Substantial costs are generally incurred by both parties to an employment dispute when a matter proceeds to the Employment Relations Authority – however the ERA’s Costs Award framework will often see the winning party still losing financially.
In 2016 the ERA set a new ‘Daily Tariff Rate’ framework for determining cost awards in cases within their jurisdiction. The Daily Tariff Rate for the successful party in proceedings was increased to $4,500 for a full day hearing and $3,500 for each subsequent day thereafter spent in the Authority.
However, while this increase in costs is recognized, the actual costs of successfully defending a case in the ERA are often far greater than this, and often the Authority Member does not decide to award the full tariff rate.
Previous studies have demonstrated that the average costs awarded was just over $3,000 while the median costs of presenting a successful defense was approximately $12,000. A 2016 NZ Law Society article estimated that the time involvement by a Lawyer or Professional Representative in preparing for, and attending, an ERA Hearing (Investigation Meeting) was between 30 – 40 hours with the costs awarded covering less than half of this time.
The tension between the lower costs awards and the actual costs incurred appears to be related to the fact that the ERA encourages a level of predictability and balancing the successful party’s right to have a financial contribution to its costs while allowing the unsuccessful party to not have such a great impost on its financial resources.
This effectively states that to lose a case is one matter, but then to also be required to pay the winning party a substantial costs contribution is almost a step too far. An recent Employment Law Institute article (July 2024) reinforced the findings of an earlier survey that concluded that the winning party in the ERA was only awarded, on average, 37% of the actual cost incurred.
While many disputes are resolved within mediation, or in full and final settlement agreements negotiated before matters proceed to the ERA, there are some cases that are destined to only be concluded within a more formal process, such as an ERA Hearing. Therefore, given that significant costs will be incurred in participating in such proceedings, it is critical that an Employer creates the best chance of getting a successful outcome, while not creating a win-lose situation when it comes to costs recovery.
The three critical steps here are:
- Engage a representative that has a good record of success in the ERA.
- Engage representation that does not inflate the costs beyond what might be considered reasonable for the degree of risk likely to be incurred.
- Consider submitting a ‘Save As to Costs’ offer prior to the Authority date to enhance your chances of gaining an ‘uplift’ in the costs awarded.
Costs of gaining representation for an ERA Hearing can differ greatly with some larger law firms amounting costs in excess of $40,000 for an ERA case (Law Society Oct 2016 article), with this resulting in significant deficits being incurred by the successful party after the cost’s awards have been determined. On this basis, it is therefore critical that any Employer who has a grievance raised against them, or is considering taking an Employee to the ERA, should seek a risk assessment review of the case, and an estimate of the likely costs to be incurred, before determining what the best cause of actions is.
We have been representing Employers in the ERA and Employment Court since 1999 with a high degree of success and therefore, if you have a case that has the potential to end up in the ERA, please feel free to contact us to discuss how we can support you.