Emergence of the problem

Alan^[6] worked in a moderate size company, where he had responsibility for aspects of the company's sales and finances. He supervised one staff member (Beth) and reported to two managers (Carol and David). At the time that the ERP arose Alan and the managers had been with the company for between 3 and 6 years and Beth for over 12 months.

Both the Mediation Survey and a survey of Authority hearings showed that the largest group of employees involved in hearings had been employed for between 1 and 4 years at the time the issue arose.

Figure 1: Management structure for narrative

Long description for Figure 1

Several of the problems investigated in the case studies arose in workplaces with unclear or recently changed management structures.

Initially the relationships between the four were happy and productive. There were, however some tensions between Alan and Beth and lines of reporting were not always clear. Alan reported to Carol for sales functions and to David for other areas of work (Figure one).

The initial issue arose when Beth complained to Carol about aspects of Alan's communication style. Carol notified Alan that Beth had made a complaint, but did not explain its specifics. Carol requested that Alan attend a meeting to discuss the issue. Alan declined involvement in a meeting unless he was notified of the complaint against him and the particulars of his alleged actions.

Initial informal efforts at resolution

Alan requested a meeting with Beth to sort out whatever the issues were. Carol talked to Beth about this request, but Beth refused to meet. Alan once again asked Carol to explain the circumstances, but Carol said that she could not do so without Beth's permission. Carol and Alan both felt frustrated by the process, but Carol felt that she could not breach Beth's confidentiality.

The case studies suggest that many employers found conflict between employees particularly difficult to handle.

Carol began to investigate the complaint and found that some other colleagues had concerns about Alan's attitude. However she did not receive any specific examples. She again approached Alan to discuss the general thrust of the complaints. At this stage the issue was regarded as either a potential performance issue or a personality/relationship conflict, although the parties were unclear about the exact nature of the ERP.

It was common for in-house conflict issues, in particular, to be difficult to define initially. An employer raising a matter without providing specific examples of the behaviour that they are concerned about is taking high risks.

Resolution by negotiation

Employers responding to the survey were most likely to attempt resolution by direct negotiation in the first instance. Forty seven percent of the ERPs reaching the attention of respondents began with attempted individual resolution and 31% were resolved this way. Another 29% were settled in-house with external parties involved, making 60% settled by negotiation without mediation. Employers also favoured direct negotiation as a mechanism for future dispute resolution, with over 70% identifying it as their preferred option for future ERPs.

In-house resolutions were the quickest and lowest cost to settle. The median time for resolution was one month - the lowest for any of the methods of resolution - and the median direct cost was $300, with a mean of $3000.^[7]

Introduction of external parties

Concerned about the development of issues, Alan decided that he needed help from a representative, and hired a lawyer to support him.

The introduction of external representatives was often a key moment in the development of an ERP. Once one party has brought in an external party, the other may feel constrained to do the same.

When David heard that Alan had hired a lawyer he decided that the company also needed legal representation. The company hired a lawyer specialising in employment issues to assess the actions taking place so far. The specialist noted that managers had failed to make it clear to Alan what actions he needed to improve on and suggested that they continue to negotiate a solution. After a meeting of representatives, Alan, Beth and Carol agreed to try to improve working relationships, to be clearer about behavioural expectations and to use mediation in the event of future difficulties.

Legal representatives may enter at any point in the development of the ERP. There is no requirement to have a representative, even for hearings before the Authority. While both of the representatives here continued to support informal methods, other representatives favoured more confrontational or formal approaches.

Mediation

After a few months it became apparent that the new arrangements were not working out. Beth was complaining of stress and Alan was getting conflicting messages from Carol and David about his performance. In accordance with their previous agreement, the team brought in an external mediator to help them work through the issues.

Stress was common for both the immediate participants and for others in the workplace (such as Beth).

Alan supported sending the ERP to mediation, as he felt it gave him the first opportunity he had to explain his point of view. Up until that point he felt that Beth was the only one who had been able to explain her perspective (as the previous meeting had not included an opportunity for him to comment on specific incidents).

The desire to be heard was a recurrent theme for employees in the case studies. "Effectively I wanted to be heard, because in the first meeting the guys didn't hear me and ... trundled through." (Employee)

The four of them met together with a private sector facilitator at a neutral venue. Under mediation, they agreed that Beth would continue to report to Alan and that Alan would attend a communication skills workshop. They also agreed to streamlined accountability arrangements, with David responsible for Alan's performance management.

The Department of Labour's Mediation Service provided mediators for most of the ERPs in the survey and case studies. However some employers said they would only use DOL mediators if the employment relationship had broken down irrevocably.

Employment Relations Authority

Shortly after mediation, Beth went on sick leave. While Beth was on leave, Alan noticed that a sum of money had been incorrectly credited to his account. He told Carol about this, as she was in charge of that part of the system. She thanked him and said that she would look into it. She mentioned the discrepancy to David, who was concerned that the relationship between Alan and Beth may have contributed to Beth's illness. David then sent Alan a letter stating that the financial discrepancy was being treated as potential serious misconduct and requesting his attendance at an investigation meeting. At this meeting, Alan was dismissed.

In using Alan's discovery of a financial discrepancy as they did, the managers lost his trust and belief that they were acting in good faith. This happened in several ERPs in the case studies.

This "fishing" for excuses to dismiss the employee led to escalation and loss of trust in each case where it occurred.

Similar effects could be found where employees seemed to focus excessively on the process followed by the employer rather than the substantive issues.

Alan consulted his lawyer who recommended that they approach the Employment Relations Authority with a personal grievance claim. The Authority referred the complaint to the DOL Mediation Service. The company offered Alan a substantial sum of money to settle the case but would not agree to publicly withdraw the accusation of financial irregularities. Alan declined the offer, because he felt that the accusation of dishonesty was unjustified, and would prevent him from finding future work in his field. The company made other, similar, offers in the lead up to the Authority hearing, with the same results.

The Authority must consider whether mediation will be helpful in resolving the problem.

The Authority hearing took place four months later, and the determination was released three months after that. The determination was in favour of the employer, but Alan's lawyer was convinced that a challenge would be sustained.

Of the ERPs covered by the survey, only five percent (six ERPs) were resolved at the Authority. Taking an ERP through to the Authority was a time consuming process and generally appeared to be more expensive than negotiated or mediated resolutions.

Administrative data shows that the average time from an application to the Authority to the actual hearing, including time for unsuccessful mediations, where appropriate (where mediation was successful there was no need for a hearing) was 148 calendar days. The time from the Authority hearing to the issuing of a determination was 43 days.

Employment Court

The final stage of the ERP was a hearing before the Employment Court. It was still important to Alan to clear his name, and he saw the Court as his last opportunity to do so.

Both Alan and the company presented their cases to the Court. Taking into account the fact that Alan had volunteered the information about the overpayment (and therefore could not be assumed to have engaged in misconduct) and the poor processes used in leading up to the dismissal (fishing for reasons for dismissal and a failure to allow Alan to explain the discrepancy), the Court found in favour of all of Alan's claims and ordered compensation accordingly.

The company did not appeal the case to a higher court.

Court proceedings are the least common, but most expensive, way of settling ERPs. In the survey, only two cases were resolved at the Employment Court and one each at the High Court^[9] and Court of Appeal.

Because these cases were so rare, it is difficult to provide definite figures from the survey on the costs of ERPs that reach the court system. As an indication, however, the time and costs were higher again than those for the Authority.

Outcomes

Alan ended up winning his case at the Employment Court and his employer decided against further appeals. Although Alan received a substantial payout and cleared his name, he ended up out of pocket overall. For both him and his employers the process was also highly stressful and time-consuming. For the employer in this case the financial costs were higher than those Alan faced, as they had to make a payout and cover legal costs as well as the time devoted by company management to pursuing the case and staffing costs to replace Alan and Beth during the period of ERP.

Unsurprisingly, the type of mechanism used to resolve ERPs had a significant impact on the amount of time it took to reach resolution. ERPs that were settled in-house were the fastest, while cases that led to Employment Relations Authority or Court hearings took much longer.

The relative costs to employers of ERPs according to the method of resolution are indicated below.

The time taken and costs involved with problem resolution were lowest for the ERPs resolved through direct negotiations between the parties (the pathway most favoured by employers). The median costs for resolutions reached through mediation or negotiations involving third parties were between $3,000 and $7,300. There were insufficient numbers to provide significant figures for cases reaching the Authority or courts, although indicative figures showed that these cases were more expensive. The findings support the preference in the Act for informal resolutions, while showing that the costs can become a significant issue for employers.

It is probable that one of the reasons for the lower costs of internal resolutions is that they are dealing with less severe or complex ERPs than those settled by other means.