The Court of Appeal on Wednesday 6 March upheld a landmark Employment Court decision holding an employer liable for an employee's resignation.
The employee, Mark Matheson, committed suicide the day after his employment was terminated. On appeal, the Court confirmed the Employment Court's decision that Mr Matheson was constructively dismissed by his
employer, Christchurch-based engineering firm Transmissions & Diesels (T&D).
However, the Court reduced the level of compensation T&D was required to pay and the level of costs awarded against T&D. Mr Matheson, a highly skilled mechanic, was employed by the engineering firm as the Manager of its Wellington branch. The Employment Court found that Mr Matheson was unjustifiably constructively dismissed and that the dismissal was a contributor, but not the only cause, of his suicide. T&D was ordered to pay compensation of $60,000 to the estate and approximately $107,500 in
costs.
This was the first case in New Zealand where an estate has initiated a personal grievance after the death of an employee.
T&D appealed the Employment Court's finding on liability and the quantum of the damages and costs awarded. The challenge to liability failed, but the Court accepted that the award for damages and costs was excessive.
LiabilityThe Court of Appeal upheld the Employment Court's finding that Mr Matheson's resignation was caused by T&D's breach of the implied term in his employment contract that it would treat him reasonably and fairly. The particular breaches the Employment Court identified were:
Failing to consult Mr Matheson about the appointment of a Parts Manager, which impacted on Mr Matheson's role as Branch Manager Failing to give Mr Matheson support or assistance in managing staff relations issues (T&D knew Mr Matheson had no previous management experience) The immediate and unquestioning acceptance of Mr Matheson's resignation when he was in a sobbing and uncontrollable state. (When Mr Matheson resigned he asked whether any other positions were available within the company. The Court considered this indicated the resignation was not genuine.)The Court found that the stress and humiliation Mr Matheson experienced was caused by T&D and described the distress as 'as profound as it could possibly be'. The Court considered Mr Matheson's suicide showed that his distress went far beyond the usual disappointment of an employee over the loss of a job.
QuantumOn appeal, the Court accepted that the award of $60,000 compensation was too high and reduced it to $35,000. The Court of Appeal's reasons were two-fold:
in assessing the extent of the distress Mr Matheson suffered the Employment Court overlooked the fact that there were other substantial causes for which T&D were not responsible the award of $60,000 was outside the pattern established in previous cases. The award of $35,000 is still at the higher end of the scale. Few awards over $20,000 are made for hurt and humiliation.Lessons for employersThe facts of this case illustrate what can happen at the extreme end of the scale when employers do not follow procedural or substantive fairness. The Court of Appeal has confirmed that employers need to be wary of seizing on resignations which have not been genuinely offered.
For further information, please contact Andrea Lawton, solicitor
andrea.lawton@phillipsfox.com
Andrea Lawton is a Solicitor in the employment law team at Phillips Fox. Sheappeared as co-counsel for the estate in the Employment Court and the Court of Appeal.
This is a general summary only and should not be taken as a substitute for specific advice.
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