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Most employment cases that go to mediation are resolved there. The mediation will finish with a binding agreement.
Usually the agreement provides for the payment of money by the employer to the employee, and other things. It is rare for our clients to be let down by their former employer, however, occasionally it happens. The employee is not paid or they don’t receive their certificate of service or the employee finds out that the employer has failed to keep the settlement confidential. What can you do if this happens to you? An application can be made to the Employment Relations Authority for a compliance order which will force the employer to do what they should have done. The ERA can also impose a penalty on the employer and award you costs. If you have a mediation settlement that hasn’t been honoured by the employer please talk to us. We can get everything sorted for you even if you went to mediation with another representative.
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Sometimes we have clients who are accused of doing bad things: stealing, threatening to kill another employee, harassment, ongoing serious performance issues, or any number of things. Sometimes the employee has done what they are accused of, other times they vehemently deny it but the evidence, or the employer’s attitude, is against them. The employee will have been called to a disciplinary meeting and there is a very real possibility that they will be dismissed at that meeting. You may wonder if there is any point in being represented if you are in this kind of situation. The answer is a clear yes.
We have never (so far) been to such an employment meeting where an employer has refused to allow the employee to resign instead of being dismissed. Nor have we ever (so far) been to such an employment meeting and the employer has refused to make a payout of some kind (in some cases this has been modest, in other cases it has been surprisingly generous). The key is that we must be with you at the meeting (or that we are instructed in time so that we can communicate with the employer before the meeting starts). Because we know what to look for, and because we offer a professional and businesslike way to resolve the differences between the parties, the employer will almost always offer more than they are legally obliged to. If you go to the meeting by yourself and then decide to try to do something after the meeting your situation is likely to be much more difficult. At that stage the employer has no incentive to convert a dismissal into a resignation or to offer you a payout. It is critical that you have representation at (or before) the meeting if you have a weak case. Of course, it is also important to be represented if you have a medium to strong case, but it is more important the weaker your case is. When negotiating an exit package two of the most important things to keep in mind are:
1 - What’s your alternative? 2 – What will happen if you don’t accept? If you’re offered $4,000 to leave, this may not sound like much. If realistically you can hope to achieve $15,000, an offer of $4,000 is not a good solution and you probably shouldn’t accept it. If, however, your alternative is a dismissal with no payout because you have done something wrong, or because you have had several warnings about your performance over the last few weeks and the employer’s procedural mistakes are minor, the $4,000 (and being allowed to resign instead of being dismissed), might be a good offer. You also have to ask what will happen if you don’t accept. If you are offered $4,000, but you have a good case and you can expect to get $15,000, you are on strong grounds to take the case to an urgent mediation or to the Employment Relations Authority. If however, you have done something wrong and you turn the settlement offer down, you may find yourself with a dismissal on your employment record. This will make it hard to get a new job. If you take the case further, you may not even get the $4,000 that the employer originally offered you. Sometimes we find that the “best alternative” changes during the meeting as we see the evidence, assess the strengths of both the employer’s and the employee’s case, and weigh up the pros and cons of all the available alternatives. It’s often hard for an employee to understand the strengths or weaknesses of their own case, so it’s essential to have someone experienced acting for you who can advise you accurately. If things are bad at work, or if you’re being pressured to leave, don’t just hand in your notice. If you just hand in your notice your leverage decreases enormously. In most cases what you should do is raise a personal grievance and seek a negotiated exit first, in exchange for handing in your notice (once everything is agreed to your satisfaction). It is important that this process is handled correctly in order to maximise the likelihood of a good exit package and so that some good will is retained in case you need to rely on your employer for references.
Some employees worry that raising a personal grievance sounds confrontational. It doesn’t have to be if it is handled correctly and professionally, however, by raising a personal grievance you increase your chances of a quick settlement and a good payout. If you’re ready to quit, please talk to us first. Under Section 123(1)(c)(i) of the Employment Relations Act, payments made by an employer to an employee for humiliation, loss of dignity, or injury to feelings, are generally tax free. Being able to make tax free payments as part of an employment dispute settlement has benefits to both employer and employee. The employee receives more in the hand than they would have if they had received the same amount of wages or salary as a settlement. From the employer’s point of view less cash is payable.
In order for such payments to be tax free they must be genuine and not a recharacterisation of lost wages or salary. If the settlement contains a section 123(1)(c)(i) payment that in reality is wages/salary renamed as payment for hurt and humiliation this is a sham and the Inland Revenue Department can apply tax to the amount in question plus penalties and interest. The IRD can ask the parties to justify how they calculated the amount agreed under section 123(1)(c)(i). The onus of proof is on the parties to justify their position – not on the IRD. In order to avoid later issues with settlements it is important for a personal grievance claim to be actually raised, and that the parties are represented so that careful consideration can be given to any tax free payment. The parties should avoid section 123(1)(c)(i) amounts that are almost the same as a month or two of salary as it makes the tax free amount look like a sham even if it is not. Please ask us if you have any questions. When considering an exit package, or any kind of negotiated settlement, several factors need to be considered:
Lost wages. Usually 3 months is the maximum. There are some exceptions. Commonly 1-2 months are offered. Section 123(1)(c)(i) tax free payments for hurt and humiliation. Common amounts range from $5,000-$10,000. Sometimes they are lower – depending on the circumstances of the case and the employer, however, we have had success with obtaining much higher settlements of over $40,000. Care needs to be taken in structuring these settlements right. If done wrong they could expose you to unwanted attention from the IRD together with substantial tax penalties. Costs. Sometimes an explicit amount is agreed for your costs, other times a global settlement amount will be agreed and your costs will form one part of that amount. Benefits: for example, medical insurance, superannuation schemes, EAP assistance. The parties need to agree how and when these will finish being the employer’s responsibility. Protecting your reputation: issues here include references, agreements not to say anything negative about the former employee, providing third parties with agreed reasons for leaving, removal of warnings from your employment file, converting a dismissal into a resignation, and apologies. Everyone has different needs in terms of what they need to obtain out of a settlement in order to allow them to move on with dignity. Please contact us if we can help. Terry Watson was dismissed by his employer because of misconduct towards other employees. Mr. Watson took a personal grievance claim against his former employer, Oceana Gold, and they made him a settlement offer that included:
This case illustrates two points. Firstly, that it usually better for you as an employee to settle your case as early in the process as possible - at the exit negotiation or mediation stage. Early settlement usually leads to the best financial outcome for the employee (and the employer!), it allows for confidentiality and references, it is quick, and it keeps legal costs as low as possible. Naturally, not every case is able to be settled and some do have to be taken to the ERA, however, employees need to be careful that if they do choose to take their case to the ERA that this is in their best interests. The second point is this: we don’t know what legal advice Watson was given and we make no comment or criticism of his representative, but a quick internet search shows that there are many employment lawyers who seem to view the Employment Relations Authority, or worse, the Employment Court, as the first and only port of call. The only thing that can be guaranteed from that kind of tactic is large legal fees. When choosing someone to act for you, choose carefully. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10859785 |
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