Increasing compensation awards for successful employee claims

When an employee is successful in a personal grievance claim, an order of remedies will usually follow. Understanding the likely compensation awards is part of the risk assessment for both employees and employers in pursuing and defending claims, particularly in a jurisdiction where parties never fully recover the costs associated with the dispute. It is therefore important for parties to be aware of the recent trend of increasing compensation awards by the Employment Relations Authority and Employment Court.

What could an employee get? Remedies available to employees in a successful personal grievance claim

An employee raising a claim that they were unjustifiably dismissed, unjustifiably disadvantaged in their employment, discriminated against on one of the prohibited grounds, sexually or racially harassed, or subjected to duress due to membership or non-membership of a union/employees’ organisation.

Remedies include:

• reinstatement and an order of compensation for lost wages where the employee was unjustifiably dismissed;
• compensation for hurt and humiliation;
• compensation for loss of benefits.

Reinstatement is the primary remedy available in the Employment Relations Act 2000. Section 123(1)(a) enables an order that the employee is reinstated to their former position or a position no less advantageous.

Section 128(1)(b) of the Act enables an order of lost wages to compensate the employee for wages they would have reasonably expected to have received, but for the dismissal. This is ordinarily an order of lost wages between the date of the dismissal and date that an employee found other employment, and a starting point of 3 months remuneration. If an employee finds employment on a lesser rate of pay, then an employee may claim the difference. However, there is discretion of an award of compensation above 3 months remuneration, where circumstances associated with the termination of employment impacted the employee’s ability to find alternative employment. 

Section 123(1)(c)(ii) of the Act provides for an order of remedies for humiliation, loss of dignity and injury to the feelings of the employee. 

Section 123(1)(c)(ii) of the Act enables an order or compensation for loss of benefits, such as Kiwisaver contributions, health insurance, bonuses or commission payments.

Awards of compensation must be supported by evidence from the employee.

Increasing compensation awards for hurt and humiliation compensation

Historically, compensation awards were often sums between $5,000 - $12,000, with rare high awards sitting between $15,000 – 25,000 considered unique outliers. However, recent decisions from the Employment Relations Authority and the Employment Court have seen significant increases in compensation awards.

Compensation bands

In 2017, the Employment Court introduced a framework of compensation ‘bands’ to guide the award of orders for hurt and humiliation [1], based on:

• Band 1: low level loss or damage: up to $10,000
• Band 2: mid range loss of damage: $ 10,000 - $40,000
• Band 3: high-level loss or damage: over $40,000.

The approach had a material impact on increasing compensation awards, despite not being expressly referenced in each case issued by the Authority or Court. 

Recent increases in hurt and humiliation compensation

In June 2023, the Employment Court revised the framework for that guides compensation awards [2], noting that it had been some time since the quantum of the bands were reviewed. As a result, the bands were updated to:

• Band 1: low level loss or damage: up to $12,000
• Band 2: mid range loss of damage: $ 12,000 - $50,000
• Band 3: high-level loss or damage: over $50,000.

It can be expected that the Authority and Court will continue to award compensation in line with the new bands. This will impact expectations for employees seeking remedies, and the assessment of risk to employers arising from personal grievance claims.

Recent determination – high compensation award following bullying

In Parker v Magnum Hire Limited & Anor [2024] NZERA 85, the Employment Relations Authority awarded a total compensation award for hurt and humiliation of $105,000. 

In this case, the employee brought personal grievances for unjustified actions causing disadvantage in respect of the employer director’s bullying and psychologically abusive treatment of him, together with an unjustified suspension from work. It was alleged that the conduct escalated over time and continued outside of work. The employee alleged he was ultimately constructively dismissed from his employment. 

The consequences of the conduct towards the employee were significant. He went to hospital on the belief he was having a heart attack following an incident with the director, which was found to be a panic attack. He developed depression, anxiety and post-traumatic stress symptoms akin to PTSD. 

The Authority concluded that the employee had been bullied at work, the bullying was or ought to have been reasonably foreseeable in the circumstances, the employer did not protect the employee from the harm that was foreseeable, and ultimately failed in its obligation to provide him with a safe workplace. The unjustified disadvantage claim was successful, as was the claim for an unjustified suspension. Following attempts to resolve the employer’s breaches of duty which were unsuccessful, the employee’s resignation was also reasonably foreseeable. The constructive dismissal claim succeeded.

The remedies were for compensation amounts under s. 123(1)(c)(i) of the Act were considerable:

• $50,000 for the bullying disadvantage grievance
• $5,000 for the suspension grievance
• $50,000 for the constructive dismissal grievance.

The Authority also awarded lost wages and penalties, and that the parties were to confer regarding bonus entitlements, holiday pay and interest. Costs were reserved.

The level of harm suffered by the employee in this case was severe. However, the case indicates a willingness of the Authority to award significant compensation awards, for each separate cause of action, not solely one global compensation figure for hurt and humiliation.

Recent decision – high damages award for breaches

The decision of the Employment Court Cronin-Lampe v The Board of Trustees of Melville High School [2023] NZEmpC 221, also resulted in a significant award of remedies. Two employees successfully pursued personal grievances due to a number of health and safety breaches suffered in their roles as school counsellors. This was a unique case, which involved the employees suffering extreme trauma and long-term PTSD relating to 32 deaths that occurred in the school community throughout their employment, including suicide, fatal road accidents, terminal illness and murder. 

Mrs Cronin-Lampe was awarded $130,000 and Mr Cronin-Lampe was awarded $97,000 for damages for non-economic losses for past and present on-going mental harm suffered. In considering the damages for non-economic losses, the Court considered what amounts the claimants may have otherwise been awarded for hurt and humiliation. Applying the banding approach, the Court considered compensation would have been in Band 3, with the employees receiving $85,000 and $63,750 respectively. However, the Court held the employees were entitled to the higher of the two remedies, and awarded remedies based on contractual causes of action. 

What can employers and employees expect?

It can be expected that:

• The bands for compensation awards will keep being reviewed and increasing over time.
• Employee expectations for higher remedies will be reflected in personal grievance claims. Discussions regarding how to resolve claims for personal grievances at mediation or in without prejudice negotiations between parties should anticipate those increasing expectations.
• Employees pursuing claims will need to have credible information to support a claim for remedies, and it is reasonable for employers to seek this in response to any claim.

For advice on managing employment relationships and employment disputes including personal grievance claims, don’t hesitate to contact our specialist employment lawyers at DTI Lawyers. You can contact us on 07 282 0174, or reception@dtilawyers.co.nz