Tort Claims and Employment – Jurisdiction of the Employment Relations Authority settled by the Supreme Court

It is not very often that an employment case reaches the Supreme Court. However, in August this year that Court settled the jurisdiction of the Employment Relations Authority (Authority) versus the High Court, where an employee alleges they have suffered harm as a result of the employer’s negligence. The decision, FMV v TZBI,1 also provides useful general guidance as to the exclusive jurisdiction of the Authority as set out in s161 Employment Relations Act 2000 (Act).2

Background

The plaintiff (FMV) was employed by TZB for one year from February 2009 with her employment ending when she gave one month’s notice. Seven years later, in December 2016, she filed proceedings against TZB in the Authority and in the High Court.3 In the Authority, she brought proceedings in relation to a personal grievance (unjustified disadvantage and dismissal). In the High Court she brought a tort action in negligence. Both claims related to alleged bullying and discrimination. In the High Court the claim was framed as a breach of a duty of care to not cause her psychiatric harm, to maintain a safe system of work and to provide her with information relating to her state of health.

FMV initially advanced her action in the Authority which stayed the proceeding until FMV could provide evidence that she had the mental capacity to proceed. It also raised as an issue that the personal grievance upon which the proceeding was based may have been brought out of time.

FMV then took steps to advance her claim in the High Court. TZB successfully struck out the claim on the basis that the Authority had exclusive jurisdiction to hear her claim. This was confirmed by the Court of Appeal. FMV then appealed to the Supreme Court.

The Issue

Section 161(1) of the Act states that the Authority has:

exclusive jurisdiction to make determinations about employment relationship problems4 generally, including …

It then goes on to list from (a) to (s) what “employment relationship problems” are included within the Authority’s jurisdiction. Amongst these are:

(a) disputes about the interpretation, application or operation of an employment agreement:
(b) matters related to a breach of any employment agreement:
(c) matters about whether a person is an employee …
….
(e) personal grievances:
(f) matters about whether the good faith obligations imposed by this Act … have been complied with …
(g) matters about the recovery of wages …
…
(m) actions for the recovery of penalties …
(n) compliance orders …
…..
(p) orders for interim reinstatement …
….
(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):
…
(s) ….
(our emphasis)

Section 161(3) of the Act provides that:

(3) 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.

The important issue in the case was the interpretation of s161(1)(r), which refers to “any other action … arising from or related to the employment relationship … (other than an action founded on tort)”. In simple terms, the issue was whether the tort exclusion applied to all aspects of the Authority’s jurisdiction referred to in s161(1), or only to actions other than those specifically itemised. Put in a more technical way, the question was whether the words “other than an action founded on tort” in s161(1)(r) modified the reference to “employment relationship problems generally” in s161(1), or only the words “any other action” in s161(1)(r). If the former, it would mean that actions founded on tort could only be brought in the High Court.5 If the latter, it would mean that only in the case of actions related to an employment relationship other than those listed in s161(1)(a) – (s) and founded on tort, would the High Court have jurisdiction.

The Supreme Court considered the legislative history of the Act, its broad scope and the purpose of the employment institutions, including the intention to provide access to justice with a minimum of formality and cost. It noted that s161 describes the Authority’s jurisdiction using a non-technical term “problem”, which was a supervening class that could encompass different legal forms.

It found that a general “carve out” of claims founded on tort claims so that they could be brought in the High Court would undermine the intention of the Act, in particular being “to channel employment problems into the employment jurisdictions”. The Supreme Court, therefore, discarded this interpretation.

The “carve out” for tort claims therefore only related to 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).

The Court accepted that this resulted in the abolition of most employment-related tort actions, other than the industrial torts (tort proceedings relating to strikes and lockouts) which are brought in the Employment Court.6 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 …”.7

Application to the Facts

FMV’s claims in the High Court clearly arose from an employment relationship problem, so the only question was the extent of the carve out for claims founded in tort.

It followed from the Court’s reasoning that FMV could not pursue the action in tort in the High Court. This was because the alleged bullying and discrimination issues could be framed as a personal grievance and/or a claim for breach of an employment agreement, and therefore did not fall within the limited tort exception in s161(1)(r).

Guidance as to Jurisdiction of the Authority Generally

In the course of reaching its decision, the Supreme Court considered earlier decisions of the High Court and the Court of Appeal which had endeavoured to grapple with the meaning of s161.

BDM Grange8 involved an employee/director who resigned and joined a company which then secured the exclusive distribution right which had been held by the former employer, BDM Grange. BDM Grange brought proceedings in the High Court against the former employee, Mr Parker, and his new employer. The claims against Mr Parker were for breach of fiduciary duty (passing on confidential information), misuse of confidential information and the torts of unlawful means conspiracy and deceit. Mr Parker applied to strike out the claims against him on the grounds that they fell within the Authority’s exclusive jurisdiction.

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.

JP Morgan9 involved a dispute between a bank and its former CEO, Mr Lewis. Mr Lewis had resigned pursuant to a settlement agreement concluded after he raised a personal grievance. When Mr Lewis looked for new employment, the bank denied that Mr Lewis had been its CEO. Mr Lewis brought proceedings in the Authority, but the Authority found that it did not have jurisdiction to address breaches of the settlement agreement, which was not in the form of a Record of Settlement under the Act.10 Eventually the issues came before the Court of Appeal which considered that the Authority’s jurisdiction related to matters which “directly and essentially” concerned the employment relationship. There was no extant employment relationship between Mr Lewis and the bank, the claim did not relate to any ongoing obligations under the employment agreement, and did not concern a breach of a Record of Settlement under the Act. It followed that the Authority did not have jurisdiction. The Court of Appeal also expressed the view that theft by an employee, although clearly a breach of an employment agreement, was not “in essence” an employment relationship problem because the existence of that relationship would not be a “necessary component” of causes of action that could be asserted.

The Supreme Court disagreed with the approaches of the Courts in both BDM Grange and JP Morgan. It did not agree that the Authority’s jurisdiction was largely contract based. It found it was largely expressed in “factual terms” and was a clear departure from the contract-based approach of the Employment Contracts Act which preceded the Employment Relations Act. It considered an approach which allowed a party to “plead their way round” the Authority’s exclusive jurisdiction was not appropriate, and nor was one which treated employment relationship problems as a separate category exclusive of other legal categories.

Rather, the Supreme Court found an employment relationship problem may encompass various legal forms “as long as the problem relates to or arises from an employment relationship”.

The Supreme Court accepted that not all issues arising between employer and employee would come within the Authority’s exclusive jurisdiction. The general test was whether parties were in an employment relationship and the issue arose in a work context. It followed that theft by an employee would be within the exclusive jurisdiction of the Authority, as it was a breach of the employment agreement.11 Furthermore, where an employer defamed an employee by, say, falsely accusing him or her of theft, the employee would be unable to bring an action for defamation in the High Court but could bring an action in the Authority seeking compensation for unjustified disadvantage.12

The Supreme Court explained that jurisdiction was wider even than the general test it expounded (during the employment relationship and in a work context). It extended to obligations between employer and employee entered into during the employment relationship, even if the effect of those obligations operated to bring the employment relationship to an end.13 That is, disputes over settlement agreements between employer and employee which were not under s149 of the Act and signed by a mediator (such as in JP Morgan), also fell within the exclusive jurisdiction of the Authority.14

Conclusion

The Supreme Court’s decision creates a jurisdictional monopoly for the Authority over almost all disputes arising in connection with an employment relationship, and means that claims in tort by an employee against an employer will very rarely be able to be brought in the High Court. This is because they will almost always fit within one of the categories referred to in s161(1), in particular unjustified disadvantage/dismissal and/or breach of contract.

This decision will facilitate employees’ access to justice, and will also benefit both employees and employers because disputes that may otherwise have been brought in the High Court can be resolved through the less formal and less expensive employment institutions. Save in exceptional circumstances, most employment relationship problems must also be referred to mediation before progressing in the Authority.

It will be of concern to some, however, that employment litigants are denied access to the courts of general jurisdiction, which is the effect of the Supreme Court’s interpretation of s161.15

Split proceedings of the kind in FMV will be avoided. However, split proceedings brought both in the Authority and the High Court will still arise. An example is proceedings brought by an employer against someone who is sued both as a director and an employee.16

If you would like to know more about the issues arising from this matter, please contact Rachel Scott

  1. FMV v TZB [2021] NZSC 102. This article discusses the approach of the majority, Winkelmann CJ, O’Regan and Williams JJ. William Young J reached the same conclusion as the majority by somewhat different reasoning. Glazebrook J dissented.
  2. This in large part bounds the jurisdiction of the Employment Court which under s178 of the Act has jurisdiction to hear matters removed to it by the Authority, and under ss179 and 187(1)(a) to deal with challenges to the Authority’s determination.
  3. A personal grievance should be brought within 90 days of the event giving rise to the grievance, but there is a discretion to extend in exceptional circumstances. A proceeding based on a personal grievance must be brought within three years of the raising of the personal grievance, suggesting FMV’s personal grievance was raised well out of time. As regards the High Court claim, it seems FMV’s intention was to argue she was under a disability when her causes of action accrued.
  4. “Employment relationship problem” is defined in s5 of the Act as including “a personal grievance, a dispute and any other problem relating to or arising out of an employment relationship …”.
  5. Save the so-called “industrial torts” which must be brought in the Employment Court, discussed below.
  6. Act, s187(h).
  7. FMV, above [129].
  8. BDM Grange Ltd v Parker [2006] 1 NZLR 353. Discussed from [78] of the Supreme Court judgment.
  9. JP Morgan Chase Bank NA v Lewis [2015] 3 NZLR 618 (CA). Discussed from [83] of the Supreme Court judgment.
  10. A Record of Settlement needs to meet the requirements set out in s149 of the Act, including having been signed by a mediator. The Act provides specific remedies for breach being a compliance order and/ or a penalty – s161(1)(m)(ii) and s149(4)(4), s151 and s137 of the Act.
  11. FMV, above, [97].
  12. FMV, above, [96].
  13. FMV, above, [99].
  14. FMV, above, [100].
  15. Glazebrook J dissented expressly on this basis saying the plain meaning of s161 was that actions in tort are excluded from the Authority’s jurisdiction. Reinforcing this conclusion was the fact that the Act did not provide the Authority with any express power to apply the rules of the law of torts.
  16. Discussed in FMV, [102] – [103].

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.