Is it necessary for us to attend mediation? Employment Law Update October Week 3

An employee has raised a personal grievance and has requested us to attend mediation with the Ministry of Business, Innovation and Employment. We are not sure whether we want to attend. Are we required to go to mediation?

Generally, the starting point is that when a request is made to attend mediation such attendance is voluntary, but only in the first instance. Attendance at mediation can quickly shift from being voluntary to being mandatory if the matter becomes filed with the Employment Relations Authority.

If the employee files a Statement of Problem with the Authority regarding the employee’s grievance and the Authority grants such a direction for the parties to attend mediation, it then becomes mandatory for an employer to attend mediation under s 159(2) of the Employment Relations Act 2000 (the Act). In the vast majority of instances where a matter is filed with the Authority, the Authority will direct the parties to attend mediation, as mediation is the primary dispute resolution mechanism for most employment relationship problems and the Authority is required to consider directing parties to mediation (s 159(2)).

It is important to be aware that a refusal to attend mediation can potentially count against an employer if the matter were to proceed to the Authority, particularly if the refusal is after a direction has been ordered by the Authority. An employer’s refusal to attend mediation could potentially have an impact on how legal costs are allocated following the hearing. For instance, a greater award of the other party’s legal costs may potentially be awarded against an employer who refused to attend mediation (on the basis that legal costs could potentially have been avoided if an attempt at resolving matters had occurred in mediation).

An additional consideration is whether the employee is still employed with you or not. If the employee is still employed with you, there will be some potential risks to refusing to attend mediation, even if it is still only at the voluntary stage. While there is an existing employment relationship there are contractual obligations between the parties. Employment agreements are required to contain a process for resolving employment relationship problems (s 65(2)). Most employment agreements will have them, and most will refer to mediation services. Further and most importantly, the implied duty of good faith applies to both parties during the existence of the employment relationship (regardless of the content of the employment agreement), which requires both parties to be, among other things, responsive and communicative (s 4). In some instances where an employer fails to attend mediation where an existing employment relationship is in place, an employer may be at risk of being regarded as breaching the duty of good faith.

In a recent decision, the Employment Relations Authority found that an employer breached its obligations of good faith towards an employee when the employer declined an employee’s request to attend mediation while there was still an existing employment relationship: Juutilainen v Len Reid Oils Ltd trading as Pennzcorp [2019] NZERA 243. The employee gave his notice of resignation after receiving notice from the employer to commence a redundancy proposal (which the Authority found was not for a genuine redundancy). During his notice period the employee requested the employer to attend mediation. When the Mediation Service contacted the employer, the employer declined the request to attend mediation. Although a breach of the duty of good faith was found to have occurred by the employer, this action occurred after the employee gave notice of resignation, and therefore could not form part of the employee’s claim of constructive dismissal. However, the failure to attend mediation, along with a failure of fair treatment of the redundancy proposal, resulted in a penalty of $2,000 being imposed on the employer.

It is not clear why you do not wish to attend mediation, but it is important not to take an unnecessarily negative view of attending. Mediation is an opportunity for both parties to attempt to resolve their differences with the assistance of a skilled, experienced and neutral mediator. Either or both parties are entitled to bring support and/or legal representation if that is their wish, and there is no outcome to the mediation process unless both parties agree to it. It is an opportunity for matters to be resolved at a lower level before they escalate, such as by progressing to more serious forums such as the Employment Relations Authority.

Reproduced with permission of Wolters Kluwer NZ