9.09.2021

Supreme Court asserts Employment Relations Authority exclusive jurisdiction

The Supreme Court has recently issued a significant judgment clarifying that the Employment Relations Authority (Authority) has exclusive jurisdiction over claims arising in a “work context”.

In doing so it has substantially shifted the ambiguous distinctions previously applied by the High Court and Court of Appeal in favour of the exclusive jurisdiction of the Authority.

The decision is instructive for tortious claims in an employment relationship and the appropriate forum for dispute resolution of any claims that arise from employment.

It also indicates a broad definition of “employment relationship problem”. 

Background

The case involved an employee (FMV) who resigned from her employer (TZB) and later issued a personal grievance alleging bullying and discrimination.  Following this, FMV filed separate proceedings in the Authority and the High Court; the former grounded in allegations of various breaches of TZB’s obligations under the Employment Relations Act 2000 (the Act), and the latter in the tort of negligence for failing to provide a safe working environment.  

Although the cause of action differed between proceedings, FMV was effectively attempting to litigate the same matter twice.  In the first instance, the High Court ruled that this was an abuse of process and that the jurisdiction to hear the claim lay solely with the Authority. 

The Court of Appeal largely agreed with the High Court decision.  The decision was then put before the Supreme Court for final determination.

Legal Issue 

The question before the Supreme Court was whether the Authority has exclusive jurisdiction to hear the claim.  If so, FMV would be prevented from bringing proceedings in the High Court.

The answer turns on the interpretation of s 161 of the Act that gives the Authority exclusive jurisdiction to make decisions about “employment relationship problems generally”.  Section 161 lists examples of actions included within this jurisdiction, with a catch all clause under s161(1)(r) that gives the Authority jurisdiction over:

any other action (being an action that is not directly within the jurisdiction of the court) arising from or related to the employment relationship or related to the interpretation of this Act (other than an action founded on tort)

The part in brackets referred to as the “Tort Exception”

The issues before the Court were whether:

  • FMV’s claim was an “employment relationship problem” giving the Authority exclusive jurisdiction; and
  • If so, whether the claim is nevertheless excluded from the Authority’s jurisdiction by the Tort Exception in s 161(1)(r) of the Act.

Meaning of “Employment Relationship Problem” 

The Court put great emphasis on Parliament’s legislative intent when considering how the term “employment relationship problem” should be interpreted.  

Upon recommendation of the Select Committee, Parliament intentionally changed the wording of the Employment Relations Bill 2000 to better capture the broad policy intent for employment institutions to have exclusive jurisdiction over employment matters.

In addition, the word “problem” was used to denote a factual category, not a legal one such as that of property, tort, or contract.  Instead “problem” encompasses all of these in a supervening class of its own.  Under this interpretation, provided the “problem” relates to the employment relationship, and is in the work context, it will be an “employment relationship problem” for the purposes of the Act.  In doing so that Supreme Court distinguished and/or departed from earlier High Court and Court of Appeal decisions that focused on traditional causes of action, how a matter was pleaded, a narrow contractual approach to employment jurisdiction, and/or that settlements resolving the termination of employment fell outside of employment relationships.

As FMV’s claim was based on a personal grievance, it quite neatly fit into the category of an employment relationship problem.  The Authority therefore had exclusive jurisdiction to hear the claim.  

The next question was whether the exclusive jurisdiction was nevertheless excluded due to the Tort Exception.

Application of the Tort Exception 

The Court again considered the legislative intent of the Act and contemplated whether Parliament intended for the Tort Exception to modify the broad jurisdiction of the Authority over employment relationship problems.

The intent behind this was to keep costs to a minimum and mitigate the obvious disparity of power between parties.  Therefore, a general tort carve out would negate this intention, particularly given how often employment relationship problems also give rise to tort-based claims.

The Court concluded that excluding all tort-based claims from the Authority’s exclusive jurisdiction was too important a step to have simply been alluded to in s 161(1)(r) without further elaboration.  Consequently, the Tort Exception does not apply in the present case and is only applicable to actions not listed under s 161.

Simply put, if an action is listed in s 161 and is also a tort, the Tort Exception is not triggered, and the Authority will have exclusive jurisdiction.  The Supreme Court suggested that parties should seek to bring their problem within one of the categories listed in s 161 rather than focusing on tort.  In doing so it suggested that most torts that arise within employment will fit within personal grievances generally.

Examples of the Test Applied 

The Court helpfully gives several examples of the jurisdictional test applied, which we have summarised below: 

Situation

Jurisdiction

Reasoning

An employer accuses an employee of dishonesty and notifies other employees of the accusation.

Authority

The employer’s words are framed in the work context.   

Theft by an employee.

Authority

This is a breach of the good faith obligation that forms part of the employment relationship.

However, separate criminal proceedings can also commence and have no bearing on the civil claim.

A dispute over the quality of products purchased by an employee from the employer. 

Other judicial body

The parties are in an employment relationship, but this event occurs outside of the work context.

“Post-employment problems”

E.g. the enforcement of a restraint of trade or settlement agreement.

Authority

Compliance will generally be an employment relationship problem because the obligation was entered into during the employment relationship and in the work context.

Proceedings brought against a director by the employer company.

Both Authority and other judicial body

The allegations relating to the director’s capacity as an employee fall under the jurisdiction of the Authority.

Other allegations may fall under the jurisdiction of the ordinary courts, for example for the breach of directors’ duties.

 Future Developments?

The Supreme Court accepted that there may still be occasions of procedural uncertainty, and with this, additional expense for parties.

William Young J suggested, and the majority endorsed, the possibility of a default assignment of employment related disputes to the Authority, with a power to remove appropriate cases to other judicial bodies.  This would eliminate the need for parties to file proceedings in multiple institutions to preserve their position where the jurisdiction is unclear.

Whether or not Parliament intends to heed the recommendation of the Supreme Court remains to be seen.  For now, this judgment demonstrates that the Authority will retain exclusive jurisdiction for the vast majority of employment disputes with very limited exceptions.

If you have any questions about this decision, or about employment law issues more generally, please get in touch with our Employment Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

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Kerry
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