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Confidentiality in Mediation

August 2007

NB: The comments included in this publication should not be read as representative of the view of the Court, Authority, or the Department of Labour. Rather, any view expressed is in the nature of an opinion only.

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An overview of recent developments

Introduction

Mediation is a process in which participants, with the assistance of a mediator, systematically isolate disputed issues in order to develop options, consider alternatives and reach agreements that will accommodate their needs.1 The use of mediation is strongly encouraged under the current legislative scheme, and is routinely used by parties in employment relationships as a means to resolve employment relationship problems.

The extent to which communications between parties to mediation can be relied on outside the mediation process has long been a contentious topic in employment law. Under s148 of the Employment Relations Act 2000 ("ERA") what is said, done, and created for, or during, the mediation process for the purposes of the mediation, is confidential.2 Such communications cannot be referred to beyond the mediation process without consent of the party or parties involved.

Over recent times the case law appears to have oscillated between two positions. At one point, the Employment Court allowed for exceptions to confidentiality in mediation. The Court then adjusted its stance, and maintained that mediation communications should be afforded "absolute" confidentiality. The Court now appears to have shifted back to the former position, by permitting exceptions in certain circumstances.

Recently the Employment Court in Jesudhass v Just Hotel Ltd3 reviewed previous judicial interpretations of the meaning of s148 ERA. It found that if communications are not for the legitimate purposes of mediation, those communications would not be confidential. The decision clearly signals a move away from the Court’s earlier approach to the section. It could also be of real importance to any party wanting to use what was said or produced at mediation later in the dispute resolution process, or if a further dispute arises.

Confidentiality in Mediation Prior to the Employment Relations Act 2000

To gain an accurate picture of the status of confidentiality in mediation under the ERA, it is important to track how the jurisprudence has evolved.

The predecessor of the Employment Relations Authority, which currently determines employment relationship problems, was the Employment Tribunal under the Employment Contracts Act 1991 ("ECA"). The Tribunal provided dual functions of adjudication and mediation services. The ECA protected information related to mediation from disclosure under the Official Information Act 1982.4 There was, however, no other statutory protection for the confidentiality of communications related to mediation. The mediation process was not prescribed as it is under the ERA.

Although the ECA did not guarantee confidentiality, it was a common practice of mediators to treat information relating to mediation with confidentiality, and for parties to agree mediation would take place on a confidential, without prejudice basis. 5

Almost immediately prior to the enactment of the ERA, the Employment Court considered whether a document produced in mediation was discoverable in subsequent court proceedings.6 The case was Crummer v Benchmark Building Supplies Ltd.7

The Court was aware its decision may not have "far-reaching consequences" as the Employment Relations Bill had recently been introduced and dealt expressly with confidentiality of mediation.8 Section 148 ERA would soon govern the situation. The Court pointed out, however, that "the integrity of the adjudication process stands to be impugned if a party is able improperly to shelter behind the confidentiality of the mediation process".9 The decision is noteworthy as it may be considered as foretelling the stance the Court would in time adopt in Just Hotel Ltd.

The facts of Crummer are straightforward. Mr Crummer was dismissed from his employment, and subsequently claimed it was unjustified. The parties engaged in mediation at the Employment Tribunal in an attempt to resolve their differences, agreeing it would take place on an in confidence, without prejudice basis. The mediation was unsuccessful. At the Employment Court, Mr Crummer sought discovery of a written statement his employer had read out at mediation. He alleged the statement included an assertion Mr Crummer’s prior conduct was taken into account in the decision to dismiss.

The Full Court held that, in limited circumstances, statements related to mediation were discoverable, and could be inspected by the other party in subsequent proceedings if they had been reduced to writing, unless they were protected by legal privilege or there were public policy reasons not to allow discovery. The Court considered such statements were not normally admissible as evidence at a subsequent hearing because of the public policy of "encouraging litigants to settle their differences rather than litigate them to a finish."10

The Court found exceptions to the public policy rule existed where there was good reason to admit evidence. Examples listed by the Court were:

  1. Where there is a strong risk that the Tribunal in its adjudication jurisdiction would be deceived by the exclusion of the evidence
  2. The exclusion would defeat the legislative intent; or
  3. Where the statement or admission gives rise to a new cause of action."11

A limited range of exceptions to confidentiality and inadmissibility was therefore allowed.

The Current Legislation

Section 148 in Part 10 of the ERA was enacted in response to the findingin Crummer. It was said to "prevail" over Crummer and ensure confidentiality in and around the mediation process. The following is an outline of the relevant sections under the ERA.

In establishing the institutions for dealing with employment relationship problems, a principal object in Part 10 of the ERA was to recognise that employment relationships are more likely to be successful if problems in those relationships are resolved promptly by the parties themselves.12 The ERA also seeks to recognise that if problems are to be resolved promptly, expert problem-solving support, information, and assistance needs to be available at short notice to the parties to those relationships.13 For that reason, mediation is promoted as the primary problem-solving mechanism for employment relationship problems.14

Section 148(1) in Part 10 states:

  1. Except with the consent of the parties or the relevant party, a person who;
    1. provides mediation services; or
    2. is a person to whom mediation services are provided; or
    3. is a person employed or engaged by the Department; or
    4. is a person who assists either a person who provides mediation services or a person to whom mediation services are provided—
      1. must keep confidential any statement, admission, or document created or made for    the purposes of the mediation and any information that, for the purposes of the mediation, is disclosed orally in the course of the mediation.

Anything relating to, or disclosed in mediation that is confidential by reason of s148(1) is inadmissible evidence in Court or in front of any person acting judicially.15 There does not appear to be any dispute that Members of the Employment Relations Authority would be caught by the section, being persons "acting judicially".

Where mediation services are provided for the purpose of assisting in determining or agreeing on new collective terms and conditions of employment, the confidentiality protections do not apply.16

A small number of exceptions to the confidentiality rule are expressly provided for under the ERA.17 For example, section 148(6) makes clear the protections in s148 do not prevent the discovery or admissibility of evidence which is otherwise discoverable or admissible and which exists independently of the mediation process.

Section 149 provides that terms of settlement signed by a mediator are final, binding, and enforceable by the parties. Except for the purpose of enforcement, parties cannot seek to bring the terms of the settlement before the Authority or the Court.

Finally, it is interesting to note the definition of "mediation services" in s5 when considering the status of mediation services provided by mediators other than those from the Department of Labour. Section 5 refers to "mediation services" as those provided "under s144, by the chief executive", indicating Department of Labour mediators are bound by the s148 confidentiality provision, and not private mediators.

Perhaps not surprisingly, the Employment Court has held "mediation services" in s148 are "not restricted to departmentally provided mediation."18

Case Law: Interpretations of s148 ERA

Shepherd v Glenview Electrical Services Ltd

The meaning and effect of s148 was explored at length by the Court in Shepherd v Glenview Electrical Services Ltd.19 Mr Shepherd alleged he was told by his employer during mediation that the Waikato District Health Board did not want him working on its site, and that was the reason for his dismissal. He later acquired evidence from the Health Board indicating the explanation was not based on fact.

Mr Shepherd argued he settled his claim in mediation for less than he originally sought because of the explanation, and sought to set aside the mediated settlement. He wanted to adduce evidence of the explanation as part of a personal grievance claim.

The Court considered by enacting ss148 and 149, Parliament intended to "disallow any opportunity at all to have ruled admissible any statement made at mediation."20 The statement was therefore not admissible as evidence because of s148.

Nevertheless, the Court was of the opinion the combined effects of s148(1) and (3) were "clear, absolute, and draconian."21 Where misrepresentations and fraudulent statements might be made in mediation, the Court believed it was "not right that such absolute and unassailable confidentiality is required in the interests of justice in all cases."22 Section 148 appeared to make evidence of criminal offences committed by a party at mediation inadmissible, if the offences were committed while making a statement for the purposes of the mediation.23 It questioned whether the Legislature intended such consequences to result from of its desire for absolute confidentiality. However, the Court reluctantly found its hands were tied by s148.

Employment Relations Authority determinations have similarly taken a strict approach to s148. In one instance, the Authority showed comparable frustration at the effects of s148. In Snaith v S&A Ltd, it held it was statute-barred by s148 from investigating claims of bullying by one party during mediation.24

Jesudhass v Just Hotel Ltd

Against this background, the significance of the Court’s decision in Just Hotel Ltd is apparent.

The plaintiff (Mr Jesudhass) was employed as a general manager at Just Hotel. After a series of employment relationship problems arose with his employer, he was suspended. He raised a personal grievance against Just Hotel for unjustified disadvantage. The parties then used the Department of Labour’s Mediation Service. Mr Jesudhass claimed that during the mediation, the employer’s representatives relayed to him through the mediator that he would be dismissed after the conclusion of the mediation. The dismissal was later confirmed by the employer. The employer denied that this had occurred in mediation.

Mr Jesudhass pursued an unjustified dismissal grievance, and on application to the Employment Relations Authority, the matter was removed to the Court. The issue to be decided was whether the alleged statement by the employer could be admissible evidence at the substantive hearing of the dismissal grievance.

The Court took this as an opportunity to reassess its prior stance on the meaning and effect of s148 ERA. It noted at the heart of the question for decision was the meaning of the phrase "for the purposes of the mediation".25 The meaning of the phrase was not entirely clear on its face: 26

For guidance, the Court considered comparable confidentiality provisions in other statutes. It also took into account the scheme and traversed relevant sections of the ERA, particularly Part 9, which could assist in determining the meaning of the phrase.

Among the sections examined was the first object of s101 ERA. Section 101 recognises that "in resolving employment relationship problems" access to information and mediation services is more important than "rigid formulaic procedures".27 The Court also considered the first object in s143, that the employment institutions (including the Mediation Service) should support successful employment relationships and the good faith obligations underpinning them.

From other ERA sections the Court drew a number of conclusions about the phrase "for the purposes of mediation":28

The Court understood Parliament’s intention to be that confidentiality should automatically attach to all mediations irrespective of whether the parties had agreed to it in advance.29 Crummer had confirmed common law privilege was not absolute, and the Court doubted Parliament intended to go further and create "absolute privilege with all of the easily imaginable harshness and injustice that this might entail."30 Parliament used the phrase "for the purposes of the mediation" to maintain the balance between "predominant privilege" on the one hand, and circumstances where "common sense and the interests of justice" would warrant disclosure and admissibility on the other.31

The Court rejected a submission the confidentiality and inadmissibility provisions were not absolute in the sense they did not preclude evidence of the participants’ physical actions. On the contrary, the Court regarded:32

"What is said or written may be as powerful and reprehensible, sometimes even more so, than what is unspoken or unwritten. The examples we have given of threats, blackmail, and attempts to pervert the course of justice may arise solely by words spoken and/or written. In our view, Parliament cannot have intended that evidence might be given of criminal actions while words constituting an offence should be confidential and inadmissible."

The Court held the phrase "for the purposes of mediation" reflected common law requirement communications in mediation must be genuinely for the purpose of settling litigation or potential litigation, and those protections are lost when the communications are for other purposes.33 Therefore, the confidentiality and inadmissibility contemplated by Parliament in enacting s148 could not be absolute. However, the Court stated:34

"...Parliament must have intended that parties would have the freedom to express themselves and their positions in a way that they might not in an investigation meeting before the Authority or in proceedings before the Court. For example, an admission made in the course of mediation that a dismissal was unjustifiable should not be able to be the subject of subsequent evidence if the mediation does not settle the employment relationship problem."

Where privilege or admissibility is in issue, the question in each case would be where to draw the line between the two positions. The phrase "for the purposes of the mediation" relates to information that should be properly protected in the mediation context. If information is provided that is not for the legitimate purposes of the mediation, then it is not entitled to the protections of confidentiality and inadmissibility. 35

Mr Jesudhass could therefore introduce evidence at the substantive hearing of the grievance of communications between the parties at mediation, other than those made in an attempt to resolve the employment relationship problem.36

In the alternative, the Court found that the dismissal must have been intended to have effect outside mediation. It therefore existed outside the mediation process and was admissible on that basis.37

Also relevant to the question was the legislation’s emphasis on conducting employment relationships in good faith. The ERA requires parties directed to mediation by the Employment Relations Authority or the Court to "comply with the direction and attempt in good faith to reach an agreed settlement of their differences".38 Therefore, the legislation does not expressly state the duty applies to voluntary mediation. The Court believed there could be no valid distinction between Authority or Court directed mediations, and those instigated by the parties themselves.

The Court commented:39

…it is inimical to the conduct of a mediation in good faith that wrongful or misleading or unlawful words or actions should be permitted as part of a dispute resolution forum in which parties are expected to behave towards each other in good faith. Similar expectations arise at common law…Equally, we conclude that parties to an employment relationship engaging in mediation with a view to sustaining and improving that relationship, or even settling the terms of a former relationship, are engaging in a process that requires engaging in good faith behaviour.

Therefore, engagement in mediation is an "additional, but unspecified, circumstance in which the good faith rules apply".40 The Court believed Parliament "could not have intended to penalise a party who failed to comply in mediation with the duty of good faith in s4(1) to the high standard set out in s4A, but in respect of whose conduct no evidence could be given."41

Lauchlan v Keegan Contractors Ltd

A recent determination of the Employment Relations Authority has adopted the Court’s approach to mediation communications in light of Just Hotel Ltd. In Lauchlan v Keegan Contractors Ltd,42 the Authority concluded the employee’s allegations about what occurred at mediation did not in fact occur. It preferred the employer’s evidence that nothing was said at mediation constituting grounds for breaching the confidentiality of the mediation. While this finding resolved the issue, the Authority further considered whether what was claimed to have occurred at mediation was not "for the purposes of mediation" and/or for the purposes of settling litigation or potential litigation.

It considered Just Hotel Ltd had concluded parties who had engaged in mediation, in order to deal with an issue in their employment relationship, were acting for the purposes of mediation. The Authority found that all actions taken in the situation at hand were for the purposes of mediation.43 The Authority reiterated the Court’s finding in Just Hotel Ltd that "the purposes of mediation" reflected the common law requirement communications genuinely be for purpose of settling litigation or potential litigation before confidentiality applied.44 The Authority believed the Court was not holding that there had to be litigation or potential litigation before confidentiality could apply. Lauchlan is a good example of how the approach in Just Hotel Ltd can be applied in practice.

Conclusions

In conclusion, the jurisprudence of confidentiality in mediation under the ERA appears to still be under development.

The Court in Just Hotel Ltd acknowledged that parties carry out hard bargaining and take certain positions in mediation. It believed its finding did not compromise parties’ "ability to make, and consider freely, offers of settlement" in the mediation process.45 However, it did state that the law must draw a line between acceptable and unacceptable conduct, and included in that exercise was the need to acknowledge the desirability of settlement of disputes in mediation. It considered Parliament achieved that balance by enacting s148, as the Court had interpreted it, in Just Hotel Ltd.

Finally, it should be noted Just Hotel Ltd were granted special leave to appeal by the Court of Appeal against the Employment Court’s decision.46 It will be of great significance to all parties to mediation in the future, and practitioners in employment law, to discover whether the Court of Appeal will confirm the new approach championed by the Employment Court in Just Hotel Ltd.

Endnotes

1 See "Going to Mediation" http://www.ers.govt.nz/problem/mediation.html accessed 29 August 2007.

2 Employment Relations Act 2000 ("ERA") s148.

3 [2006] ERNZ 173

4 Employment Contracts Act 1991 s102.

5 Crummer v Benchmark Building Supplies Ltd [2000] 2 ERNZ 22 para 9-12.

6 A party to a court proceeding may serve a notice for "discovery" requiring another party to the proceeding in possession of a relevant document to compulsorily disclose ("discover") that document: Spiller, Butterworths New Zealand Law Dictionary (4th Edition, Butterworths, Wellington, 1995) p91.

7 [2000] 2 ERNZ 22.

8 Crummer v Benchmark Building Supplies Ltd [2000] 2 ERNZ 22, para 6.

9 Crummer v Benchmark Building Supplies Ltd [2000] 2 ERNZ 22, para 24.

10 Crummer v Benchmark Building Supplies Ltd [2000] 2 ERNZ 22, para 25.

11 Crummer v Benchmark Building Supplies Ltd [2000] 2 ERNZ 22, para 25.

12 ERA s143(b).

13 ERA s143(c).

14 ERA s3(a)(v).

15 ERA s148(3).

16 ERA s148(5).

17 ERA s148(6).

18 Lowe v New Zealand Post [2003] ERNZ 172.

19 [2004] 2 ERNZ 118.

20 [2004] 2 ERNZ 118.

21 Shepherd v Glenview Electrical Services Ltd [2004] 2 ERNZ 118, para 46.

22 Shepherd v Glenview Electrical Services Ltd [2004] 2 ERNZ 118, para 46.

23 Shepherd v Glenview Electrical Services Ltd [2004] 2 ERNZ 118, para 46.

24 unreported, L Robinson, 9 May 2005, AA 169/05.

25 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 42.

26 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 11.

27 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 42.

28 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 44, 45. Sections discussed included: ss143(a)-(da), 144(2) (particularly (d)), 147, 149, 150, 152, 153, and 159 ERA.

29 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, paras 47, 48.

30 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 46.

31 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 46.

32 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 55.

33 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 56.

34 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 57.

35 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 58.

36 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 70.

37 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 62.

38 ERA ss159(2) and 188(3).

39 Jesudhass v Just Hotel [2006] ERNZ 173, para 51.

40 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 52.

41 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 53.

42 unreported, G Wood, 15 March 2007, WA 41/07.

43 Lauchlan v Keegan Contractors Ltd unreported, G Wood, 15 March 2007, WA 41/07, para 22.

44 Lauchlan v Keegan Contractors Ltd unreported, G Wood, 15 March 2007, WA 41/07, para 20.

45 Jesudhass v Just Hotel Ltd [2006] ERNZ 173, para 68.

46 Just Hotel Ltd v Jesudhass unreported, Chambers, Robertson, Arnold JJ, 17 October 2006, CA 69/06.