Hurt and humiliation payments on the rise

2017 has seen an increase in amounts awarded by the Employment Relations Authority and the Employment Court for hurt and humiliation under section 123(1)(c)(i) of the Employment Relations Act 2000 (Act).

These increases flow on from concerns that such awards have been “left behind” in the broader context of compensation payments and appropriate adjustment for inflation.

Consistency keeping awards artificially low

There had been little increase in average hurt and humiliation awards over the past 20 years, with figures typically sitting around the $4,000 to $7,000 mark. In 2015 the Employment Court highlighted this concern in Hall v Dionex Pty Ltd[1] noting that, while there is a need for a degree of consistency with other cases, there is a danger of using consistency to keep awards at an artificially low level.  In particular, the Employment Court stated that hurt and humiliation awards in the Authority and the Employment Court had fallen “woefully” behind and had not kept pace with inflationary effect.

Since Hall, several decisions have taken note of the Court’s comments. For example, the Court in Rodkiss v Carter Holt Harvey Limited[2] awarded $20,000 for hurt and humiliation under section 123(1)(c)(i) of the Act following a successful claim by Mr Rodkiss of constructive unjustified dismissal. The Court in Rodkiss commented that, while awards need to bear in mind the recognised need for moderation in employment cases, compensation should be a reasonable amount.

Awards starting to rise

This year, the long-signalled increases to compensatory awards in the Authority and the Court have gained traction.  On a review of Authority and Court decisions to the end of July 2017, the average hurt and humiliation award under section 123(1)(c)(i) of the Act is around $9,000.  Approximately 20% of these decisions included awards of $15,000 or more, and 40% to 50% of the awards have been over the $10,000 mark.

The highest recent award was made in June, when Ms Stormont was awarded $25,000 hurt and humiliation following a successful personal grievance claim arising out of a redundancy process.[1]  In this case, the Court pointed out that a review of compensatory awards for unjustified dismissal for redundancy between January 2013 and July 2016 showed average awards of $6,000 from the Authority and $15,000 from the Court.  The Court then referred to the cases of Hall and Rodkiss and noted that these cases showed a distinct increase in the quantum of awards for hurt and humiliation.  It also commented that the top end of awards for hurt and humiliation from the Authority and the Court have fallen well short of awards for the same type of loss in the Human Rights Review Tribunal.  This seems to be a reference to the well-known Hammond v Credit Union Baywide[2] case as a comparison, where the individual received a $98,000 compensatory award.

New Zealand is not the only place where hurt and humiliation awards are on the rise.  In the UK, there has been ajoint consultation statement seeking views on increasing the Vento bands for damages for injury to feelings and psychiatric injury. Vento Bands are the ranges set in the UK by case Law [5] for payments to compensate for hurt and humiliation.      The last formal increase in these bands occurred eight years ago, and changes are on the horizon in the UK to keep pace with the Retail Price Index.

Importance of understanding your obligations

In Rodkiss v Carter Holt Harvey Limited the effect of these increases to hurt and humiliation payments by the Authority and the Court means that procedural defects in employment processes will start to cost employers more than they have before.  For this reason, it will be even more important for employers to (i) be aware of what their obligations are in respect of good faith and due process that must be followed, and (ii) ensure managers (or those implementing an employment process) are educated about the right steps to take and that those steps are followed.

Footnotes

[1] Hall v Dionex Pty Limited [2015] NZEmpC 29

[2] Rodkiss v Carter Holt Harvey Limited [2015] NZEmpC 34

[3] Stormont v Peddle Thorp Aitken Limited [2017] NZEmpC 71

[4] Hammond v Credit Union Baywide [2015] NZHRRT 6

[5] Vento v Chief Constable of West Yorkshire Police [2002] EWCA CN L871

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