A five step approach to compensation for humiliation, loss of dignity and injury to feelings

After finding an employee was unjustifiably dismissed the Employment Court took a detailed five step approach to compensation for humiliation, loss of dignity and injury to feelings and confirmed that these awards should be considered in three general financial bands

Ms Cheng worked for Richora Group Limited  for  three months before her employment was terminated. She successfully brought a claim against Richora in the Employment Relations Authority for unjustified dismissal. Richora challenged the Authority’s determination in the Employment Court.

Background facts

Ms Cheng suffered from depression. Mr and Mrs Li, who ran Richora and knew about her depression, offered her administration work. Ms Cheng began work in January 2017. The employment was not formally documented. After a month Ms Cheng had not received any wages.

On 7 March 2017 the Li’s accountant told them the IRD had been in contact about not paying any employee wages. Later that day Ms Cheng found she had been locked out of the Richora offices by the Li’s.

On 8 March 2017 Ms Cheng’s husband met with Mr Li  at Mr Li’s request. Ms Cheng did not attend due to illness. Mr Li said Ms Cheng had contacted the IRD (which she denied) and offered $3,000 for Ms Cheng’s resignation. The next day Ms Cheng attempted to commit suicide.

Later that month Mr Li posted online about an unnamed employee who he described as “despicable and shameless… villainous”. The post caused further emotional damage. On 11 April 2017 Ms Cheng raised a personal grievance.

The Court’s analysis

The Court found that Ms Cheng had been unjustifiably dismissed on 7 March 2017. It held that the Li’s did not adequately engage Ms Cheng, she was not told the purpose of the 8 March 2017 meeting and it continued despite her absence. She was not given an opportunity to respond to Mr Li and she was pushed to resign. The Court ordered Richora to pay unpaid wages and three months’ lost remuneration.

Of greater interest was the following five step approach the Court took to assess any compensation for humiliation, loss of dignity and injury to feelings.

Step 1 Harm – Richora’s conduct on 7-8 March 2017 damaged Ms Cheng’s self-esteem, made her feel devalued, caused her to experience depression, anxiety and acute stress.

Step 2 Extent of loss – Ms Cheng suffered acute loss: she experienced a dramatic decline in health. The severity of the harm was compounded by pre-existing conditions but the Li’s were always aware of Ms Cheng’s mental state.

Mr Li’s online posts were made after she was terminated. The loss that is compensated must arise from the grievance, in this case the unjustified dismissal. While the posts were linked to the employment, the harm arising from the posts could not be linked to the unjustified dismissal and compensation for loss caused by the posts could not be awarded.

Step 3 Where on the spectrum of cases does this case sit in terms of harm suffered? – The Court found the harm fell in the upper band: Ms Cheng was seriously impacted by the sudden end to her employment, especially as she held the Li’s in high esteem and placed value on their relationship.

Step 4 Where on the spectrum of cases does this case sit in terms of quantum? – The Court confirmed the ‘band’ approach first seen in Waikato District Health Board v Archibald and stated that the bands are: band 1 (low range harm) $0-$10,000; band 2 (mid range harm) $10,000-$40,000; band 3 (upper range harm) over $40,000. The Court looked at awards in similar cases and placed this case in band 3.

Step 5 What is a fair and just award in the present case? – In the Authority Ms Cheng was awarded compensation of $20,000 for humiliation, loss of dignity and injury to feelings. The Court considered Ms Cheng should have been awarded more to reflect band 3 harm. However, Ms Cheng had not sought a greater award and so the Employment Court did not have the jurisdiction to award an amount higher than that claimed.

Take away points

This case set a new five step approach to determining the level of award made for humiliation, loss of dignity  and injury  to feelings. It also confirms the banding approach recently adopted by the Employment Court. Employers should be wary of the increased awards now being made; even harm in the middle range could warrant an award of close to $40,000.

Although post termination conduct can often not be taken into account when determining compensation for loss, employers should note that employees are not barred from seeking redress through other means.

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