Cash for hurt feelings – Employment Court decision signals increases for hurt and humiliation payments

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The old adage “sticks and stones” may apply to squabbling children, but it certainly doesn’t apply where an employer’s words or actions lead to an unjustifiable sacking.

Many employers see employment (and its termination) as a purely business transaction, and are shocked to find out that employees can claim for injury to feelings. The reality is that firing somebody, and the way an employer goes about it, can have a significant impact on an employee and even result in serious medical effects.

Whether you agree with this approach or not, it is the legal method New Zealand has chosen to compensate an employee when the employer breaks its legal obligations. Employers need to know what the legal risks are before taking any steps in this space.

How do you put a dollar figure on hurt feelings?

That has always been the difficult question. Lawyers advising their clients have had to rely on previous decisions in similar circumstances where the “average” has sat somewhere between $6,000 and $8,000 for the past decade. In the more serious cases we have seen $15,000-$20,000 but those have been very rare.

To make things even more difficult, there has been a sizable variance in awards from case to case, and even different levels seen between similar Employment Relations Authority cases in different cities. Other tribunals which also award compensation for injured feelings (such as the Human Rights Review Tribunal for Privacy Act breaches) have been handing down much higher awards – tens of thousands of dollars more than in comparable employment cases.

In a recent decision, to try and cure this uncertainty, the Employment Court decided to put some guidance around how to calculate these awards.

Waikato DHB v Archibald – A banded approach

In this case, the Employment Court set out helpful bands so employers, employees, and their legal advisors can assess a claim. The Court took the figure of $20,000 as representing a moderate amount of compensation – i.e. a middle ground. Based on that assessment, the bands are:

  • Band 1 – Low level of loss / damage – $0-$13,333
  • Band 2 – Mid-range loss/damage – $13,334-$26,666
  • Band 3 – High level loss/damage – $26,667-$40,000 (or higher)

Generally, for compensation to get into Band 2 or Band 3 we would expect to see medical consequences (stress, anxiety etc), or particularly bad behaviour on the part of the employer (nasty correspondence, unreasonable delay, significant procedural deficiencies, bullying type behaviour). When compared with the previous average in the $6,000-$8,000 range, it’s fair to expect the new average to be significantly higher in the future. We have already seen several Employment Relations Authority decisions using this methodology in the $15,000-$20,000 range where previously $8,000 would have been the norm.

How can we help?

The best way to avoid a significant award is not to make mistakes in the first place. WRMK’s employment team regularly deals with disciplinary issues for our clients to avoid grounds for a personal grievance altogether. If you think a staff member has misbehaved enough to warrant dismissal, the best time to call us is before you have taken any steps. Similarly, if you are an employee and think you have been unfairly dismissed, there is a strict 90-day time limit to take steps.

If a personal grievance has been or is likely to be raised, we can help you through all steps of the dispute process. If you have a question about a disciplinary process, or an employment matter in general, please contact our employment law team.