ERA examines factors in assessing costs of worker's claim
The Employment Relations Authority (ERA) recently dealt with the case of a worker who challenged his employer, an export company, alleging unjustified suspension, unfair treatment during an investigation, and ultimately, constructive dismissal.
The worker argued that the company's actions had left him with no choice but to resign, claiming that the investigation process was flawed and that he had been disadvantaged by the outcomes of the disciplinary procedure.
As the case unfolded, it raised questions about the fairness of workplace investigations and the consequences of rejecting settlement offers.
This case provides insights into how the ERA approaches cost awards in employment disputes, particularly when Calderbank offers are involved and when issues arise regarding disclosure and the admissibility of evidence.
On 5 June 2024, the ERA made its initial determination on the matter. The Authority found that the worker was unjustifiably suspended by the employer. Moreover, the ERA determined that the worker was unjustifiably disadvantaged by the employer's investigation process and the outcomes of the disciplinary process. The Authority also concluded that the worker was unjustifiably constructively dismissed.
As a result of these findings, the ERA ordered the employer to pay the worker lost wages amounting to four months' salary (less PAYE) and $25,000 compensation under section 123(1)(c)(i) of the Employment Relations Act 2000.
In the initial determination, the ERA encouraged both parties to resolve the issue of costs between themselves. The Authority mentioned its usual practice of applying a daily tariff to determine costs, stating:
"As the investigation meeting for this matter took most of two full days, my preliminary view is that the notional daily rate for two days is the appropriate starting point for a determination of costs".
When the parties failed to reach an agreement on costs, the worker filed a memorandum on 2 August 2024 seeking an order for a contribution to his costs. The employer responded with a memorandum on 16 August 2024.
The worker's legal team sought full solicitor-client costs from 9 February 2023, totaling $68,500 plus GST. Alternatively, they asked for an uplift from the daily tariff for a two-day investigation to $37,500 plus GST.
The worker's submissions pointed to several factors supporting an uplift from tariff costs. These included the employer not providing full disclosure of relevant documents, including meeting recordings, and raising concerns about the worker having made recordings of meetings without disclosing that the employer had recorded the same meetings.
The employer argued that the Authority should delay fixing costs, as they had challenged the Authority's determination. They also said that if costs were to be awarded, they should be limited to the daily tariff.
The worker's legal team mentioned two settlement offers in their submissions. The first offer was made on 9 February 2023 when the worker was still employed but not at work, and before mediation occurred. The second offer was made on 12 February 2024, about two weeks before the investigation meeting.
The ERA noted the significance of these offers, particularly the second one:
"The rejection of a Calderbank offer is a ground for an uplift in costs. The Court of Appeal have commented that a 'steely' approach should be taken when a party has rejected what turned out to be a reasonable offer to settle."
The ERA decided that the appropriate starting point was the tariff for a two-day investigation meeting, which is $8,000. They then considered whether an uplift was warranted based on the rejected Calderbank offer and other factors.
The ERA stated:
"I find that it is appropriate to award an uplift of $4,000, taking into account the rejection of the second Calderbank offer and additional costs associated with dealing with matters related to additional disclosure steps and admissibility of recordings."
Regarding the actual costs incurred, the ERA said:
"I do not consider it reasonable to take into account costs incurred after the investigation meeting occurred and submissions were provided in an award of costs and would have disregarded on this basis the invoices from May and July 2024, which totalled approximately $4,600 plus GST."
The ERA also emphasised the principle of modesty in cost awards:
"I am also not satisfied that sufficient information has been provided about the basis of actual costs for February 2024, being the month when the second Calderbank offer was open and the investigation meeting occurred, and March 2024, when submissions were provided, totalling approximately $33,200 plus GST, for me to apply a further uplift based on actual costs. I do not consider doing so would be consistent with the principle that costs in the Authority should generally be modest."
In the end, the ERA ordered the employer to pay the worker $12,000 as a contribution to costs and to reimburse the filing fee of $71.55 within 28 days of the determination date.
