ordered. Reinstatement is nearly always opposed by the employer. The decision to dismiss is generally not taken lightly. Little is likely to change the employer’s mind between the dismissal and the application for reinstatement.

An employee’s choice to seek reinstatement is also not an easy one. Returning to the workplace you have been fired from, to work for the people who fired you, can often be a bitter pill to swallow. However, many employees have little choice. It has been argued that reinstatement is important in terms of holding employers to account. If there is no risk of reinstatement then a well-resourced employer can simply fire staff and then pay them out.

However, in terms of compensation for unjustified dismissal, the landscape has certainly changed since 2011. In certain situations involving discrimination and harassment, an employee can choose to make a complaint under the Human Rights Act and commence proceedings before the Human Rights Review Tribunal. Traditionally awards in that jurisdiction have been a lot higher than those in the Employment Relations Authority.

The ‘‘high water mark’’ was the decision of Hammond v Credit Union Baywide. Ms Hammond was awarded a record $168,000 in damages. Her employer was required to apologise to her for the severe humiliation, loss of dignity and injury to feelings she suffered. Ms Hammond resigned from NZCU. Five days later she baked a cake for a colleague who had also resigned from NZCU. In the cake’s icing was written ‘‘NZCU f..k you’’ and other derogatory comments. The cake was baked for a private function of friends. Ms Hammond took a photo of it and put it on her Facebook page. Her Facebook page was only accessible to her Facebook friends. Somehow NZCU executives accessed Ms Hammond’s Face-book page and took a screenshot of the photo of the cake. It was then sent to local recruitment agencies advising them not to hire Ms Hammond. The screen-shot was also sent to Ms Hammond’s current employer, requesting that she be sacked. This resulted in her being forced to resign.

NZCU accepted that Ms Hammond’s privacy had been breached when the screenshot was sent to employment agencies and to her employer. Chief Employment Court Judge Inglis has delivered several decisions this year which have referred to compensation bands adopted by the Human Rights Review Tribunal. There has been much comment about the inadequacy of compensation awards in the Employment Relations Authority when compared with those in the Human Rights Review Tribunal. It seems that Judge Inglis is intent on redressing that imbalance.

The most recent decision was delivered in September this year (Richora Group Limited v Cheng). Melody Cheng claimed that she had been unjustifiably dismissed by Richora Group. Ms Cheng was offered work with the company when in a relatively fragile state and suffering from depression. The company was aware of this. At some stage, the employer became concerned that Ms Cheng may have contacted IRD and complained about wage and tax issues. In response the employer arranged for the locks to be changed and didn’t let Ms Cheng know that this had occurred or why. The employer then sent a text message requiring Ms Cheng to attend a “seri­ous meeting”. A meeting took place between the employer and Ms Cheng’s husband. In that meeting the employer proposed that Ms Cheng accept a payment and resign. In the early hours of the following morning Ms Cheng suffered an acute stress reaction and made a suicide attempt.

A couple of weeks later the employer posted to the Rotorua Chinese community of commerce online chat group. The posting referred to a member of the Chinese community, claiming that she had reported the employer to IRD. The post continued “people who are not nor­mal and positive or defective in moral and ethics really should not be employed. They just want more money by using this abnor­mal approach. I hope everyone could take it as a warning!”

The Chinese community in Rotorua is relatively small and tight-knit. People tend to know each other and who works where. While the employer had not specifically named Ms Cheng, he had named himself and his company and had made it clear he was talking about a female employee. Ms Cheng was the only person working in the Rotorua office at the time.

Judge Inglis found that Ms Cheng was constructively dismissed and that the dismissal was unjustified. She was locked out of the workplace without prior notice or explanation. She was unwell at the time, which the employer knew. Judge Inglis referred to the extent of loss suffered by Ms Cheng. This manifested in a dramatic decline in her physical and mental health, a suicide attempt and medical intervention. The Judge then referred to the relevance of awards in the Human Rights Review Tribunal.

Drawing the threads together, the Judge approached the issue of damages by adopting three bands. The first band is between $0 and $10,000; the second between $10,000 and $40,000 and the third band is over $40,000. Judge Inglis placed Ms Cheng’s claim in band three, however, as her claim only sought $20,000, that was the amount awarded. There was no award for the distress suffered by the derogatory comments posted to the Rotorua Chinese community of commerce online chat group. That is because there needs to be a link between the grievance and the loss. The grievance was the dismissal. The postings occurred after the dismissal and therefore did not contribute to the loss.

If the court and the Employment Relations Authority continue to adopt Judge Inglis’ banding approach then it may well be that employees are content to make claims for damages alone rather than seek reinstatement.


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