Personal Grievances – When a Win is actually a Loss

A recent personal grievance case between Philipa Johnson and the National Business Review (NBR) resulted in a win for the employee, which actually ended in a financial loss for her when all was said and done. The Employment Relations Authority determined the employee was unjustifiably dismissed. However, the sting in the tail for the employee was that her legal costs were 10 times higher than the compensation she received.

As an employer, it can at times feel like the cards are stacked against you when dealing with a personal grievance. Frequently the better business decision can be to reach a settlement to resolve a dispute even when you have done nothing wrong. From a point of principle this may not feel particularly comfortable.

However, despite best intentions an agreement might not be reached, or you may decide the principle is more important. As a client goes through the decision process to determine which strategy to adopt, we take you through the risks of each pathway and the potential costs of both winning and losing a grievance in the Employment Relations Authority.

At the same time we analyse the risk for the employee and likely value of any compensation award, and this helps inform the decision on how  much to consider offering to reach a settlement if this is the preferred option. There are times the employee is either too greedy or poorly advised and their expectations of a settlement amount are unrealistic.

Affecting the level of the award Johnson received was the Authority’s determination that she breached her employment agreement when she took and distributed confidential information from the employer when she left their employment.

Johnson was awarded $1,666.67 in lost wages and $8,000 in compensation for the unjustified  dismissal. She had claimed $50,000. However, she was ordered to pay a $9,000 penalty for breaching her Employment Agreement, of which $6,750 was to be paid to the NBR and the balance to the Authority. Johnson paid a staggering $96,000 in legal fees.

The winning party ordinarily is awarded $4,500 in costs for a one day hearing in the Authority.  With this in mind, even without the penalty awarded against her, Johnson was always going to be on the losing side financially, as she claimed $50,000. This case demonstrates how principle can override common sense, and some people cannot be negotiated with.