Canterbury Manufacturers’ Association.
Media Release.
14 June 2006
The Hidden Costs of the Personal Grievance ‘Gravy Train’.
Canterbury Manufacturers’ Association says that members do not report an increase in personal grievance claims under the
Employment Relations Act. However, companies are being advised to settle out of court to avoid incurring heavy legal
costs irrespective of the quality of their performance management – take the easy way out, it will be cheaper.
The Association says that there are serious and damaging issues facing employers under the legislation as it currently
stands. The requirements of the ERA mean that they are faced with the increased burden of proof when having to justify
disciplinary action with a staff member on performance issues. The CMA acknowledges that the current law does offer
greater protection for employees against unfavourable working practices and actions such as unfair dismissal and
harassment and this is a positive outcome. Nevertheless, the ERA is open to exploitation by employees willing to take
riskier and less sound legal cases against firms. It has also given rise to the number of ambulance chasing lawyers
frivolously exploiting the system with no-win, no-fee offers in the hope of leveraging a pay out on the “it’s cheaper to
settle” advice on the employers side. In all this there no is concern for the situation or the potential damage to the
particular company and other employees involved.
The Association warns that some of its members have been confronted by demands for a cash settlement by advocates
working on behalf of employees in return for not taking the case to the employment court in addition to the same advice
being given by their own legal advisors. Therefore, companies are faced with the pressure to settle from both sides and
the CMA says that such practices and costs must be taken into account and the debate widened to ascertain the true cost
of the ‘gravy train’ running on the rails of the ERA.
The process of taking disciplinary action against an employee has now become so complex that both firms and their staff
need to be well educated on their obligations and rights under the ERA. Firms have taken steps to limit their exposure
to possible grievance claims by developing their human resource practices and are increasingly looking to recruit team
members on a temporary basis through an employment agency before offering any sort of permanent contract.
The Association says that the issue of personal grievance varies amongst firms and rather than look exclusively at the
number of cases being sent before the Employment Relations Authority, the focus should be on the pressures and stress
being placed upon firms to offer cash settlements to avoid legal costs.
The Association also points to the impact the legislation and the actions of those seeking to exploit it contributing to
the reticence in employing have in recruiting new staff. Companies, especially the more vulnerable start-up or small and
medium enterprises, can face comparatively significant costs in the personal grievance area, the money comes from
somewhere. Inevitably, investment and growth suffer.
ENDS