August 2023 marks two years since the Supreme Court clarified the parameters of the exclusive jurisdiction of the Employment Relations Authority (ERA) in FMV v TZB [2021] NZSC 102 (FMV).
Despite representing a significant shift of boundaries for the specialist employment jurisdiction, the judgment is clear that there will still be cases of “jurisdictional uncertainty at the margins”. Some of those marginal issues have since been resolved as FMV has been applied by the lower courts (see John Rooney and Sara-Jane Lloyd Update on the FMV v TZB case [2023] ELB 37 for a summary of recent decisions).
This article sets out the key takeaways from the FMV decision and attempts to identify some factors to consider when deciding where to file a claim that sits “at the margins”.
Supreme Court decision
The primary issue in FMV was whether the employee (FMV) could bring a claim in tort against her former employer (TZB). Alongside proceedings in the ERA, FMV had filed a tort claim in the High Court, alleging that TZB had failed to provide a safe system of work, thereby breaching a duty not to cause her harm. Both the High Court and Court of Appeal held that FMV’s claims fell squarely within the exclusive jurisdiction of the ERA. FMV appealed.
In its decision, the Supreme Court considered the interpretation of s 161(1) of the Employment Relations Act 2000 (Act), which prescribes the ERA’s exclusive jurisdiction. The court’s analysis recast the parameters of that jurisdiction, holding that if a dispute can be framed as an “employment relationship problem” under s 161(1)(a)–(qd) of the Act, then it must be brought in the ERA.
The Supreme Court held that whether something is an “employment relationship problem” requires an assessment of all the facts of the matter, but if a controversy arises during the course of an employment relationship and in a work context, then it will be an employment relationship problem (and within the ERA’s exclusive jurisdiction). This will be the case even if a cause of action in tort is available on the facts of the dispute: if it can, the matter must be framed as an employment relationship problem under s 161(1)(a)–(qd).
Previously, it was open to a party, in some circumstances, to plead these claims in tort and issue proceedings in in the courts of general jurisdiction. For example, it was not uncommon for employer claims alleging conspiracy by unlawful means to be brought in the High Court against a former employee and his/ her new employer for breaches of post-employment obligations.
The decision in FMV confirms, significantly, that the employment institutions have exclusive jurisdiction over a far broader range of disputes than was previously understood, including post-employment problems. This includes claims arising out of a settlement agreement that has not been countersigned by an authorised mediator under s 149 of the Act, restraints of trade and cases of employee theft.
Cases ‘at the margins’
In recasting the ERA’s jurisdiction, new areas of uncertainty have inevitably arisen. Two years on, many remain. William Young J, in a separate judgment endorsed by the majority in its judgment, at [184] anticipated several situations where jurisdictional issues may arise, including:
- overlapping statutes;
- disputes involving employees of intelligence and security agencies;
- claims under the Privacy Act 2020;
- disputes involving company law issues; and
- disputes in which one of the parties is not the employer or
William Young J noted that it would be possible (via legislative change) to assign these types of cases to the ERA by default, and for it to have the power to remove to the appropriate body cases involving particularly difficult issues.
Such an approach (and there is no suggestion that the legislature is taking steps towards this) could go some way towards resolving the current difficulties faced by representatives in framing claims at the margins.
On the other hand, it could also add a layer of complexity for litigants in a jurisdiction that is intended to facilitate resolution of issues at a low level and where many are self-represented or represented by lay advocates. Filing in the wrong jurisdiction can have devastating consequences for a party. If a claim is held to fall under the exclusive jurisdiction of the ERA but is not initially pursued in that forum, by the time a decision to that effect is handed down, a party may be time-barred from starting over in the ERA. In such cases, the High Court has confirmed that it is not possible for the parties to submit to its jurisdiction (see Fuji Xerox New Zealand Ltd v Whittaker [2021] NZHC 1469).
Where to file?
Drawing these points together, what is the best approach in a “marginal” case? The court in FMV was clear that a factual assessment is required, but there will inevitably be borderline cases. One such borderline case might be where, during the course of his/her employment and during work hours, an employee breaches obligations owed to the employer by diverting business opportunities to a competitor of the employer, at the behest of that competitor.
Assuming the employer wishes to take action against both the (likely now former) employee and the competitor, is this a case where split proceedings are required in the ERA (against the employee) and in the courts of general jurisdiction (in tort, against the competitor)?
Or does the ERA have jurisdiction to hear and determine a claim against the competitor too, given the “controversy” (the diversion of business opportunities by an employee during work hours) conceivably arose during the course of an employment relationship and in a work context?
Without attempting to set out any sort of checklist or to provide a definitive answer to the example above, the considerations in marginal cases will include:
- Even if the issue does not fall neatly into one of the categories in s 161(1)(a)-(qd) of the Act, the categories are inexhaustive. Does the controversy nevertheless arise during the course of an employment relationship and in a work context?
- Are (or were) all parties to the dispute in an employment relationship? If not, does the broad definition of “employment relationship problem” encompass the matters in dispute?
- Even if the employment relationship has come to an end, are there ongoing obligations, deriving from that relationship and the way in which it came to an end, that are in issue?
In a truly marginal case, the answers to these questions are unlikely to be straightforward. A careful consideration of the facts and existing post-FMV case law may not be conclusive. In such circumstances, seeking a preliminary determination as to jurisdiction would seem appropriate.
Rebecca White is a senior associate at LangtonHudsonButcher and a member of the ADLS Employment Law committee.
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