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Cost Of Employment Court Major Disincentive

23 August 2004

Media Release

Cost Of Employment Court Major Disincentive To Business

The hassles and high cost of using the Employment Court to resolve employment conflicts is encouraging many businesses to “pay up” against claims against them.

Of the more than 350 responses to an Auckland Chamber of Commerce survey on a number of issues, 78 (22%) gave details on why they had chosen to “pay up” and not use the Employment Court despite advice that they had strong cases.

The amount of the out-of-Court settlements indicated by the respondents averaged between $5000 and $6000 with a number reaching $25,000 and a few as high as $40,000.

In all cases, the respondents indicated that despite being very confident of the reasons for dismissal, it became clear either from advice or their own assessment that the costs of being represented in a Court hearing would be greater than the settlement – even if they won.

In an example typical of many, a business cited advice that it would cost $10,000-$15,000 to defend a decision to dismiss a person. While the company believed it would have won, it took advice that “nothing is guaranteed” and decided to settle out of court for $13,000.

Reasons respondents choose to “pay up” and not use the Court included:
- Cheaper … less stress;
- Too slow – we wanted the problem resolved quickly so we could move on;
- Commercial reality – lawyers cost money;
- $8000 was paid as “go away money” even though we had a water tight legal case;
- Legal advice on the time and cost to defend.

Commenting, Chamber CEO Michael Barnett said the survey had been undertaken to provide feedback to Government on what was plainly an issue of concern to many businesses.

“The survey confirms a perception within the business community that the cost of justice is too high, and that the Employment Court system is biased towards the employee.”

A remedy that restores respect for the judicial system and the Court would seem required. As to what it might be, Mr Barnett suggested that perhaps Employment Court hearings should be reserved for major cases, and a more business-friendly system of mediation – similar to the small claims court – be put in place for claims less than $40,000.


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