Heavy handed process costly

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Banks v Hockey Manawatu Inc

When the Human Rights Act was changed to make it difficult for employers to retire staff, it was inevitable that there would be problems with people who were past their best wanting to hang onto their roles and resist change. The story of Mr Banks looks like one of these cases, but the way in which the board handled the situation reflects board politics rather than good employment practice. It was a very expensive mistake.

Mr Banks was employed as the operations manager (the most senior manager) at Hockey Manawatu for around eight years before he was dismissed, a few days before his 70th birthday. Banks had had a successful corporate career before his role with Hockey Manawatu.

In mid 2013, a consultant’s report into the organisation indicated there was room for improvement at both governance and management level of the organisation, however the board did not show Banks the report.

A few months later, one of the staff complained that he had been abusive and Banks was told to moderate his language. In March 2014, a staff member resigned after an altercation with a colleague, and told a board member it was due to Banks’ poor management of the situation.

The board swung into action and had secret meetings with staff and a secret board meeting with minutes, that explored four options for terminating the relationship. Banks was oblivious to this activity and in June, out of the blue, he received an invitation to mediation. Naturally he got legal advice and the lawyer asked what the issues were that they wanted to mediate.

The party’s lawyers then took over the situation, but the employer’s lawyer didn’t get it right.

After Banks had been on sick leave for a month, the employer’s lawyer wrote to him, indicating that as he had been off work for a month he was incapable of performing his duties due to his medical condition and his employment would be terminated.

The matter went to mediation, the Employment Authority and then court. In his decision the judge said “I saw no evidence in the course of this lengthy hearing or in the 900 pages of documents produced to the court, which would indicate that the board of Hockey Manawatu had any appreciation of its basic obligations as an employer in relation to grievance and disciplinary matters…in the months leading up to the termination of [Banks] employment there was not very much that the board got right”.

The judge heavily criticised the secret meetings with staff that were not reported to Banks and the secret board meeting. The minutes of the secret board meeting, when they were presented to the court, put the nails in the coffin of the board’s case, not only because of their content but because they were material information that had been withheld from Banks.

Banks was awarded lost wages of $30,000 and hurt and humiliation of $18,000. But what really attracted my attention was the judgement on costs. Banks’ lawyer cost him $131,600 plus GST. The judgement on costs was 28 pages long, analysing what was fair and reasonable in the circumstances. The hearing took 10.5 days and there were 900 pages of evidence.

The judge penalised the employer for rejecting an earlier offer of settlement, penalised it for withholding information and awarded costs for the Employment Authority hearing. She also added GST to the award of costs as Banks had no way to recover that as a GST registered organisation could. Having decided what was fair for Banks, the judge then looked at the organisation’s balance sheet and determined it had sufficient assets to pay the amount. Banks was awarded costs of $123,000 on top of his $48,000 lost wages and compensation.

There are some key messages here. Always be transparent in your dealing with staff. It is a fundamental principle of natural justice that people know what they are accused of, by whom and have an opportunity to respond. Secondly, ending a contract due to medical incapacity is a lot trickier than it looks on paper. You have to have medical evidence that the person is incapable of performing their role again within a reasonable period. Thirdly, know when to walk away from a fight and take your losses. It is really tough, but this situation could have settled for $40,000 before it got to court. Instead, it went to court and they ended up paying Banks $171,000 plus their own legal bills.

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About Author

Anne Aitken

Anne Aitken is a highly experienced Human Resources professional who focuses on helping employers strengthen their organisations through working with their people. email: anne@anneaitken.co.nz | www.anneaitken.co.nz

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