Review of the Employment Relationship Problem Resolution System

Appendix 4: Comments from Business New Zealand, New Zealand Council of Trade Unions, Small Business Advisory Group and the Quality Regulation Review

Two main issues were discussed during the consultation: how a lack of regulation impacts on the behaviour of employment advocates; and how "no win, no fee" arrangements affect dispute (i.e. employment relationship problem) resolution.

SBAG, Business New Zealand and New Zealand Council of Trade Unions all noted that advocates are not subject to the same rules as lawyers. Business New Zealand expressed concern about regulating advocates because to do so would unduly limit types of representation available, i.e. by friends, and a blanket prohibition of advocates could prevent employer organisations from acting.
SBAG, Business New Zealand and New Zealand Council of Trade Unions did not submit that the lack of regulation was a substantial problem with the dispute resolution system.

Business New Zealand noted the general perception that these fee arrangements increase claims but highlighted that information is largely anecdotal. Business New Zealand emphasised that such fee arrangements focus on money rather than settlement so are at odds with the Act's objectives. New Zealand Council of Trade Unions does not consider that such fee arrangements have increased the number of personal grievance claims. SBAG considers that these fee arrangements increase the number of 'vexatious' claims and claims based on procedural errors.

The issues raised were: that many employers consider there is more emphasis on procedural rather than substantive fairness in dispute resolution; and that access to justice is an issue for everyone - employees need to have adequate, affordable representation when they need it, and so do employers.

Business New Zealand and SBAG note that many employers consider that the system does not work in their favour. SBAG proposes introducing a provision stating that if an employer has acted in a substantively fair way, any small procedural error should be overlooked i.e. section 18(6) of the Disputes Tribunals Act 1988. Business New Zealand considered that notions of fairness depend who is affected and the system is probably 'as fair as it can be'. New Zealand Council of Trade Union submits that the current system is fairer than SBAG's alternative dispute resolution proposal.

SBAG and Business New Zealand were concerned that an employee has access to legal aid to reduce the costs of taking a personal grievance while an employer has to shoulder legal costs themselves. SBAG and Business New Zealand emphasise that any proposal needs to ensure that both employers and employees can adequately represent themselves without having to pay enormous fees.
Business New Zealand commented anecdotally that many, especially smaller, employers settle against a background of lacking expert advice of their own and being unable to make a proper judgement as to the merits of the case. This means small employers can be vulnerable to the tactics of experienced employee advocates - particularly the less scrupulous.
New Zealand Council of Trade Unions commented that there are many employees who cannot afford adequate representation, and others who are forced as a result of poverty to engage incompetent representation.

Business New Zealand does not support a Code because it would: need to be interpreted; increase the amount of process; and further limit the discretion of a decision-maker by requiring strict adherence to the Code. An alternative is to provide more information about the type of steps to be taken when dismissing an employee. Business New Zealand considers that a Code would exacerbate the focus on process over substance.
SBAG was undecided. It supports the creation of a 'safe harbour' for employers that it is simple and effective but support for a Code would depend on who develops it, who buys in to it and what status it has.
Business New Zealand and SBAG's comments were dependent on the type and shape of the Code to be developed.
NZCTU supports a Code and considers that disciplinary inquiries, temporary and probationary employment could be covered, in addition to other areas.

Submissions noted that there is little information about the current cost of dispute resolution (even how much lawyers and advocates are charging) and how that impacts on businesses.
SBAG emphasised that small businesses are hit hard when disputes occur because disputes cause financial losses and psychological stress. Costs are higher for a small business as one under-performing employee may make up a large percentage of the workforce. Costs include the time spent away from the business, other staff being unsettled, trying to cover for or recruit a replacement for the employee involved in the dispute, and stress in personal, family and work relationships. These are all powerful disincentives to be involved in a formal process. SBAG submits that these considerations result in SMEs settling to make the problem go away rather than defending their actions, particularly when they are concerned about the (unknown) costs of legal representation and may think that they cannot afford legal advice.
SBAG notes that SMEs in general lack specialist advice about recruitment, performance management and dismissal procedures, and that SME owners may be technical experts but lack skills in dealing with people.

There was support for added flexibility to dismiss staff in probationary periods. Interviewees in the retail and hospitality sector considered that disputes processes are biased in favour of employees, but this remains anecdotal and has not been substantiated in the analysis and research the Department of Labour has undertaken.