Compensation Awards Trending Up

01 October 2017

Compensation awards in the Employment Relations Authority are trending up but not by much.  For 2016 the average hit $7,000 up from $6,344 the previous year.

However, the EMA says employers pay an average of $50k if they lose in the ERA and spend almost $12k even when they win!  On the other hand employees lose an average of $16k if they’re unsuccessful and on average only get $15k if they win.

This is driving more parties to settle in mediation because the cost of going on to the ERA is very high for only modest gains.  In many cases even when the employee is successful their legal costs exceed the compensation received.

There needs to be a better way – one that is faster, cheaper and requires less time and emotional energy for all parties.  In our view we need something akin to the Disputes Tribunal process operated by the Ministry of Justice.  This allows non-employment disputes to be resolved very quickly.  The waiting time for a hearing is relatively short and the parties must represent themselves – no lawyers.  The Tribunal member hears both sides of the story and then tries to broker a settlement. Failing that the Member makes a decision, usually given verbally at the end of the hearing, which is enforceable in the District Court.

The Tribunal can hear small claims up to $15,000 or, if everyone agrees, $20,000. As described above, that is well within the range of the average settlement for employees who are successful in the ERA.

Interestingly, the Labour party’s policy envisages this sort of approach for dealing with dismissals under trial periods; and in Australia the Fair Work Commission operates a similar process.