Posted on: Dec 15, 2016

Among other interesting things, in this recent case the Employment Court closely examined remedies, and in particular the effect of s 124 in reducing remedies to account for an employee’s contributing behaviour.  In other words, where the employee’s behaviour or conduct (the actions of the employee) contributed towards the situation that gave rise to the personal grievance, then the amount of remedies awarded may be reduced accordingly.  Actions that would normally result in a reduction in remedies are those which may be categorised as being “culpable” or “blameworthy”.

In this case, the question of whether the Authority or Court can, having fixed the remedies, then eliminate them entirely where the conduct of the employee is sufficiently egregious as to justify such a conclusion.  This question was also raised (but not answered) by the Court in Harris v The Warehouse Ltd [2014] NZEmpC 188, with Chief Judge Colgan considering that there was a “respectable argument” that it was not permissible to reduce remedies by 100%. You can read our earlier blog post about this case here.

Standard dictionary definitions of the word “reduce” were considered – that is to diminish, lessen or make smaller (which does not extend to outright extinguishment), as were historical statutes and the relevant case law.  The Court referred to a recent UK case from the Employment Appeals Tribunal in which the Tribunal held that the word “reduce” when construed in context did permit a 100 per cent reduction in remedies.  However, the UK legislation differs to New Zealand in that it provides the additional words of “to any extent” which the Employment Relations Act does not provide.  The Court therefore said at para [204]; “on the face of it, s 124 contemplates reduction only“.

However, the Court confirmed that it would be open to the Authority or Court, in cases where the employee should recover nothing, to say so as part of the process of assessing compensation.  Although it appears to achieve the same result, this is different to awarding remedies and then reducing those remedies by 100 per cent:

[216] We conclude that s 124 does not permit complete removal of a previously established remedy. Rather, when there is misconduct which is so egregious that no remedy should be given, notwithstanding the establishing of a personal grievance, the Authority or Court may take that factor into account in its s 123 assessment in a manner that conforms with “equity and good conscience”. The absence of a remedy in rare cases, notwithstanding the establishing of a personal grievance may be appropriate. The Court of Appeal reached this conclusion where there is disgraceful misconduct discovered after a dismissal. We consider that the statutory scheme allows for the same outcome in other instances where, for example, there has been outrageous or particularly egregious employee misconduct. 

A 50% reduction will be “significant”.

The Court then proceeded to make some brief remarks as to the extent of reduction which may be justified, and noted the following observations from previous cases:

  • A reduction of 25% is one of particular significance.
  • The finding of contributory fault of 50% is a significant one.

The Court then respectfully adopted and emphasised these conclusions and awarded Mr Dewar’s remedies be reduced by 16.7 per cent.

Conclusion

A key takeaway from this case is employers will need to prepare themselves for lower reductions in remedies going forward.  Where we may have previously advised that an employee’s contribution will significantly or wholly reduce his/her entitlement to remedies, this will no longer be the case.  We’re expecting to see far lower reductions coming out of the Authority and the Court, and this will have an impact on the monetary value of settlements when it comes to resolving disputes.

See: Xtreme Dining Limited t/a Think Steel v Dewar [2016] NZEmpC 136 (31 October 2016)



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This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.