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Hidden Costs of Personal Grievance 'Gravy Train'

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.


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