An update (10 Nov 2020) of The Legal Framework of Workplace Bullying in New Zealand

First published 14 January 2019.

An update 10 November 2020.

In 22-months there have been three Labour Party Ministers of Workplace Relations and Safety, the Hon Iain Lees-Galloway, Andrew Little and now Michael Wood.

Nothing has been done in that time (or in fact in the last decade) to provide access to justice for the targets/victims of workplace bullying.

Worksafe NZ was created in November 2013 and the Health and Safety at Work Act 2015 (HSWA) was enacted in April 2016 as a consequence of the Pike River mine disaster that killed 29 miners. Mental health was added to the definition of health and there was an expectation that psychosocial harm in the workplace would soon be prosecuted by Worksafe NZ. To date, there have been no prosecutions in a workplace bullying case - see link (2 June 2018) below to the TV1 News article in which I feature:

https://www.tvnz.co.nz/one-news/new-zealand/worksafe-stands-handling-bullying-complaints-despite-not-launching-single-prosecution

And the Employment Relations Authority (ERA) are not capable of applying the intent of the HSWA and instead enable/condone workplace bullying by trivialising complaints and as an example, apply nonsensical 90-day timeframes to notifying of each incidence of being bullied - see the media article from 29 November 2017 that featured the then Minister of Workplace Relations and Safety Iain Lees-Galloway and I:

https://www.stuff.co.nz/business/99356441/culture-safe-call-on-govt-to-start-new-agency-to-hear-workplace-bullying-cases

My orginal post of 14 January 2019 is shown below:

The following is a report given by CultureSafe NZ Ltd to one of the worlds foremost workplace bullying experts, American Workplace Bullying Institute Co-Founder and Co-Director, Dr Gary Namie, prior to Dr Namie being keynote speaker at our anti workplace bullying/sexual harassment "CultureShift 2018" conference at Te Papa Wellington on 24/25 October 2018.

Employment relations – legislative structure

Employers are bound by the Employment Relations Act 2000 (“ERA 2000”), which includes at section 3 an overarching duty of good faith which also binds the judicial and quasi-judicial system that enforces the legislation. The ERA 2000 also has as overarching ideals the acknowledgement of the power imbalance between employer and employee, as well as the minimisation of litigation and the use of mediation for resolving disputes.

Unlawful discrimination against an employee by an employer may also be actionable under the Human Rights Act 1993 (“HRA 1993”), as may retaliation or victimisation for making or appearing likely to make public interest disclosures of serious wrongdoing under the Protected Disclosures Act 2000 (“PDS 2000”). However, these issues are more likely to be resolved within the employment process, where there is a choice, because it has greater resources.

Protected disclosures that the employer is obliged to recognise are limited to those made in accordance with the employer’s internal processes, although in theory a report made in any form may be recognised if it is made in good faith. Where an employee has made a protected disclosure, they are in theory protected from civil proceedings by virtue of section 18 of the PDA 2000. However, there is little or no record of the PDA 2000 or HRA 1993 being used effectively.

If a protected disclosure is made to an organisation’s chief executive or the person appointed for such reports, and no action is taken, the report may be made to an “alternative authority” as defined in the Act. Such authorities expressly exclude Members of Parliament. Ministers of the Crown may receive protected disclosures, but they and their staff are anecdotally disinclined to do so. This reinforces the secrecy problems created by the employment procedures discussed below.

There is an obligation under the United Nations Convention Against Corruption (“UNCAC”) to ensure that employment in the public sector is free of corrupt practices as defined in that Convention, and to ensure that where such corrupt practices occur there is a judicial system appropriate to deal with that. New Zealand ratified the UNCAC in December 2015. As discussed below, workplace bullying and the problems of inaction and secrecy appear to be particularly endemic in the public sector in New Zealand, putting New Zealand in breach of its international obligations, and there appears to be a particular abuse of public resources in enforcing secrecy and non-publication which runs in direct contradiction to New Zealand’s obligations under the UNCAC.

Recommendations:

-         Ensure that the limitations of the PDA 2000 do not apply to disclosures of criminal offences i.e. that a person cannot be pursued for reporting criminal offences by an employer.

-         Ensure that that limitations of the PDA 2000 cannot be applied to employees who have left their employment and are reporting breaches of statute, including criminal offences, in good faith.

-         Allow reporting under the PDA 2000 to Members of Parliament and ordinary professionals and officials such as doctors and policemen, even during the employment.

-         Ensure that the public sector and the court system comply with international anti-corruption obligations.

Employment law – institutional structure

Employment law in New Zealand is a specialist jurisdiction governed by the Employment Relations Act 2000, which covers most matters of employment relations.

Certain matters of employment relations are reserved to the exclusive jurisdiction of the Employment Relations Authority (“the Authority”) by virtue of section 161 of the ERA 2000. The Employment Court is generally accessible only through the gateway of the Authority.

Some matters, such as actions founded on tort, are not included in section 161. Settlement agreements by which an employer and employee agree terms for the termination of employment (including “non-disclosure agreements”) are justiciable in the employment process and in practice are always taken to the employment process but are not included in section 161. It is unclear whether a mainstream Court would regard such a settlement as within the terms of a contract of employment under section 161 ERA 2000 and refuse to hear it.

The Authority is a government agency. Its Members have the powers of judges, including the suppression of documents and proceedings and the imposition of fines, but are not necessarily legally trained. They have no obligation to respect the individual’s right to justice. Decisions may be taken or refused by a Member on any basis. Time-limits are very short, and it is entirely within a Member’s discretion whether or not to extend them.

There is in theory a right to natural justice under section 27 of the New Zealand Bill of Rights Act 1990, but failure to accord justice does not render the determination of the Authority void or appealable. The Authority can and does enforce its own determinations. There is no right of appeal.

The only means of obtaining any procedural justice is to go to the Authority first and then to seek a rehearing in the Employment Court under section 179 of the ERA 2000. The Employment Court has its own procedural rules which are however similar to those of an ordinary Court. An application for rehearing in the Employment Court does not operate as a stay of the process in the Authority, so Authority determinations, including as to costs, may be enforced during the Employment Court process.

By the time a matter reaches the Authority, generally the employment relationship has ceased. There is no longer any obligation of good faith between the parties.

The Authority is governed by the obligation in the ERA 2000 to acknowledge and address the imbalance of power between employer and employee, but this is usually addressed by reinforcement. The Authority routinely imposes suppression orders, costs orders and fines against employees without due process. The Authority particularly “punishes” breaches of suppression orders. As yet there has been no challenge to these under the constitutional provisions of section 14 of the New Zealand Bill of Rights Act 1990, relating to freedom of expression, including the freedom to receive information. This area of law is overwhelmingly characterised by secrecy.

Appeal from the Employment Court is to the Court of Appeal, with leave.

Authority determinations may be judicially reviewed, but by virtue of section 194 only once any appeals process has been exhausted.

Recommendations:

-         Reorder the Authority process on the model of the Disputes Tribunal, so:

o  Compulsory use of the Authority only in the case of matters of small value;

o  No lawyers allowed;

-         Require Members to ensure both parties have been served with and had access to all relevant documents;

-         Basic training for Members in workplace issues, including health and safety, bullying, etc;

-         Oblige Members to respect the right to justice under s 27 NZBORA 1990;

-         A right of appeal and / or the staying of enforcement of Authority decisions by application for rehearing;

-         Staying of Authority orders pending rehearing.

Employment dispute resolution procedures

If there is an employment relations problem (such as an allegation of bullying), the employer and employee could or should first try to resolve it internally.

If that does not work, there is a system of mediation sponsored by the Ministry of Business, Innovation and Employment, who provide a free venue for mediation and a free mediator. It is regarded as unreasonable if a party refuses to go to government mediation, especially because it is provided free.

Originally employment mediations were informal settlements of differences which also offered the opportunity to compensate employees for wrongs done to them, with the level of such compensation being kept secret so as not to encourage other employees to seek the same. The employee’s silence about the wrongdoing would be part of what they were compensated for, and so if they spoke of it they could be required to return that compensation. Such compensation was not wages or salary and so was tax-free.

New Zealand mediation is conducted under sections 144 to 155 of the Employment Relations Act 2000. Section 148 provides for secrecy in mediation: although it says “confidential”, the effect as interpreted is that of legal privilege. No-one may speak about what happened in mediation and the mediator cannot be called to give evidence of what occurred. The previous Chief Judge of the Employment Court, His Honour Chief Judge Colgan, expressed concern that this meant an employer could breach the obligation of good faith, but held that the wording of section 148 indicated that that was what Parliament had chosen.

A settlement agreement may be countersigned by a government mediator under section 149 of the ERA 2000. By virtue of section 149 (3), such countersignature means the “settlement” cannot be set aside for the reasons in sections 36 - 40 of the Contract and Commercial Law Act 2017 (formerly section 7 of the Contractual Remedies Act 1979). Section 37 includes the right to cancel a contract because one was induced to enter into it by the other party’s fraudulent misrepresentation.

Accordingly sections 148 and 149 (3) of the ERA 2000 taken together mean that an employer may use fraudulent tactics in a mediation with impunity. Once the employee’s signature is procured, even if fraudulent misrepresentation in the mediation were somehow to be proved, that would not be grounds to set the resulting “settlement” aside, because it is permitted by section 149 (3) ERA 2000.

This appears to be the only area of New Zealand law that provides statutory permission and evidential cover – and so encouragement - for the commission of fraudulent acts of any kind. It also appears that employers acting as such are the only legal persons with the benefit of such permission and cover.

Employers have been aware of the advantages government-sponsored mediation offers to them of for some years, including the potential for making dubious provisions enforceable by inserting them into the contract (* Wragg ).

Settlement agreements habitually include payment to the employee by way of compensation for wrongs done to them, exclusion of future proceedings by the employee relating to the employment, and a “non-disclosure” or “non-disparagement” clause. There is no express limitation of the wrongdoing that “non-disclosure” or “non-disparagement” provisions can be used to conceal.

In comparative jurisdictions, the concealment of crime by employment “settlement” contract is void. However, in New Zealand, the Authority recognises the employer’s right to concealment of crime by contract, and so not only enables the concealment of crime by contract but also confers a right to perpetrate crime and to have its reporting by the employee “punished”. 

Elsewhere in New Zealand law, the provisions as to concealment of evidence of crime and as to agreements to commit crime are however outlawed in the usual way. Concealment of evidence of crime is itself a crime under section 71 of the Crimes Act 1961, and contracts or conspiracies to defeat justice are criminal offences under section 116 of the Crimes Act 1961. The authority of a government “mediator” will however render blackmail, concealment of evidence and the defeat of justice enforceable under section 149 (3) ERA 2000.

There is considerable anecdotal evidence that the structures of secret mediation in New Zealand have become disconnected with their original intentions and that the employment law system is used in opposition to the stated will of Parliament.

The secrecy of mediation and bans on discussing the resulting settlements no longer ensure that disputes are finally resolved in a mutually beneficial deal. Instead, these are used to conceal and enable wrongdoing and even criminal acts by employers on a protracted or permanent basis. Employers have in effect obtained a private subsystem of law by which they obtain the right not only to deprive their employees of basic human rights or to carry out criminal acts but to obtain enforcement of that through the New Zealand legal system. It is difficult or impossible for MPs or even Ministers to know what processes are used because the Authority routinely imposes and enforces secrecy orders such that no-one, not even lawmakers, can know what is being carried out.

Recommendations:

-         Remove the permission to use fraudulent misrepresentation within mediation (i.e. the exclusion of sections 36 – 40, especially section 37, CCLA 2017 in section 149 (3) ERA 2000);

-         Remove any special permission for the use of criminal offences in employment “negotiations”;

-         Modify the secrecy of mediation to make negotiations equivalent to “without prejudice” offers which may entail an admission of lack of good faith elsewhere (i.e. without permitting employers to use criminal offences);

-         Impose an obligation on government mediators to ensure the law relating to good faith and “without prejudice” negotiations is not abused in mediation, including a duty to call a halt in the case of intimidation or threats;

-         Either remove the ban on calling evidence as to what happened in mediation or enforce mediated settlements only where there is no dispute as to the circumstances of their signature; impose a two-week “cooling-off” period between the mediation session and the signature of any document;

-         Remove the power to impose suppression or “non-publication” orders, and certainly the power to impose “fines” for breaching them; there is no reason why compensation cannot be ordered to be returned if it has been agreed for silence and silence is breached, and there is no reason to favour employment contracts or employers with quasi-criminal penalties for breach when other civil contracts do not attract such penalties.

Use of the Employment Relations Act 2000 to conceal or enable criminal offences

Whilst it would be helpful to have workplace bullying clearly stated as a criminal offence in its own right, this would be an incomplete solution given that the New Zealand employment process currently enables offences by employers.

In Rose v St John [2010] NZEmpC 163, the employee complained of bullying and was called to mediation to discuss it. In the mediation she was confronted without warning with a threat to dismiss her for her work performance record. She sought to open the mediation in order to bring evidence that she had signed the “settlement” agreement for reason of blackmail and thus to have it set aside. HHCJ Colgan held that by virtue of statute mediation could not be opened to provide evidence of criminal offence of blackmail happening within it, saying that if there was serious wrongdoing there would be evidence of it outside the mediation.

On the basis of a literal reading of section 149 (3) ERA 2000, New Zealand lawyers considered that a settlement agreement signed by a government mediator under section 149 of the ERA 2000 could not be questioned before the courts and would be enforceable whatever its contents. This reinforced the lack of express reference in the ERA 2000 making void contracts to conceal serious wrongdoing or to defeat of justice, which are contrary to sections 71 and 116 of the Crimes Act 1961. For some time, the New Zealand employment system has been used by employers’ lawyers to conceal crimes and to have that concealment enforced particularly by the Authority through its routine issuing of non-publication orders.

The Authority further enforced secrecy about employers’ concealment of offences by developing a routine practice of enforcing for breach of non-publication orders. This has meant that no protest can be made about the obtaining or use of orders concealing or enabling offences by employers.

In 2017 Her Honour Judge Christina Inglis in 8i Corporation v Marino [2017] NZEmpC 69 asserted that this interpretation of the law was incorrect and that employment law cannot be used to conceal or enable offences by employers.

HHJ Inglis held that the Employment Relations Act 2000 did not set up a parallel but contradictory system of laws to be enforced within the New Zealand legal system. She confirmed that although a “settlement” agreement could not be set aside for the reasons in sections 36 – 40 of the Contract and Commercial Law Act 2017, it could be invalid because it contravened the criminal law or was an illegal contract.

Sections 70 – 84 of the Contract and Commercial Law Act 2017 (formerly the Illegal Contracts Act 1970) deal with illegal contracts. Section 71 defines an illegal contract as one that is illegal in law or in equity in its creation or performance and section 73 says that such a contract will be ineffective. The Court of Appeal has confirmed that employment matters are generally subject to “orthodox contract law”. This all appeared to have confirmed that employment “settlements” had to be ordinarily lawful.

However, the Employment Court has not accepted this. In Sawyer v Vice-Chancellor of Victoria University of Wellington [2018] NZEmpC 71, the plaintiff sought relief for constructive dismissal, having resigned after her managers falsified records about her. The employer raised by way of non-affirmative defence a “settlement” document signed under section 149 ERA 2000 by which it claimed the employee’s rights, including her basic human rights, had been permanently terminated, and sought a preliminary hearing of whether that “settlement” was valid. The employee claimed the document was an illegal contract because the employer’s lawyer had blackmailed her into signing it by threats, that the government mediator had advised that the document was “unenforceable”, and that its contents were illegal. She showed substantially incorrect and altered documents which the employer’s lawyer had threatened to expose about her if she did not sign the “settlement”. The employer made no denials, but said that a contract signed under section 149 of the ERA 2000 cannot be set aside “as a matter of law”. HHJ Smith returned the position to that before the judgment of HHCJ Inglis in 8i Corporation v Marino [2017] NZEmpC 69. HHJ also confirmed orders for the employee to “compensate” the managers for speaking out about their falsification of her records, made permanent the non-publication order on the “settlement” permitting the offences and ordered the employee to pay the costs of the university lawyers.

Recommendations:

-         Confirm by Ministerial statement or legislative amendment that illegality in contracts is not permitted by virtue of countersignature by a government mediator;

-         Confirm by Ministerial statement or legislative amendment that “settlements” cannot confer rights that could not be conferred by an employment contract e.g. the right for one employee to threaten violence, use forged documents etc

“Non-disclosure” agreements, New Zealand lawyers and the New Zealand Law Society

As mentioned above, secrecy is the most pressing problem in New Zealand employment law, together with toleration of bullying, violence and threats and an unwillingness in the Authority and the Employment Court to implement the good faith requirements of the ERA 2000 or properly acknowledge and address imbalances of power.

Secrecy is also the greatest tool of the bully. New Zealand employment law, with its emphasis on non-publication and enforcement against anyone seeking to discuss bullying, gives rights to employers to bully employees, and can enable employees to use the employment system to reinforce and embed their bullying.

This debate is currently live in the United States and the United Kingdom, where the wrongdoing and offences concealed are principally those of sexual harassment within large private organisations. In New Zealand the wrongdoing and offences concealed appear to be equally of non-sexual harassment, and to be a problem particularly within the public sector.

The problems of state-assisted bullying appear to be focused in large or public organisations because they require considerable legal input to set up and enforce, and smaller organisations are less easily able to afford that. This does however also mean that the state can become a major locus of offending, that state resources increasingly go into concealing that offending. The bullying and offending can then itself become embedded as part of the industry or service, encouraging a broader form of corruption within organisations and departments.

Following a Select Committee investigation in the UK Parliament, the Solicitors Regulation Authority (SRA) of England and Wales (the equivalent of the New Zealand Law Society’s regulatory or disciplinary arm) issued a Warning Notice on 12 March 2018. This was designed to deal with the type of “non-disclosure agreement” or NDA that major City firms had obtained from victims of sexual harassment when paying them off. Evidence was given that lawyers had prepared NDAs that required the victims to give notice to the firm if they proposed to report the sexual abuse to the police. It was accepted by the City lawyers that although such agreements were unenforceable, since the victims might not know that, or might be intimidated, they tended to pervert the course of justice (the equivalent of New Zealand’s defeat of justice). The SRA now requires reporting of all such agreements by the lawyers concerned, for disciplinary reasons.

In New Zealand, however, lawyers are permitted to obtain such “agreements”, because employers, uniquely, have the right to conceal offences and to defeat or pervert the course of justice provided they obtain a signature under section 149 ERA 2000. A further problem is that New Zealand lawyers are unwilling to allege fraud or other offences by other lawyers within civil proceedings, and the New Zealand Law Society is as likely to respond to any such allegation by disciplining the lawyer making the allegation without investigation rather than investigating the allegation to see whether it is true.

If reform were to be introduced, there should be simultaneous liaison with the New Zealand Law Society. If it were decided that HHCJ Inglis had been correct, this would retrospectively criminalise the actions of a number of employment lawyers, and some consideration should be given to whether the Law Society would have the capacity to deal with that as an internal issue.

There is no theoretical impediment to enforcing the law relating to illegal contracts and criminality on New Zealand lawyers. Although the employment jurisdiction in New Zealand permits the concealment of offences and defeat of justice, it is in fact now, and always has been, contrary to lawyers’ duties under the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the “Rules of Conduct”). These Rules have the force of law and ought always to have been enforced by the Law Society. However, they have not been.

The Law Society of New Zealand is currently considering its actions in relation to workplace sexual harassment and it is suggested that dealing with workplace bullying generally, and both of those in the context of NDAs and the obtaining and enforcement of “settlements” under section 149 ERA 2000 is desirable in the light of international as well as domestic concerns.

Recommendations:

-         End the right for an employer, or an employee using the employer’s powers, to have a victim employee “punished” under a “non-disclosure” or “non-disparagement” clause for speaking about harassment, threats, forgery, etc;

-         Prosecute parties or lawyers who have sought or obtained “settlement” contracts to conceal criminal offences or defeat justice or who have used “settlements” to perpetrate offences.

-         Ensure that the New Zealand Law Society engages with the limitations on rights of employers and lawyers and enforces those limitations appropriately.

Notes

1.      The current law leaves New Zealand in breach of its international obligations under the UNCAC in relation to public sector employment. This must be included in the next periodic report

2.      Where employment processes or a signature under section 149 ERA 2000 legitimises offences that affect third parties should be made clear. For example, the external auditor in Sawyer accepted the use by managers of falsified medical records to sign money out of a discretionary account. If this is not in fact permitted by section 149 ERA 2000, it makes the auditor party to false accounting contrary to section 260 of the Crimes Act 1961.

3.      A clear summary of the provisions for the removal of employees’ human rights both during and after employment should be provided including for the purposes of international trade negotiations. Some countries do not willingly trade with states that do not respect human rights.

4.      The effects of allowing employers a right to conceal and commit offences on the rule of law should be analysed, especially with regard to public sector employers.