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Alternative Dispute Resolution Series: How It can help You – Mediation in Employment Disputes

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Alternative Dispute Resolution (“ADR”) methods are alternatives to going directly to court. Using ADR methods instead of pursuing the matter in court is usually more cost effective for all the parties involved, takes less time to resolve the dispute, and also relieves the court of cases they believe can be resolved between the parties without court assistance.  This particular article will focus on mediation in the context of employment law and form a part of our ADR article series which will include articles on formal/informal negotiation and arbitration over the next two newsletters.

Mediation is essentially a voluntary process where an independent person (a “mediator”) assists the parties attending the mediation. This typically involves an employee and employer in an employment dispute, working through legal and emotional issues and developing solutions together to repair the employment relationship problems in a semi-formal and confidential environment.

Attending mediation is not like attending court as you are not under oath and are not cross-examined. Mediation requires the employee and employer (“the parties”) to attend the mediation, or it cannot proceed. Each party is entitled to bring representation and a support person to the mediation. At the beginning of the mediation, the mediator will outline the process of the mediation and ask the parties if they have any questions about the process.  During the mediation, the mediator will ask each party questions to identify and refine the issues. The mediator will give each party the opportunity to speak; interruptions are not permitted. If the parties are not able to adhere to this rule, the mediator may put each party in separate rooms and talk to each party individually to attempt to reach a resolution.

Anything said during mediation and all documents prepared for the mediation, including the terms of the resolution, if one occurs, are confidential. Because of this, what happens in mediation may not be able to be used as evidence in the Employment Relations Authority (“ERA”) or Employment Court. Confidentiality encourages the parties to be honest and forthcoming with their information to increase the chances of reaching a resolution.

When preparing for mediation, the parties are encouraged to prepare written statements, accounts of events, and collate any evidence and documents such as texts or emails to support their position. To get the most out of mediation parties are encouraged to:

  1. Listen to the other parties’ point of view, even if they do not agree;
  2. Acknowledge anything they may have done differently or better;
  3. Be honest and open;
  4. Have an open mind for resolutions; and
  5. Be willing to bend a little to reach an agreement.

Even if a resolution is not reached between the parties, they can request the mediator to recommend a non-binding solution under section 149A of the Act that the parties can consider. The mediator will make a written recommendation. The recommendation will include a date when the recommendation will become binding; the parties may consider accepting or rejecting the recommendation. Please note that if either party does not reject the recommendation before the specified date, it will become a full and final settlement and enforceable.

The parties also have the option of requesting a binding recommendation under section 150 of the Act.

Some advantages of resolving the dispute at mediation are:

  1. The cost is significantly less than hearing the dispute in court; and
  2. Mediation lets the parties have a degree of control over the agreement reached.

The disadvantages of mediation are that it may not result in a resolution, in which case the process will add to the legal costs.

Where the mediator feels that mediation is unlikely to produce a resolution, the mediator will usually conclude the mediation. The parties’ options at this point are to refer the matter to arbitration or the ERA or to stop pursuing the matter altogether.

If you are an employer or an employee and facing this situation, it is best to seek legal advice.

Employees – what are we allowed?

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When asking Kiwis what their entitlements are when it comes to annual leave, holidays and resignation, the responses are generally vague.  Government statistics show that over 50% of working Kiwis have held their current employment position for less than 18 months, therefore, it is imperative for them to be familiar with employment law and employee rights.

Resigning

An Employment Agreement (“Agreement”) generally allows for employees to resign at any point in employment given they provide notice of resignation (“Notice”).  Notice can be given in the manner specified in the Agreement or in writing at a minimum.

When resigning there are various options available; however, for the purposes of this article, two options are discussed in detail: Gardening leave, or an Agreement.

Firstly, employees may take what is often known as Garden Leave.  Garden Leave allows for employees to be bound by their employment obligations and be paid as normal, whilst not undertaking work for the remainder of their Notice.

Granting Garden Leave requires mutual agreement by the employee and employer, although this agreement may be given under the Agreement.  Gardening Leave is often used where employers wish to restrict the departing employee’s access to clients or confidential information.

Secondly, an Agreement can be reached between the employee and employer to terminate employment immediately rather than at the expiry of the Notice.  If an employee does leave prior to the Notice period finishing, without the consent of the employer, the employer is entitled to seek damages or losses in the Employment Relations Authority or Employment Court.  These damages may include the costs of hiring additional staff for the period of the Notice or the loss of work opportunities due to the lack of staff available.

In light of the potential repercussions outlined above, it is imperative that any agreement of this nature is documented in writing.

Final Pay

An employee is entitled to request their final pay on the last day of work rather than the following payday.

The final pay must include:

  • All hours worked since the last payday until the end of employment;
  • Any annual holidays, public and alternative holidays accrued; and
  • Any additional lump sum or other payments owing which may be included in the Agreement or negotiated as part of leaving.

If the final pay does not include the bulleted points above, employees are encouraged to, in the first instance, seek any entitlements in arrears from their employer. If a dispute arises, other options available include making a claim for a breach under the Agreement or the Employment Relations Act 2000. In the event of such a dispute, it is recommended to seek legal advice.

Holidays

Under the Holidays Act 2003, employees in New Zealand are entitled to a minimum of 4 weeks paid annual leave (“Leave”) per year with the opportunity to take at least 2 of the 4 weeks Leave continuously. Unless otherwise agreed, leave entitlements are subject to the employee working 12 months for the same employer.

Leave pay must be the greater of the ordinary weekly pay or the average weekly earnings over a 12-month period, prior to the Leave.  The latter may be more relevant for employees who work on a commission basis or non-periodic schedules.

If an employee has worked for a 12-month period for the same employer, the employee may agree with their employer to either:

  • Take all Leave accrued that year; or
  • Take a portion of Leave accrued as soon as possible and carry over the remaining Leave into the next year; or
  • Be compensated financially for up to one week of Leave.

On resignation, if an employee has not reached 12 months of employment; they are still entitled to payment for annual holidays being calculated at 8% of their gross earnings during employment.

Employees are entitled to request unpaid leave in addition to their leave entitlements.

Summary

It is recommended that before resigning from a position, the Agreement’s terms and conditions are read and understood. Understanding your entitlements and the right to request or demand an act or information as an employee is tremendously beneficial. This knowledge provides protection and ensures employees are informed, and treated fairly by their employer.

If you have any questions or if you have any employment issues you would like to discuss with a Solicitor, contact us.

The ins and outs of a restraint of trade clause

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Restraint of trade

The world of business is increasingly competitive.  Business owners as employers have become more focused on securing and safeguarding information that sustains their business, such as trade secrets and profit margins.  Those employers may consider the inclusion of a restraint of trade clause in their employment agreements as a safeguard against employees leaving their employment and using this sensitive information to the former employer’s detriment.

 

What is a restraint of trade clause?

A restraint of trade clause is designed to protect a business’s sensitive information to which its employees may have access.  The most common conditions in restraint of trade clauses tend to prohibit or limit an employee from working in a certain field of expertise, and/or in a designated geographical location, and/or for a specified period of time.

 

Consideration

An employer considering the inclusion of a restraint of trade clause within an individual employment agreement is advised to consider offering the employee consideration such as an increase in wages or salary, given the imposition the employee may face if a restraint of trade clause is sustained.

 

Practicalities to consider

A restraint of trade clause does not automatically protect an employer.  The Courts take a careful approach when making determinations about restraint of trade clauses, and often deem restraint of trade clauses unenforceable from the outset.

Where a dispute arises, the Courts examine all aspects of the restraint of trade clause, paying particular attention to whether the conditions are reasonable in order to protect the employer’s interests, relative consideration or compensation, as well as the reasonableness and practicality of the conditions imposed upon the employee.

The Courts may consider the following factors when considering the enforceability of a restraint of trade clause:

  • Whether the former employer has a proprietary interest that is capable of being protected; (for example, did the employee have access to confidential information or having built up a strong customer/client/supplier relationship);
  • Whether it is reasonable to restrict the employee’s employment options/activities;
  • Whether the period of the restraint is reasonable;
  • Whether the geographical limits of the restraint are reasonable.

Before considering inclusion of a restraint of trade clause it is vital to understand what is the interest or the purpose of the restraint of trade clause; what reasonable parameters may be imposed in order to achieve that purpose; and in return whether fair consideration or compensation been offered to the employee.

Restraint of trade clauses can be very beneficial for employers, especially if a business is reliant on securing and safeguarding its interests critical to the successful running of the business.  It is essential to understand all aspects of a restraint of trade clause before relying on one to protect your business, as finding the right balance in a restraint of trade clause is vital to ensure that it is enforceable.  We are available to help draft and discuss such terms.