Personal Grievance: NZ law change to reduce payouts

Published 11 December 2024 | 2 min read

For many New Zealand businesses, navigating personal grievance claims has become a challenging and costly endeavour. The Employment Relations system, designed to ensure fairness and protect workers, has seen some outcomes that raise questions about balance. Employers often feel that the scales have tilted too far in favour of employees, leaving them vulnerable to significant payouts even when the employee’s misconduct is clear.

This imbalance can create additional costs for employers, undermining workplace morale and setting an unsettling precedent. Cases like a truck driver dismissed for falsifying timesheets receiving $10,500 in compensation and 13 weeks’ lost wages, or a restaurant worker dismissed for stealing food being awarded $21,000 for hurt and humiliation, highlight the need for change.

Misconduct still resulting in large payouts

Take the example of the truck driver. Their actions not only violated trust but also put both the employee and employer at risk of legal and financial penalties. Yet, the system awarded the employee a substantial payout despite their misconduct. Similarly, a restaurant worker’s act of theft was acknowledged, but they still received compensation for hurt feelings. These cases underline a recurring frustration among employers - why should poor behaviour be rewarded at their expense?

For many business owners, this isn’t just about money—it’s about fairness. Employers who act to protect their business, staff, and reputation often find themselves embroiled in disputes that feel less about justice and more about financial settlements. These stories add to a growing sentiment that the current framework disincentivises accountability and fairness.

What is the NZ Government doing?

Workplace Relations Minister Brooke van Velden has taken a firm stance, arguing that personal grievance settings need recalibration. Announcing a series of changes, van Velden pointed out that the system’s unintended incentives have led to outcomes where poor behaviour is rewarded.

“We’re not setting the correct culture in New Zealand,” van Velden said. “Where we’re rewarding poor employee behaviour, workers are left questioning why they bother doing the right thing if others benefit for doing the wrong thing.”

Her argument is bolstered by statistics showing the average compensation awarded in such cases has nearly tripled since 2014. The government’s proposed changes aim to restore balance, ensuring that compensation reflects the true context of the dispute.

Here’s the law changes every employer should know:

• No payouts for serious misconduct: Employees dismissed for actions like violence, theft, or dishonesty will no longer receive compensation.
• Reduced compensation for contributing behaviour: If an employee’s actions contributed to the grievance, their payout can be reduced by up to 100%.
• Higher threshold for procedural errors: The focus will shift to whether an employer’s actions were fair, rather than penalising technical missteps.
• Focus on obstruction: The Employment Relations Authority and Employment Court must consider whether an employee’s behaviour obstructed their employer’s ability to meet obligations.

These changes aim to ensure the grievance system prioritises fairness and encourages employees to meet workplace standards.

How will these changes impact NZ workplaces? 

The new changes to personal grievance law represent a significant shift towards the employer. By addressing cases of serious misconduct and ensuring compensation aligns with the facts of each case, the government is aiming to restore trust in the employment relations system.

For employers, these changes are a chance to refocus on creating fair, productive workplaces without the looming threat of disproportionate payouts. Now is the time to review HR policies and practices to ensure compliance and readiness for a fairer future.

Note: This information is based on official details from Employment New Zealand and is subject to change. Always refer to the latest guidelines for the most accurate information. Visit Employment New Zealand here.