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Compensation for Loss of Dignity: the illusive search for a principled approach

31 March 2017 - By John Goddard

Quantifying damages for loss of dignity has been problematic for employment institutions for the last 30 years. The jurisprudence remains unclear and awards have remained unrealistically low. The problems with quantification have been exacerbated by recent developments in privacy law where there is an increased focus on fully compensating plaintiffs. Two cases illustrate the dichotomy that has emerged.

A stressed woman using a laptop computer

Ballylaw Holdings Ltd v Henderson [2003] 1 ERNZ 313, (2003) 7 NZELC 97,244

Ms Henderson worked as a caregiver and kitchen assistant in a rest home where it was standard practice to buy a birthday cake on a resident’s birthday. On the day of a resident’s birthday, Ms Henderson asked the nurse manager if the resident would receive a cake. The manager replied “I do not have time to think about that. If you want to, you do it”. Ms Henderson decided to buy the cake. She left to buy the cake nine minutes before her shift was due to end. Her employer accused her of falsifying her time records, made allegations of dishonesty against her and summarily dismissed her. The Employment Court awarded her $10,000 compensation for loss of dignity.

Hammond v Credit Union Baywide [2015] NZHRRT 6

In this case, Ms Hammond was employed by a credit union. Her friend and colleague G, who also worked for the credit union, challenged its executive team on various matters. This led to mediation and G’s employment terminating. Ms Hammond also encountered problems in dealing with the management and resigned. After her resignation, but before her notice period had expired, Ms Hammond made a cake for G which was adorned with expletives. Ms Hammond took a photo of the cake and uploaded it to her Facebook page which had restricted privacy settings. Credit Union Baywide obtained a screenshot of the cake and emailed it to four HR agencies to warn them against the risks of employing Ms Hammond. She brought a claim in the Human Rights Review Tribunal alleging breaches of various privacy principles. The Tribunal awarded her damages of $98,000 for loss of dignity.

In making this award the Tribunal suggested that there are presently three bands for awards for loss of dignity:

  • For less serious breaches: awards up to $10,000;
  • For moderate breaches: awards between $10,000 to $50,000
  • For the most serious breaches: awards in excess of $50,000.

Admittedly, the Ballylaw decision is now 14 years old. However, a recent survey of awards in the employment institutions reveals that the median of awards between 2013 and 2016 falls well within the lowest band identified by the Tribunal.1 There appears to be a significant discrepancy between the various institutions.

Both plaintiffs and defendants need to carefully consider their options and choice of remedies. Where an employee has suffered damage to their reputation resulting from the manner in which their employment has been terminated and their employer’s subsequent conduct, they have three options for redress:

  1. To bring a claim for unjustified dismissal in the employment institutions seeking compensation which includes compensation for loss of dignity; and/or
  2. To make a claim to the Tribunal alleging breaches of privacy principles seeking compensation which also includes compensation for loss of dignity; and/or
  3. Making a claim in court based on defamation.

Employment Institutions

Why are awards in employment institutions so low? The legislation provides for payment of compensation for:

  • Humiliation, loss of dignity and injury to the feelings of the employee; and
  • Loss of any benefit, whether or not of a monetary nature, which the employee might reasonably have been expected to obtain if the personal grievance had not arisen.

Damage to reputation could be claimed under each of these limbs. But in terms of quantum, there are two schools of thought. For example, according to Tipping J, in Andrews v Parceline Express Ltd [1994] 2 ERNZ 385 (CA) at 398:

“Firm restraint must be kept on the quantum of awards in this area. While the type of damage for which the compensation is awarded is real, a sense of proportion must be maintained.”

An alternative approach requires the amount of compensation to properly reflect the amount of harm that has been caused. In this vein, Thomas J stated in New Zealand Fasteners Stainless Ltd v Thwaites [2000] 2 NZLR 565 at [44]:

“It should be accepted that compensation under this head must be real compensation. Being wrongfully dismissed or dismissed in an unfair manner represents a traumatic experience to the employee concerned, and he or she should be fully compensated for that trauma.”

In 2004, the Court of Appeal identified in NCR (NZ) Corporation Ltd v Blowes [2005] 1 ERNZ 932, 2 NZELR 673 at [47] that awards of more than $10,000 were made in less than 10% of cases and awards of more than $15,000 in just 2.5% of cases. A recent survey of awards demonstrates that awards for loss of dignity have remained low.2

Although there are no limits on awards for loss of dignity, most are below $10,000. There are no bands for awards and limited guidance. Often it remains unclear what harm awards are designed to address and many awards are not accompanied with coherent reasoning. However, there is no doubt that firm restraint has been exercised at the risk that employees are not receiving full compensation for their ‘traumatic experience’.

Human Rights Review Tribunal

The Privacy Act 1993 provides for awards of damages for:

  • Pecuniary loss suffered as a result of the activity out of which the interference arose; or
  • Loss of any benefit, whether or not of a monetary kind, which the aggrieved individual might reasonably have been expected to obtain but for the interference; or
  • Humiliation, loss of dignity and injury to the feelings of the aggrieved individual.

The following principles have emerged from Hammond v Credit Union Baywide [2015] NZHRRT 6 when quantifying an appropriate award of damages (at [170] and [177]):

  • The ceiling to the Tribunal’s jurisdiction is $200,000.
  • Assessment of humiliation, loss of dignity and injury to feelings is inherently subjective.
  • The maintenance of consistency must give way to the purpose of damages awards, namely that awards reflect the specific circumstances.
  • It must be recognised that as society’s and the law’s understanding of privacy develops and matures, the perception of what constitutes a serious case may evolve and change.
  • Quantifying damages must be neither formulaic nor mathematical.
  • Old awards can be misleading unless updated to present day values.
  • The award of damages is to compensate the plaintiff and not to punish a defendant but the conduct of the defendant may exacerbate or mitigate the humiliation, loss of dignity or injury to feelings and therefore will be a relevant factor.

It is worth noting too that in order to establish a claim, a plaintiff must establish both that an action (1) is an interference with their privacy of an individual, and (2) has caused, or may cause loss, damage, or injury.

The Tribunal has no hesitation in ensuring that plaintiffs receive full compensation where they have experienced trauma as a result of interference with their privacy. We observe that the Tribunal has not experienced the same judicial pressure to apply restraint to the quantum of awards.

However, obtaining an award in the Tribunal is likely to take considerably longer than obtaining an award in the Employment Relations Authority where matters can be heard and determined within a matter of weeks or months.3

Defamation Claims

Defamation cases can be extremely expensive for plaintiffs to run and costly for defendants to defend. In many cases, legal costs far exceed the amount of any awards made. Awards in defamation cases range from purely nominal awards to very large awards. There is no upper limit.

By way of example, the largest award made in New Zealand is $900,000. Recently, ex-cricketer Chris Cairns was awarded, in a British court, the equivalent of $154,000. But the defendant in that case had to pay the equivalent of $2.6 million in costs to Mr Cairns’ legal team (Cairns v Modi [2012] EWHC 756 (QB)).

One commentator recently opined:

“Be warned! Getting involved in a defamation stoush is not for the faint-hearted. Proceedings are notoriously expensive, technical, drawn out and stressful. Much of the case law is about obscure points of pleading. Even our most experienced lawyers and judges constantly disagree about how this is supposed to be done. Worse, even the substantive law is in flux as the courts struggle to work out the implications of human rights instruments, rampant technology changes, and legislative reform.”4

This snapshot of the law of defamation would suggest that it is not an easy option. In one case (Trotter v Telecom Corp of NZ [1993] 2 ERNZ 659 at 708), the Employment Court demonstrated how both a personal grievance and a defamation claim could be made: if an employer dismissed an employee on ‘spurious’ grounds and announced the dismissal and its reasons at a press conference, an employee would both have the right to bring a personal grievance in the employment institutions and a claim for defamation in the courts.

A recent development may have provided aspiring plaintiffs with a further obstacle. Four High Court decisions have endorsed the approach in Jameel v Dow Jones [2005] QB 946 which enables a claim to be struck out as disproportionate even where there is a prima facie case that a statement is defamatory. Some of the factors for doing so include:5

  • There was a more appropriate forum available to the plaintiff;
  • The plaintiff would not attain much even if successful; and
  • The plaintiff would cause unnecessary cost by having the matter dealt with by the High Court.

While resolution of the threshold issue could be fatal to small claims, situations involving chief executives and high-profile employees would be less likely to result in successful strike out applications. Similarly, where plaintiffs could prove significant financial losses are reasonably foreseeable consequences of defamatory statements, claims are likely to remain unaffected by any threshold concerns.

Although defamation claims are expensive to run and pose a number of technical challenges, they should not be overlooked as a valuable tool in the dismissed employee’s toolbox.

In contrast with awards in employment institutions where awards are predictably low, remedies in defamation claims are potentially large but, if claims fail, the costs are likely to be extremely high. The risks are greater but so are the potential benefits.

With the advent of social media, an employee’s reputation can be irreparably damaged with the click of a mouse. Publication may be picked up by media organisations and go ‘viral’. Protection of reputation in the employment context must be addressed in this context.

Choice of forum and choice of remedies may well determine the outcome of a case irrespective of whether a case proceeds to a hearing or parties reach a settlement at some earlier date. Employers, employees and their advisers need to consider the implications and likely consequences of bringing/defending claims in the various jurisdictions described above.

John Goddard is an associate in Morrison Kent’s employment law team. He specialises in construction, earthquake, insurance and employment law. john.goddard@morrisonkent.com.

Footnotes

  1. Judge Christina Inglis and Liz Coats, “Compensation for Non-Monetary Loss – Fickle or Flexible: In Search of a Principled Framework for Pursuing, Defending and Deciding Claims under s 123(1)(c)”, Employment Law Conference (NZLS CLE Ltd, October 2016), at 414-422.
  2. Ibid.
  3. Employment Relations Authority, “Steps in the Authority Process” (2 March 2017),
  4. Stephen Price, “Defamation Issues”, Media Law (NZLS CLE Ltd, 2017) at 87.
  5. Ibid at 106.

Last updated on the 31st March 2017