Research on Personal Grievances 10/93795

Transcription

1 Research on Personal Grievances 10/ April 2010 Hon Kate Wilkinson, Minister of Labour Purpose 1. This paper provides you with a summary of key findings from research that, alongside public submissions, will inform the Department of Labour's (the Department) review of personal grievances. 2. The paper is for your information only. The research 3. We have completed the following research on personal grievances: a. a literature review of issues affecting the personal grievance system b. an international scan of provisions for unfair dismissal c. a media scan (whether the media provides accurate or selective coverage of cases when compared to the facts of the decisions) d. an analysis of Department data e. qualitative interviews with employees and employers, and f. an analysis of Employment Relations Authority (the ERA) determinations for July The findings Summary 4. Overall, the research suggests that there is an insufficient comparative analysis and research to properly explore the efficiency or fairness of the system. 5. People's tendency to seek advice and learn from other experiences through colleagues, friends and family, and now in social media (e.g. blogging and message boards) can lead to a perpetuation of misleading information, unnecessary escalation of employment issues and uninformed perceptions about the system. Media reporting does influence people's understanding of the system and can drive their perceptions of the system and processes. 6. The research shows that more could be done to raise awareness about employees' and employers' rights, obligations and the problem resolution processes to help increase understanding and knowledge, and dispel commonly held beliefs about the system. Literature review 7. There is limited New Zealand literature available on personal grievances. Evidence in the literature suggests a majority of employers are satisfied with the process and outcomes of the personal grievance system under the Employment Relations Act 2000 (the Act), covering problems resolved at the workplace to those that go to the ERA. International scan 8. An international scan of provisions on unfair dismissal protection in Australia, Canada, Germany, Great Britain, Sweden and New Zealand found that: a. statutory protection against unfair dismissal is broadly similar, with the exception of Canada (where the concepts are related more to a breach of contract than a right to retain employment) b. there is a common emphasis on accessible early resolution of problems, and c. both Australia and Great Britain have recently introduced statutory codes to guide dismissal processes and grievance resolutions. These are too recent to have been evaluated. 9. The international scan identified a lack of comparative research available to explore how the various approaches to unfair dismissal protection affect the efficiency or fairness of grievance resolution.

2 Media scan 10. The media (including web-based social media) has a strong influence on people's views of the personal grievance system. The media scan shows that the media generally portrays the facts of cases accurately but that by glossing over some aspects of the case the media can create a skewed picture of the outcome. Departmental data 11. An analysis of Departmental administrative data shows: a. there were 18 out of 986 personal grievance cases (1.8 percent) heard by the ERA and Employment Court in the period which were considered to have lacked merit or were of a vexatious or frivolous nature. In these cases, substantial cost awards were made against the claimant, ranging from $1,000- $15,000 b. section 150 is a useful tool, particularly where parties have reached an impasse. It can only be applied where both parties agree and may not always be appropriate for the parties. For represented parties, the representative is a strong influence on the decision whether to use s150. The Department is working to identify the uptake of s150 and the number of people who have representation during mediation c. between October 2008 and September 2009, 27 people were granted a provisional unemployment benefit because they raised a personal grievance. The outcomes of the 27 cases are unclear. Also unknown is whether the Ministry of Social Development (MSD) was paid back any money by the claimant as a result of either losing or winning their case, and d. enquiries to the Department's Workplace Contact Centre tend to focus on the type of problem an employee or employer is facing; the process for resolving the problem; and, in some instances advice is sought by parties on the merits of their case (the Workplace Contact Centre only provides information to the public but does suggest people contact their nearest Community Law Centre or Citizens' Advice Bureau if they would like advice). Qualitative interviews 12. The research provides indicative evidence that for some groups of employees and employers the current system is not efficient and effective and thus has not met its objectives under the Act. 13. The improvements suggested by employees and employers centre on better information provision to help gain awareness and understanding of rights and obligations around the case they may have. It was notable in this research that the employment relationship was generally over by the time of mediation, thus a need was identified for an appropriate forum of first instance intervention (prior to mediation) in which to address grievance cases when the employment relationship is over. Analysis of determinations made in July The analysis focused on 39 determinations by the ERA in relation to personal grievances for July The most common type of personal grievance claimed was an unjustified dismissal claim, with most personal grievance claims raised by employees with 1-6 years of service. Both employers and employees were more likely to have representation. However, where self-representation was used, parties were more successful in either defending or winning their claim. 15. Determinations found largely in favour of employers, with 67 percent of cases successfully defended by employers. Compensation was awarded in 33 percent of the determinations, with the most frequent amount of compensation awarded being between $3,000 and $5,000. There was only one case where compensation was reduced due to contributory conduct of the claimant. The majority of determinations were released in Auckland and Christchurch. More detail on the research findings Literature review 16. The literature review provides an overview of New Zealand research on the actual and perceived issues employers have in relation to the personal grievance process, with some additional commentary from international studies. 17. The literature reviewed was largely drawn from studies published in academic journals and by government departments, over the last five years, including Department of Labour research conducted on employment relationship problems.

3 Findings 18. New Zealand research on the personal grievance system is minimal and as such does not provide much insight into employers' perceptions about the system. However, the evidence available, with some input from British and Australian research, enables some informed comment. 19. The total costs for employers of resolving personal grievances are generally in the thousands rather than the tens of thousands of dollars (including settlement). This includes personal grievances settled in mediation or outside the formal institutions. Costs increase if a case goes to the ERA or the Employment Court (or to higher institutions), largely due to costs incurred in gaining legal advice and/or representation. It would appear to be less costly for employers to settle cases informally. It is not clear how many employers make cash settlement even when employees are unlikely to be successful if they had proceeded with a claim to the employment institutions. However, costs can be minimised by parties if they attempt to resolve the problem through selfresolution first or in mediation, which is a cost-effective low-level process for resolving personal grievances. Resolving problems early can be beneficial when preserving employment relationships. 20. The Department's 2006 survey data on the number of applications made to mediation services do not indicate a trend of increasing numbers of personal grievance claims. While the volume and effects of contingency fee arrangements ("no-win-no-fee") are not clear, such arrangements do not appear to drive an increase in the number of cases. 21. The evidence available does not allow a complete refutation of the perception that the personal grievance system places an emphasis on process rather than substance and is regarded as being unfair by employers. 22. Research in New Zealand and in other countries suggests that differences exist for small and medium-sized enterprises in their experience of resolving employment relationship problems, such as personal grievances, and in their attitude to the processes available. However, it is not clear that they experience worse outcomes, including financial outcomes, when resolving these problems compared to larger firms. 23. Overall, the research available on the personal grievance system is minimal. There are major gaps in New Zealand research on particular issues, such as employees' views. Thus there are some areas of research relating specifically to personal grievances that are unexplored. International scan 24. This international scan examined the settings around employee protection against unfair dismissal in Australia, Canada, Germany, Great Britain, New Zealand and Sweden. It looked specifically at the processes around unfair dismissal of individuals, rather than collective dismissals such as redundancies (which are treated differently in the jurisdictions examined). The research draws upon information provided by labour ministries in the jurisdictions covered, as well as legal commentaries and academic journals. Findings 25. In the countries examined, the statutory protection against unfair dismissal is broadly similar, with the exception of Canada (where the concepts are related more to a breach of contract than a right to retain employment). 26. In these countries there is a common emphasis on accessible early resolution. The data available on the resolution of unfair dismissal claims is approximate, however, the rate of resolution in mediation or conciliation appears to range from just under half (in Sweden) to the majority (in Australia). There is no research available offering any analysis of how different policy approaches to unfair dismissal affect early resolution rates, or whether the parties involved are satisfied with the processes and outcomes. 27. In the interests of having accessible and efficient systems for employment relationship problem resolution, both Australia and Great Britain have recently introduced statutory codes to guide dismissal processes and grievance resolutions. These codes are too recent to have been evaluated. 28. All of the countries examined place some eligibility criteria on unfair dismissal protection. Length of employment is a common (but not universal) criterion. It is not known whether, or how, any such probationary or trial period affects the rate of unfair dismissal claims arising, or their method of resolution. 29. Some jurisdictions exclude the employees of small businesses. There is minimal research on the effects on those excluded (or their employers). Less commonly, there are eligibility restrictions on managerial, or highly paid, employees. Again, no research could be located on the effects of those excluded, or on their employers.

4 30. The timeframe employees have in which to make a claim ranges from a fortnight to four months. No research could be found exploring the comparative impact of the timeframes that employees have to make a claim for unfair dismissal. 31. A cap on compensation for unfair dismissal exists in four of the six jurisdictions examined. In practice, compensation may generally be quite limited regardless of the lack of legislative cap. Similarly, while reinstatement may in principle be a remedy for unfair dismissal, in practice it is seldom implemented. The effects on employers and employees of the remedies available are unknown. 32. All of the countries, except New Zealand, allow workers to sue in civil courts for wrongful dismissal (breach of contract). Once more, the impact of this on employees and employers is unexplored in the literature. 33. Overall, there are notable gaps in the literature on unfair dismissal. While there is much by way of (inconclusive) theoretical and empirical literature about the macroeconomic effects of employment protection legislation, there is no comparative research exploring how the various approaches to unfair dismissal protection affect the efficiency or fairness of grievance resolution. Media scan 34. A media scan was conducted on the accuracy and consistency of media reporting in relation to personal grievances. A general scan of articles in print media from was conducted along with a specific analysis of media reporting on 15 high profile cases. These were compared with the actual ERA or Employment Court decisions in each case. The impact of web-based social media and the information sharing and dialogue opportunities it offers was also explored as part of the general media scan. Findings - General media scan The general media scan (of regional and national newspapers) identified that media reporting related to personal grievances was often skewed (for example, using emotive language like "sack", "payout" and "gravy train") to portray a personal grievance case. 36. Media reporting of articles related to personal grievances focused more on the outcome of a personal grievance case and less on the facts or process of the case. For example, "awards" and "compensation" tend to be inaccurately reported, as the media focus largely on the overall amount awarded and not the breakdown of the awards, e.g. contributory conduct, lost wages. 37. Media headlines and commentary can influence the public's perception of the personal grievance system, particularly whether it is seen to be balanced and fair. The media (including web-based social media), has a strong influence on people's views of the personal grievance system. The media scan shows that the media generally portrays the facts of cases accurately but that by glossing over some aspects of the case, the media can create a skewed picture of the outcome. Findings - Review of 15 media articles of high profile cases 38. An analysis of 15 specific cases was conducted to identify the accuracy, content and scope of media reports when compared against ERA determinations, and to identify which aspects of ERA determinations are reported most frequently and in most detail. The 15 cases were based on those cases that received a high profile through media coverage in 2008 and The media reporting of the 15 cases demonstrates a number of trends, mostly around content and level of detail in the reporting. 40. The media reporting of determinations made by the ERA was largely accurate, but brief. Factual analysis was generally accurate but varied in the level of detail provided, with most publications focusing on outcomes or the basic facts of the case. In almost all the cases where contributory conduct was cited by the ERA member, there was no mention of this in the reporting. The reasons behind ERA determinations were not discussed in great depth and a significant percentage of articles missed the finer legal details provided by the Employment Relations Authority, choosing instead to focus on the emotive and obvious issues and brushing over the underlying procedural or jurisdictional difficulties of the case. 41. In some reports there was good use of quotes by the ERA member, whilst in others there were incorrect and unsubstantiated quotes from the determination. The use of emotive headlines by articles was misleading and gave a false impression of the case. Regional papers tended to present the facts of the case and headlines in a more neutral manner as opposed to some of the "sensationalising" headlines and misreporting in the major metropolitan newspapers.

5 42. Overall, the media reporting on the 15 cases was balanced with the main issues being addressed reasonably well. There were some articles, which were poor in coverage, due to the lack of detail and also misreporting of facts and quotes from the determination. Findings - Web-based social media 43. If people are not sure about the process or where to go for advice, message boards and blogs are becoming popular ways of reaching fast and accessible information. It appears that people are interested in the views, and rely on the experiences, of others before they immerse themselves in the personal grievance process. A scan of some social media forums suggests that both employers and employees can become easily influenced by other people's views of the system and are highly likely to be misinformed by inaccurate advice through these channels. 44. The scan suggests that employers often seek advice from other employers on how to resolve personal grievances, particularly their experiences of "payouts". For example, some questions focused on the experience of other employers, the cost effective and quick options for resolving the problem, the effect on the business, reputation and costs, the personal grievance and how to identify it is a problem. 45. Similarly, employees are often unclear as to their rights when they feel there may be a problem at work and seek quick advice from others on how and whether to address the problem. The scan shows that there are a large number of employees who feel they could have a grievance but may not pursue it due to factors such as lack of finances, lack of knowledge of the system, fear of reprisal and impact on future employment. 46. Overall, people's tendency to seek advice and learn from other's experiences through colleagues, friends, family and now the social media, can lead to a perpetuation of misleading information, unnecessary escalation of employment issues, and ill-informed views about the system. People reading the social media commentary may build a bias against the other party. Departmental data Findings - Incidence of vexatious or frivolous cases 47. Although the Act does not explicitly distinguish between substantive and procedural unfairness, the Authority can and does modify awards according to its assessment of the merits of the personal grievance case. 48. In around one quarter of determinations over the calendar period, 2007 to 2009, the Authority either reduced or rejected awards on the basis of where employees' conduct has contributed to the grievance. However, a modification in awards due to contributory conduct does not necessarily mean the case was vexatious or frivolous in nature. 49. In the instance of a vexatious or frivolous case, the ERA or Employment Court, will not award compensation but rather award higher costs against the claimant to cover costs incurred by the other party, such as legal and witness costs, administrative costs, preparation time etc. In some instances, costs awarded may take into account the claimant's financial position. 50. Whilst the question may arise as to "what constitutes a vexatious or frivolous case", the Authority has established a precedent for cases that lack merit, are vexatious or frivolous, baseless and waste costs. There were 18 out of 986 personal grievance cases (1.8 percent) considered by the ERA and the Employment Court in the period , which lacked merit or were of a vexatious or frivolous nature. Substantial costs were awarded against the claimants, ranging from $1,000 to $15,000. In comparison, average awards made by the ERA on a daily basis range between $2,500 and $3000 (very few of these awards relate to substantial cost awards) [1]. 51. Representation in these cases was evenly split with claimants either representing themselves or being represented by an employment advocate or lawyer. Employers in almost all the cases were represented by a lawyer [2]. Findings - Section 150 (final and binding decision at mediation) 52. Section 150 is a useful tool, particularly in circumstances where the parties are close to an agreement but unable to take the final step to resolve a problem, and where the employment relationship is at an end. In most cases this will be used where the parties are close to a compensatory sum but are at an impasse. 53. All legal representatives and employment advocates are aware of s150. For represented parties, the representative is a strong influence on the decision whether or not to use s150. For unrepresented parties, increased information may assist in the uptake of a final and binding decision.

6 54. Ultimately s150 can only be applied where both parties agree; however, not all matters are appropriate to a final and binding decision by mediators. These include: a. where there is a distance between the parties in terms of level of settlement b. the complexity of the case, and c. where there is an ongoing relationship which may be adversely affected by such decisions. 55. Approaches to mediator use of s150: a. all mediators will seek to resolve a personal grievance through a mediated settlement as a first principle b. mediators may offer s150 at a point of impasse as a tool to encourage parties to negotiate further, and c. mediators are generally willing to use s150 where appropriate. Appropriateness is a professional judgement influenced by the circumstances of: the employment relationship problem, the advice of client's representatives, and the willingness of the parties to cede decision-making control to the mediator. 56. A s150 decision is not appealable. This influences the choice of parties to exercise s150. Findings - Unemployment benefit 57. Unemployment benefit rules [3] have also been under recent scrutiny. Some see these as providing incentives for employees to make claims for unjustified dismissals when (in some instances) these might be without justification. Department research from 2007 shows that the impact of the stand-down requirements for the unemployment benefit do not drive any significant number of personal grievances. 58. Evidence from the Ministry of Social Development (MSD) suggests that in the period October 2008 to September 2009, 27 people were granted a provisional unemployment benefit because they raised a personal grievance. During the same period a total of 118,000 unemployment benefits were granted to people. In comparison, in 2008 nine people were granted a provisional unemployment benefit because they raised a personal grievance. During the same period a total of 60,000 unemployment benefits were granted to people. Finding - Workplace Contact Centre enquiries 59. Over the past six months, the Department's Workplace Contact Centre has received approximately 53,000 calls in relation to personal grievances. These calls were made largely by employees and employers, some union officials and other groups, such as representatives and family or friends. 60. In general, callers ring to find out what to do and whether they have a case or not. Typically, customer expectations are that the Department will provide legal advice and/or the Department will act on their behalf. The Department only provides information to the public and not advice. Information the Workplace Contact Centre provides usually covers the processes involved, the rights to representation and general information about unjustified dismissal/disadvantage. Findings - Qualitative interviews 61. The purpose of this research was to ensure the views of employees and employers of small and medium-sized enterprises were captured in the personal grievance review and specifically to complement the public submissions sought in relation to the discussion paper. The research was qualitative, based on a self-selected sample. Forty seven people were interviewed: 21 employers, 24 employees, one employer legal representative and one employment advocate. Barriers to participating in the process 62. Costs (driven by legal fees) were a significant factor in decision-making for some employees, but all employers. Consideration of a drawn out process affected both employers and employees: it deterred some employees from starting the process, and it encouraged both employees and, more particularly, employers to settle at mediation even if the settlement offered scant satisfaction to either party. Balance of interests 63. Participants were commonly dissatisfied with the balance of interests between parties in the process. Employees considered employers had greater financial resources and the ability to pursue multiple courses of action. Employers felt they could be compelled to participate in a process of unknown dimensions irrespective of the merit of the employee's case, with no prospect of adequate compensation for their costs.

7 Advice & representation 64. Few employees or employers made decisions about dealing with an employment relationship problem without legal advice, or went to mediation without representation. 65. Participants were generally happy with the quality of advice received. However, the effect of lawyers on the costs of the process was noted by both employees and employers and there was interest in limiting the use of lawyers in the process. The effect of contingency fee lawyers is unexplored in this research as no employee had used one. 66. It should be noted, that many employees and employers relied on legal advice and in many cases legal representation, therefore restraining the use of lawyers in the process may place a barrier to employer and employee engagement in the process. Process versus substance 67. Procedural issues did not necessarily figure largely at mediation events, but fear of making a procedural error contributed greatly to employers' decisions to settle at mediation, regardless of their dissatisfaction with the settlement. Employees' lack of familiarity with disciplinary and grievance procedures contributed to their propensity to obtain legal advice and representation before going to mediation. Eligibility 68. Participants did not support excluding any further group of employees from the process. 69. There were mixed views from employers on the trial period provision: some employers felt that trial periods could logically be extended to all firms, and others considered firms should have sufficient processes to deal with employment relationship issues without the need for trial periods. The length of the trial period was also debated, but it was not suggested it should be shortened. 70. There were mixed views on the 90-day limitation period for notifying an employer of making a claim and the three-year limitation period for lodging a claim with the ERA or the Employment Court. There was a view that any shortening of these periods would advantage employers rather than employees. There was also some confusion as to when these periods started in the process. Remedies 71. Consideration of remedies was focused on the reality that the employment relationship was generally over when a case went to mediation. Thus compensation for lost income being set at a level that gave former employees a reasonable length of time to find another job was accepted by employees and employers. Compensation for hurt and humiliation was more contentious for employers as the amount was seen as arbitrary. However, apologies were important to employees and these were effectively expressed through compensation for hurt and humiliation. Reinstatement was generally seen by both parties as unfeasible but a remedy to retain. Changes 72. Participants agreed that a more systemic approach by mediation services could improve workplace processes; and earlier intervention by mediation services could also assist to resolve employment relationship problems. Employers were interested in a 'pre-hearing' being introduced in which a judgement would be made by an independent authority on the quality of a case with penalties for employees who proceeded against this judgement and whose case was not upheld. 73. Both employees and employers expressed interest in receiving a binding decision from mediators (with the right of appeal) but the current mediation process was not necessarily a suitable method for this; such a process would require the powers of the Employment Relations Authority. Analysis of Employment Relations Authority determinations 74. This research analysed the characteristics of 39 personal grievance cases determined by the ERA in July The characteristics considered in this analysis included the type of personal grievance claimed, outcomes of determinations, compensation awarded by the Authority, length of service and representation of parties before the Authority. The objective of the research was to provide a better understanding of the characteristics of determinations issued by the Authority involving personal grievances claims and the variables that may influence determinations, such as the impact of representatives, the type of claim and the length of employment.

8 75. Because this analysis is based on determinations from a limited timeframe, the results are indicative of this selection of determinations only and not necessarily representative of personal grievance determinations in the Authority in general. 76. The main findings from the 39 personal grievance determinations analysed for the research period of July 2009 were: a. Types of personal grievance claims: The most common type of personal grievance claimed was an unjustified dismissal claim. b. Representation: 72 percent of employees and 74 percent of employers had representation when they appeared before the Authority. The most common type of representation for both parties was a lawyer. Employers were more likely to defend the case successfully if they self-represented. Similarly, employees were more likely to win a personal grievance case if they represented themselves. c. Length of employment: The most common length of employment before the action giving rise to the personal grievance occurred was between one and six years. d. Outcome of determinations: 33 percent of determinations found in favour of the employee, 67 percent found in favour of the employer. e. Compensation awarded: Compensation was awarded in 13 of the determinations. There was only one case of contributory conduct where the damages awarded to the employee were reduced by 40 percent. The most common amount of compensation awarded where a personal grievance was upheld was between $3,000 and $5,000. f. Jurisdiction: The majority of determinations (19) were released from the Auckland Employment Relations Authority, closely followed by Christchurch (17), with Wellington releasing significantly fewer (3). There are a number of potential causes for the vast difference of determinations released, however a larger sample of data would be required to carry out any substantive analysis. Full copies of these reports are available 77. Full reports of the information summarised in this paper are available to you at your request. 78. This paper is for your information only. Footnotes [1] The Employment Court in PBO Ltd (formerly Rush Security Ltd) v. Da Cruz [2005] 1 ERNZ 808 sets out the principles guiding the awarding of costs in the Authority. [2] We have also provided you with background briefings on information and statistics on the employment institutions in the ERA and Employment Court (09/84578 refers) and mediation services (09/85487 refers). [3] Under the Social Security Act 1964, a person is entitled to a provisional unemployment benefit if they lose their job due to misconduct and they are taking a personal grievance against their former employer. If they win their personal grievance case, and receive a wage settlement, they must pay back any unemployment benefit they received. Conversely, if they lose their case they must also pay back the provisional unemployment benefit they received.