In an Employment Court decision released last year, Chief Judge Inglis revised the bands for awards of compensation under section 123(1)(c)(i) of the Employment Relations Act 2000 (Act) for hurt and humiliation. The reason for the increase was connected to inflation. However, a recent decision of the Employment Relations Authority has caused Employment practitioners to query whether the level of awards that the Authority is prepared to make are on the up.
Compensation bands
Payments for compensation under section 123(1)(c)(i) are tax free and are often included as part of a settlement between an employee and employer. Parties should be mindful of the bands when considering the quantum of an employee’s claim.
The use of bands to assess compensation was an approach introduced in the 2017 Employment Court case Waikato District Health Board v Archibald.1 In GF v Comptroller of NZ Customs Service,2 the Chief Judge noted that there is an obvious need for the bands to remain current. As such, she applied the Reserve Bank’s inflation calculator to update the bands:
- Band 1: low level loss/damage = $0 – $12,000
- Band 2: mid level loss/damage = $12,000 – $50,000
- Band 3: high level loss/damage = over $50,000
While the bands are a helpful guide for assessing how much financial compensation an employee might receive for a certain level of harm suffered; difficulty may arise when assessing which band a particular case falls into. The case law provides some direction on this point.
In Richora,3 the Court adopted a five-step approach to assessing compensation for humiliation:
- What was the harm experienced?
- What was the extent of loss?
- Where on the spectrum of cases does the case sit in terms of harm suffered?
- Where on the spectrum of cases does the case sit in terms of quantum?
- What is a fair and just award in the case?
Parker v Magnum Hire
A recent determination of the Authority may reflect a general uplift in the amount awarded in compensation under s 123(1)(c)(i). In Parker v Magnum Hire,4 the Authority awarded an employee $105,000 for hurt and humiliation.
Three personal grievances were raised by the employee, the amount of compensation awarded for each was:
- Unjustified actions causing disadvantage – bullying = $50,000
- Unjustified action causing disadvantage – suspension = $5,000
- Constructive dismissal = $50,000
The employee in this case suffered significant emotional harm including developing depression, anxiety, and symptoms akin to PTSD as a result of how he was treated by the director of his employer. The amount awarded by the Authority may just be a deviation from what we would normally expect an employee to receive for hurt and humiliation. Nevertheless, it will be interesting to see whether future cases follow suit.
Ultimately, the amount awarded for hurt and humiliation in each case will depend on the specific harm suffered by the employee. If you have any queries in respect of the above, please contact a member of Lane Neave’s specialist Employment Law Team.
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1 [2017] NZEmpC 132.
2 [2023] NZEmpC 101.
3 Richora Group Ltd v Cheng [2018] NZEmpC 113
4 [2024] NZERA 85.
