Awards of costs in the Employment Relations Authority

An employer brought an action in the Employment Relations Authority against two employees for breaches of their employment contract.  The employees had set up in opposition to the employer while still employed.  The employer was successful in the Employment Relations Authority and penalties were imposed on the employees for their breaches of contract.

Normally in such situations the successful party, in this case the employer, would receive an award of costs against the other party.  However, in this case the defending employees had offered to pay the employer a sum of money in settlement of the claim before the hearing.  That offer was rejected.  The ERA held that because the employer had unreasonably rejected the settlement offer, which was for more than the employer received from the decision of the ERA, that the employees were entitled to costs from the employer.  That award of costs seriously eroded the award of penalties made against the employees.

The employer appealed to the Employment Court against the costs order.  The Employment Court held that the employer did not have to pay costs to the employees because the employer had not unreasonably rejected the settlement offer.  This was because the employees made no acknowledgment in the settlement offer of their wrongdoing for breaches of their employment agreements and the ERA had imposed penalties on the employees which were not part of any settlement offer made.

Instead of awarding costs against the employer, the Employment Court ordered that each side should bear its own costs in the Employment Relations Authority.

As a side note because the employer was successful in the Employment Court it will be entitled to an order for costs against the employees in the Employment Court.

Alan Knowsley
Employment Lawyer
Wellington