Calculating a monetary value which fairly represents emotional harm can be difficult. After all, how do you set a figure to compensate a person’s feelings?

If an employee pursues a personal grievance in the Employment Relations Authority or Employment Court, and is successful, they may be awarded compensation for hurt and humiliation under 123(1)(c)(i) of the Employment Relations Act 2000. The negotiation of an amount for compensation is also common in private settlement arrangements.

However, calculating a monetary value which fairly represents emotional harm can be difficult. After all, how do you set a figure to compensate a person’s feelings?

Band system

In 2017, the Authority and Court implemented a band approach, which has now been widely recognised. Compensation awards are accepted as being assessed in the following three bands:

  • Band 1 - Low level loss/damage
  • Band 2 - Mid-range loss/damage
  • Band 3 - High level loss/damage

These bands were introduced by the Court in Archibald, where a nurse’s work conditions changed without consultation and she was eventually made redundant. [1]

The Court awarded the nurse $20,000 under Band 2 and described the effect on her as a deep sense of hurt that she had not been listened to and that her concerns had been “unceremoniously brushed to one side”. However, it was left unclear as to what sort of conduct would fall within the other Bands or the likely quantum.

Further guidance was provided in Richora in 2018, where the Court concluded that the bands are worth the following: [2]

  • Band 1 - $0 - $10,000
  • Band 2 - $10,000 - $40,000
  • Band 3 – over $40,000

In this case, the Court also took the following five-step approach to the assessment of compensation for hurt and humiliation:

  • Step 1 – What was the harm experienced by the employee?
  • Step 2 – What was the extent of the employee’s loss?
  • Step 3 – Where on the spectrum of cases does this sit in terms of harm suffered?
  • Step 4 – Where on the spectrum of cases does this sit in terms of quantum?
  • Step 5 – What is a fair and just award in the present case?

There has been a significant upswing in quantum since the bands were introduced and developed. For example, in the July to December 2020 period, compensation was awarded in 65 cases, with 11 of those being for more than $25,000. There were also 11 awards between the $15,000 to $15,999 bracket. In the same period for 2014, there was only one compensation award above $15,000.

While the Band system is a helpful tool, compensation for hurt and humiliation remains partly a guessing game. The difficulty arises in trying to understand what justifies each band. We hope to see some more guidance from the Court in future, but we suspect it will never be as simple as a checkbox exercise. In the words of Chief Judge Christina Inglis, “compensation is an inexact science". [3]

In any event, each case will be decided on its own merits and claims must be supported by evidence. We also note that employee contributory conduct will be considered, and that compensation is unconnected to lost wages or any personal injury for which the employee receives accident compensation.

[1] Waikato District Health Board v Archibald [2017] NZEmpC 132.

[2] Richora Group Limited v Cheng [2018] NZEmpC 113.

[3] Above n1, at [62].

Our experts

Please contact a member of our specialist Employment Team if you would like further information on the above.

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