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MBIE's Naked Power-Grab. - by Sharon Ritchie


Leighton Associates wonders how the Employment Relations Authority and the Employment Court somehow got to make their own rules and overrule the High Court and Parliament. When their role is only to resolve employment relationship disputes and enforce employment standards.


It looks like a naked power-grab. Like the Emperor in the fairy tale who said he had new clothes. All the courtiers pretended to admire them. Leighton Associates is the little boy who said he was naked.


The Employment Relations Act 2000 governs the implementation of employment agreements and the enforcement of minimum standards. Employment agreements are contracts for services. It says so in the Act.


MBIE and the Employment Court, though, will legalise frauds, order the obstruction of evidence in the High Court or issue gagging orders. How did that happen?


In 2006, Rooney Earthmoving Limited brought a claim for damages for breach of employment agreements against three former employees, in the Employment Relations Authority. The former employees had set up a rival company and tried to take Rooney's business away by competing with it.


The basis for the claim was a wrongful use of confidential information, in breach of a clause in the written employment agreement two of the men had. The company said the clause also bound the third man, although he did not have a written employment agreement.


Employment agreements habitually have confidentiality clauses, but a confidentiality clause is not an employment agreement. It is a clause protecting trade secrets, which are property, not employment. A client list is just about as far as a trade secret can legitimately extend. But it is still a property agreement, not an employment agreement.


But you aren't stopped from writing anything on to the same bit of paper as an employment agreement. And the idea that anything written on the same bit of paper as a contract for services therefore came within the ambit of the Ministry of Business, Innovation and Employment - or the Department of Labour as it was at the time - was the sneaky way that government officials and private lawyers took over commercial law and eventually wrecked New Zealand's legal system.


Property contracts do not become employment agreements just by being written on the same piece of paper as an actual employment agreement, or from being labelled "employment agreement". We wouldn't expect to see the Employment Relations Authority making orders about trusts. Nor does a tort (such as infringement of intellectual property rights) become an employment relationship matter or employment standard issue just because the parties were in an employment relationship. That would mean employers had special rights over employees in all areas of their lives, there was a parallel legal system for masters and servants which extended across their whole lives, and no-one could rely on the rule of law any more.


The Employment Relations Authority and the Employment Court have very clearly delimited powers. They only have power in relation to employment agreements, which are stated to be contracts for services.


There is no power to deal with property matters or with any torts not arising from a strike or lockdown.


But they are run by employment lawyers, and in their long campaign of statutory misinterpretation, they have grabbed all the power they can. They have also abused it.

The power grab problem seems to have begun in earnest in the Rooney case.


The claim in Rooney was that the employees induced others to breach their employment agreements, misused confidential information in order to compete unfairly with Rooney through a new company, and breached their duty of loyalty to Rooney. Paul Montgomery, the Member, said that the decisions for him were whether employment agreements were breached, what the effect of the breaches was, and what damages followed.


A confidentiality agreement is not a contract for services.. A confidentiality agreement may be made between any parties, not just employer and employee. It may be an agreement between employer and employee, but it is not about services.


If you regard it as being part of an employment agreement because it is written on the same piece of paper, you can write anything on there. You then also either have a very faulty understanding of how law works or you might just be a bit of a crook.


A Member of MBIE should not have been allowed to decide that anything written onto the same bit of paper as an employment agreement came within their remit. The Employment Court should not have allowed its mission to creep, however much its judges wanted more power and status. The High Court should not have allowed itself to be sidelined by MBIE, or by the people who wanted to use it for their own purposes - however charming they might have seemed socially. The result has fractured the whole New Zealand legal system.


There is no power for MBIE or the Employment Court to deal in anything other than a contract for services. They have no powers to award damages for torts (actionable wrongs).


Despite this, Judge Travis awarded $4,290,000 to be paid by the three former employees to Rooney for alleged breach of a duty of trust and confidence in relation to their treatment of the employer's property. Did nobody notice?

Perhaps it was just too embarrassing to contemplate that a judge had made such a big award without any power to do it.


Or maybe the people who might have commented realised instead what opportunities the parallel legal system opened up by the power-grab could offer them.


There is no right of appeal from the Employment Court - for just contracts for services, in a good faith jurisdiction, you wouldn't need it ...


The former employees were bankrupted.


It is very useful to employers and especially managers in government organisations to be able to enforce torts through the Authority and the Employment Court. The Authority and Court are run by MBIE, whose problems with fair treatment of people they don't like were recently highlighted by their treatment of Team New Zealand - and the mysterious suppression of reports of their behaviour was reported here.


As we have discussed before on Leighton Associates, the naked power-grab was then extended to “settlement” agreements. Those aren't employment agreements at all, but the Employment Relations Act allows MBIE to enforce settlements of employment relations problems. It is the same short cut from a genuine settlement of an employment agreement to anything written on a piece of paper signed off by MBIE. It's a crooked route, but if MBIE and the Employment Court Judge will sanitise it, and the real courts won't stop them making new law, and will let them enforce it, then it works like law ...


This is all a basic and obvious legal mistake. The Authority and Court can only do what Parliament authorises them to do.


Where they do something they can't, that is illegal. It doesn't matter whether they make an order that might legally have been made by another court, or they make an order that constitutes an offence. If Parliament didn't authorise them to do it, it's illegal.


Where illegal orders are made deliberately, rather than from ignorance, they are abuse of the process and contempt of Parliament. Lawyers and judges might find it hard to say they were ignorant of basic legal principles, but that might be a better alternative.


There would be a reason for crooks to prefer the Employment Court process.


The Employment Court’s Regulations allow a party to refuse disclosure on the grounds of self-incrimination. That is because it refers to a process that just deals with contracts for services.


It is not plausible that Parliament really provided a parallel system for certain people to be able to have tort or property cases heard while being able to hide evidence that, for example, they faked records or forged documents of title.


Obviously, if you are going to adapt a process to fraud and money-laundering or enabling sex offences to be carried out with impunity, though, it's very useful.


And once you have established that you can put anything into an "employment agreement" and have people ordered to comply with it, and "punished" for "breach" - you would see exactly what New Zealand has seen in recent years. You would see thieves and fraudsters and perverts claiming they have a rights to other people's money or personal integrity. Then you would see MBIE and Employment Court judges supporting that.


The real tragedy for the New Zealand legal system has been that the other courts have let their powers go. Was it laziness, stupidity, lack of education - or, as a number of QCs and judges have suggested publicly - very useful for officials, lawyers and judges to be able to cover up their own thefts, procurement frauds and "sexual proclivities"?


Now it's obvious the Emperor has been naked for a long, long time, but much less obvious - with a fatally compromised judiciary - what New Zealand is going to do about that.


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