Executive Summary

The call for public submissions on personal grievances was designed to elicit views and personal experiences of the operation of the personal grievance system.

The submissions provide a "subjective" view of the personal grievance system and findings from the submissions analysis will be supplemented by other more "objective" research conducted by the Department of Labour, providing more empirical evidence on the operation of the personal grievance system.

Public Consultation - discussion paper

The Department of Labour sought to understand the extent to which stated problems around personal grievances are genuine or are based on perception. Perceptions of the system and processes can have a real influence on people's behaviour and the way they interpret the system and processes related to personal grievances. Perceptions can be based on a number of factors including the interests represented by submitters, personal experience of the grievance process and knowledge of the rights and obligations in the law.

The Department of Labour received 219 submissions, with the majority of submissions providing an employer perspective (employers, employer associations and industry groups).

This report summarises the submissions received, identifies key themes raised by submitters and sets out their preferred options for any change to the personal grievance system.

Most submitters focused on issues related to costs, representation, balance of fairness in the system and the test of justification (section 103A of the Employment Relations Act).

Analysis of submissions

Based on our analysis of submissions and other research, the Department of Labour considers that the balance of fairness provided in the current law is about right. However, there are pervasive and enduring concerns expressed by many employers that the system is weighted against them because they believe that their processes (and any minor errors in their processes) are considered by the employment institutions to be more important than the substance of a case. Hence, many employers hold that procedural flaws may render an otherwise justifiable action unjustified.

Many employers who have had personal experience of defending a personal grievance claim (and 'lost') do not consider that justice was done; do not understand why process is important in determining whether an employer has acted in a 'fair and reasonable' manner; and any weight given by the Employment Relations Authority or the Employment Court to culpable contributory conduct on the part of the employee appears to have little impact on the employer's overall assessment of the process. Media coverage of cases, in general, by glossing over why a procedural fairness of the flaw may have been critical, or by ignoring contributory costs, tends to reinforce the view that a decision against an employer was unfair.

Many employers who have not had personal experience of the personal grievance system (past mediation) nevertheless hold strong views about the system, its costs and the likelihood of successfully defending a personal grievance allegation. Such views were often cited as the reason for choosing to 'pay out' an employee privately or at mediation.

The Department of Labour considers that the pervasive nature of such criticisms, albeit not supported by the research findings, by most academics or by many professional practitioners in the system, work to undermine it. Its credibility, its effectiveness and purpose are all undermined. Most importantly, it is possible that some employers are paying out employees unnecessarily as the allegation might not stand, if defended.

Any steps to address these problems must also take account of countervailing views, the findings of the research, and the serious business of (potentially) making changes in a well-established and important part of employment law.

Key themes:

1. many submitters said costs were unreasonable, in particular for small businesses
2. concerns were linked to costs associated with representation, unmeritorious claims and adverse outcomes
3. opposition was voiced to the no-win-no-fee advocates, in particular from employers and legal professionals but there was equally a view that the quality of advocacy was a characteristic of the individual representative, rather than of the method of payment
4. criticism of unethical practices was targeted at a range of employment advocacy providers and there was support for some form of regulation from across all groups
5. the law is not generally considered complex although many employers find it creates uncertainty, it is difficult and unclear
6. principles of natural justice were well supported throughout the submissions, although many employer submitters commented that there should be less focus on process and more emphasis on substance of personal grievance
7. the current test of justification received widespread support but many submitters advocated an amendment to explicitly recognise an employer may apply a range of reasonable responses in managing a problem
8. barriers arising from a lack of knowledge and/or advice were common concerns in the submissions for both employers and employees and were considered to be of greater significance for some groups in the community than others
9. delays were associated as much with the behaviour and availability of representatives and parties to the dispute as with the waiting times associated with the institutions
10. majority of employers and employer representatives felt that trial periods had reduced the risk of personal grievances for SME employers and supported an extension in the legislation while employees and union were opposed to this.
11. most submitters did not support different eligibility rules applying to different types of employees because they considered that the law should apply equally to all employees
12. most employers and employer representatives considered that the 90-day limitation period was not adequate or appropriate nor did they consider the three year limitation period was appropriate
13. employer submitters were more likely to suggest that reinstatement is removed as the primary remedy, but felt that it should still be an available remedy and were concerned that the current range of remedies were not effective at rebuilding employment relationships
14. most suggestions for making remedies more effective were around financial remedies, including having limits on the amount that can be awarded or increasing awards to reflect the real impact on employees
15. many submitters were satisfied with the status quo and the current "effective service" offered by the Department's mediation services and identified a constructive role for mediation in early resolution of conflict, and
16. the role of mediation in filtering out meritless claims and in assisting parties to identify the issues and the risks of a claim, in advance of mediation, was a theme throughout the submissions.

Conclusion

The objectives of the personal grievance review were to consider a number of factors. Upon analysing the submissions, we found that it:

1. strikes a fair balance between employer flexibility and employee protection: disinterested people or groups feel the system is fair. Those with an interest in the outcome of a personal grievance claim (employers and employees) both feel that it is weighted against them in different ways
2. does not impose unnecessary costs or obligations for employers or employees: both employers and employees felt the system imposed costs (direct and indirect). When compared to other dispute resolution systems in New Zealand or overseas, direct costs are relatively moderate. Some employers see these costs as being ordinary business costs. Most submitters would like to see costs reduced
3. supports improvements in workplace productivity: that employment relationship problems including personal grievances adversely affect workplace productivity, and
4. has met its objectives (as set out in the Employment Relations Act 2000): broadly, submitters felt the personal grievance system is meeting its objectives, although they also presented ideas about how it can be improved.