Employment authority must decide what hurt and humiliation is worth
Employees often believe that if they win a personal grievance against their employer they will be awarded stacks of cash. This may be a result of watching too much American television, but unfortunately the reality can be different.
An employee who brings a personal grievance can be awarded compensation for humiliation, loss of dignity and injury to feelings. Let’s call this compensation for humiliation and distress.
Additionally, they can be awarded compensation for loss of other benefits, monetary or otherwise, that they may reasonably have expected to receive had the events giving rise to the grievance not occurred.
On top of this, they can claim and be awarded loss of earnings. This is the amount of income lost as a result of the grievance.
Traditionally, awards of compensation for humiliation and distress have been relatively low. Over the past 20 years, the range of these types of awards has generally been between $1000 and
$20,000, but most are well under $10,000.
This raises all sorts of difficult questions. How do you quantify and put a number on the humiliation and distress that a person might suffer as a result of an employment grievance?
There are a large number of variables that can go into how someone may be affected by their employer’s unjustified actions.
In contrast, assessing lost income is relatively straightforward because it is simply a calculation of the difference between what an employee would have earned had the grievance not occurred, and what they actually earned.
Having said that, the Employment Relations Authority (ERA) or Employment Court then exercises their discretion as to how much of the actual loss to award. The basic award is three months’ lost wages, but this can be increased up to
12 months or more if the authority or court see fit. Coming back to awards of compensation for humiliation and distress, there is a significant variation in what employees have been awarded in different situations.
You only have to look at two recent cases to see the variation in the compensation awarded.
The first case involves an employee, Terence O’Hagan, who was dismissed from his job at Envirofoam a week before Christmas. To make matters worse, O’Hagan and his partner had also planned their wedding for the summer holidays.
Last week, the ERA found that O’Hagan’s dismissal was unjustified and awarded him $11,000 in compensation for humiliation and distress.
In considering the level of compensation to award, the ERA took into account the shock that O’Hagan felt at being dismissed without warning just before Christmas and his wedding.
The ERA also found that O’Hagan was ‘‘absolutely gutted’’ and the dismissal affected him and his wife ‘‘pretty badly’’.
In another case, a SkyCity Casino employee, Keith Hayashi, was dismissed after making an error that cost SkyCity more than $300,000. Hayashi argued that this was due to confusing instructions from his manager.
In March of this year, the Employment Court found that Hayashi was unjustifiably dismissed and awarded him $25,000 compensation for humiliation and distress.
The court held that this was a ‘‘modest’’ award, especially as Hayashi’s reputation was damaged, partly due to his being immediately removed from the work premises.
These two cases show that quantifying compensation is something of an inexact science. However, in a recent case involving the Waikato District Health Board, the Employment Court sought to introduce greater consistency in these types of awards, and also signalled that the amount of compensation awarded should be increased.
The chief judge of the Employment Court suggested that there should be three bands for awarding compensation based on the level of humiliation and distress experienced.
These comments follow an earlier paper which suggested awards of compensation up to $10,000 would be appropriate for low-level humiliation and distress; between $10,000 and $50,000 would be appropriate for moderate humiliation and distress; and $50,000 and above would be appropriate for high-level humiliation and distress.
It is not yet clear how this will be reflected in decisions of the ERA and court, but already there are signs that levels of compensation are rising.
This is long overdue as awards of this nature have not increased noticeably over the past
20 years and therefore have not kept pace with either inflation or the current economic and employment context.
It will be positive to see a greater level of consistency and predictability in awards of compensation, and to see that employees receive fair redress for the harm they have suffered.