In a rare occurrence, an employment case has made it all the way to the Supreme Court.
In FMV v TZB[1] the Supreme Court was tasked with determining whether the High Court or the Employment Relations Authority (Authority) had jurisdiction to hear the plaintiff’s claim where those claims were based in tort. The plaintiff, FMV, alleged that the employer TZB, had failed to provide a safe system of work and not cause her psychological harm. Because this is a tort (negligence) FMV brought her claim in the High Court.
The background facts
a. In 2009, the plaintiff, FMV, was employed by TZB she resigned by giving notice of one month. In 2016, some seven years after she gave notice, FMV filed proceedings against TZB in both the Authority and the High Court.
b. The proceedings in the Authority were that she had been unjustifiably dismissed and suffered disadvantage as a result of TZB’s actions. The personal grievance alleged by FMV included claims that TZB had discriminated against her, made numerous comments that she was incompetent, bullied her and threatened to terminate her employment. The Authority concluded that FMV did not have the mental capacity to continue with her personal grievance and stayed the proceeding. A further issue was that the personal grievance was most likely brought out of the 90 day time limit for raising the grievance and out of the three year period in which to pursue the personal grievance.
c. FMV also filed a discrimination complaint with the Human Rights Commission under the Human Rights Act 1993. When this matter was active the Human Right Commission raised concerns for FMV’s mental health ahead of a scheduled mediation. That mediation did not proceed.
d. In the High Court FMV filed a negligence claim against TZB. The negligence claim being based on allegations that TZB failed in its duty not to cause her psychological harm, and to implement a safe system of work. The High Court claim was struck out on the basis that the Authority had exclusive jurisdiction to hear the claim and this position was confirmed by Court of Appeal. FMV then appealed that decision to the Supreme Court.
What were the issues?
e. The issues that the Supreme Court had to determine were twofold: -
i. Whether FMV’s claim was an employment relationship problem giving the Authority exclusive jurisdiction; and
ii. If the Authority did have exclusive jurisdiction was the claim excluded by the tort exception under s 161(1)(r) of the Employment Relations Act 2000 (ERA).
f. Section 161(1) of the ERA is extensive and states that the Authority has exclusive jurisdiction to make determinations about employment relationship problems, and proceeds to list examples of what employment relationship problems may be[2]. The extensive list (which runs (a) through (s)in the legislation) includes the following: -
i. (r) 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);
g. Section 161(3) states that: -
i. Except as provided in this Act, no court has jurisdiction in relation to any matter that, under subsection (1), is within the exclusive jurisdiction of the Authority.
ii. The critical issue in this case was the interpretation of s 161(1)(r) and in particular the meaning of “any other action … arising from or related to the employment relationship, other than an action founded in tort”. To determine the correct interpretation of this clause the Supreme Court first looked to the meaning of “employment relationship problem” which is defined under s 5 as including … a personal grievance, a dispute, and any other problem relating to or arising out of an employment relationship, but does not include any problem with the fixing of new terms and conditions of employment.
h. The Supreme Court looked to BDM Grange Limited v Parker [3] and JP Morgan Chase Bank NA v Lewis [4] for assistance in the meaning of “employment relationship problem”.
i. In JP Morgan, the Court of Appeal held a problem relates to or arises out of an employment relationship within the s 5 definition if it “directly and essentially concerns the employment relationship” This did not sit well with the Supreme Court in FMV v TZB stating:
… the analysis in JP Morgan nevertheless treated employment relationship problems as a separate category exclusive of other legal categories, particularly property, equity and tort… the effect is that if a claim does not rely on the employment relationship problem.
j. In particular the Supreme Court noted that s 161(1) used the non-technical term “problem” to ensure legal form did not distract from the factual background of the dispute between the parties.
k. In practice this means that if a claim can be framed as a personal grievance then it must be brought in the Authority. If it cannot be framed as a personal grievance but occurs in the course of employment it is within the Authority’s exclusive jurisdiction.
l. There is still a general “carve out” of claims founded on tort claims so for actions that could not be brought within s161(1)(a) to (s). Furthermore, the Court found this meant that any action which could be framed in a way that brought the action within one of those provisions (for example as a personal grievance or breach of contract) must be framed in that way, and could not be brought in another jurisdiction. This meant that the tort “carve out” in s161(1)(r) would only apply to tort claims that could not be framed under the other parts of s161(1).
m. The Supreme Court accepted that this finding results in the abolition of most employment-related tort actions (with the exception of industrial torts relating to strikes and lockout which are brought in the Employment Court). However, it noted that access to justice was not at issue because the common law right to sue in tort was replaced by a more accessible regime in the Authority.
n. Regarding FMV’s tort claim, the Supreme Court held that it did sufficiently arise from an “employment relationship problem” and therefor was in the jurisdiction of the Authority. FMV’s allegations of bullying and discrimination could be framed as a personal grievance or a claim for breach of an employment agreement and could not fall withing the s 161(1)(r) tort exception.
What does this generally mean for jurisdiction of the Authority?
o. In reaching the decision, the Supreme Court considered JP Morgan and BDM Grange, both of which were the leading authority.
p. In BDM Grange an employee/director resigned and joined a rival company. The rival company secured exclusive distribution rights that were previously held by BDM Grange. BDM Grange brought proceedings in the High Court against the former employee and the rival company. The claims against the former employee were for breach of fiduciary duty, misuse of confidential information and the torts of unlawful means conspiracy and deceit. The former employee applied to strike out the claims against him on the grounds that they fell within the Authority’s exclusive jurisdiction.
q. The High Court did not strike out the claim. It found the Authority’s jurisdiction did not extend beyond claims “directly within the employment relationship” into causes of action in tort and equity. Rather, it considered the Authority’s jurisdiction was essentially contract based.
r. JP Morgan involved a dispute between a bank and its former CEO who had resigned and entered into a settlement agreement following a personal grievance. When the former COE looked for new employment, the bank denied that he had been its CEO. Proceedings were brought in the Authority, but the Authority found that it did not have jurisdiction to determine breaches of the settlement agreement, which was not in the form of a Record of Settlement which did not comply with s 149 of the Act.
s. The matter came before the Court of Appeal. The Court found that there was no employment relationship (which had been terminated and settled) between the parties and as such the Authority did not have jurisdiction.
t. The FMZ decision displaces these two leading tests the result being that the jurisdiction of the Authority is wider than the general test, that the matter must have occurred during the employment relationship and in a work context. This extends the obligations of both employer and employee beyond the termination of the employment.
u. In essence the Authority has exclusive jurisdiction over almost all disputes concerning an employment relationship, claims in tort will only in the rarest of circumstances be able to be brought to the High Court due to the wide parameters set under s 161(1) and given that most employment related issues are related to unjustified disadvantage, unjustified dismissal or breach of contract.
v. Arguably this decision will ensure that aggrieved employees will have better access to justice in tortious causes of action and the scheme of the Act provides that all employment relationship problems must be referred to mediation before progression to the Authority, this may save the parties the costs associated with bringing an action in the High Court. Positive as this may be in access to justice the denial of access to the courts of general jurisdiction, may be seen as fettering open justice.
[2] Employment Relations Act 2000 (ERA) s 161(1)
[3] BDM Grange Limited v Parker [2006] 1 NZLR 353 (HC)
[4] JP Morgan Chase Bank NZ v Lewis [2015] NZCA 55; [2015] 3 NZLR 618