Personal Grievance -what can it cost you?

In 2013 the average ‘hurt and humiliation’ compensation award from the Employment Relations Authority (ERA) in Auckland was $4,421, in Wellington $5,270, and Christchurch $5,798. Unfortunately we come under the Christchurch ERA. This is only part of the costs of losing a personal grievance. On average it costs an employer $37,085 to lose. 

Employees won 62% of cases in 2013. This has been a consistent statistic for a number of years. Constructive dismissal claims continue to be the hardest for an employee to win, however performance grievances are the hardest for employers to defend, losing 76% of the time.

It costs an employer on average $9,168 to defend a personal grievance (win or lose). It costs an employee who loses an average of $14,693. This includes their own costs and a contribution of the employer’s costs. It is important to be aware that an employer will almost never recover full costs. The ERA works from a starting point of $3,500 per hearing day to calculate a costs award. This amount will be reduced or increased based on a number of factors including the behaviour of the parties during the hearing, and ability to pay.

These statistics explain why so many cases settle at mediation, even when an employer has done everything they should – it is a costly business to prove yourself right. Added to this, it is still unfortunately at times a lottery as to the Authority’s decision. If facing a personal grievance we advise looking at the situation in the first instance from a business perspective rather than an emotional or principled one. Consider how much you are willing to pay to prove yourself right. Defending a personal grievance is costly not only in terms of the direct costs, but also the lost opportunity as your attention is drawn away from your core business.   

That said there are times that defending a claim is absolutely the right thing to do, despite the cost. Sticking to principles that are core to your values sends a message to others – particularly other employees that may otherwise consider the same approach.

The risks are not one sided. An employee considering pursuing a personal grievance runs the risk of losing (and paying the associated costs), it is time consuming and emotionally draining, there is reputational risk (win or lose), and it can make it difficult to find alternative employment.

These are all factors that are important to consider when faced with the prospect of a personal grievance.

As a note, insurances are available for businesses to cover costs of defending a personal grievance.  These insurances generally come with a $5000 excess.