Employment advocates often include specific clauses in their clients’ settlement agreements, to
make sure they get paid without too much fuss. Fair enough I suppose, everyone has bills to pay.
These clauses are more often than not included by advocates for employees and say something
like: “X amount to be paid by employer to the employee’s advocate, after receiving an invoice from
said advocate.” The idea being that the employer effectively pays the advocate and the advocate
doesn’t have to chase up their client for unpaid fees.
The direct paying of fees and even settlement amounts to advocates by employers went on for a few
years and naturally, the unregulated nature of the industry allowed for some unfortunate incidents.
Sometimes advocates would negotiate directly with the employer to induce (through their influence)
the employee into settling against their better interests. Occasionally an advocate would have the
full amount transferred to their account, ostensibly to pass on the settlement amount (minus their
fee) to the employee, only to abscond to the Bahamas with the lot. Precise records of these incidents are
scant and it’s not clear whether many of these merry pranksters had even left the country. What is
clear however, is that in 2004 a Bill was introduced to amend the Employment Relations Act,
specifically to address this problem, as well as some others.
Section 150A of the Employment Relations Act originally would prevent representatives from taking
payment from the other party but was changed when a report by the Transport and Industrial
Relations Committee recommended that section 150A was changed to allow lawyers to take
payments directly - but it says nothing about employment advocates (Report of Transport and Industrial Relations Committee, Wellington, New Zealand: Published under the authority of the House of Representatives, 13 September at Page 16). Not surprisingly, as employment advocates, unlike lawyers, do not have trust accounts that are subject to supervision.
That’s relatively straightforward and sensible law. A relief even, since law is often convoluted and
legislators frequently write laws that make little sense. Section 150A protects the consumer from
shifty practitioners who may otherwise abscond with funds and still allows regulated practitioners to
receive funds on behalf of their clients and easily have their fees met.
So why is this still happening?
To understand why, we need to take a short refresher in constitutional law, because what happened
is so obviously and bafflingly unlawful (in my not-completely-unqualified opinion).
When Parliament (the legislative branch of government) writes a law, there really isn’t anything
stopping them. They are our supreme governing body and they can write any law they please. So:
Parliament writes the law.
When there is a dispute as to the interpretation of the law, it is within the power of Parliament to
re-write the law so as to clarify its meaning and purpose. Alternatively, the courts (our judiciary) can
hear the matter and resolve disputes over interpretation by deciding on an appropriate one.
Section 150A reads:
(1) Any payment by one party to another, required by any agreed terms of settlement under section 149(3)
or decision under section 150(3), must be paid directly to the other party and not to a representative of
that party, and the party receiving the payment may not receive, or agree to receive, payment in any
“Any payment”: that is the wording of the law. Not even the judiciary is empowered to derive an
interpretation that runs contrary to the wording of the law. Subsection 3 does however, exclude
payments made to lawyers and legal aid payments.
Subsection 2 then clarifies that any payments that are made discordant to the law, did not happen at
(2) For the purposes of this Act, a payment that does not comply with subsection (1) is to be treated as if
the payment has not been made.
Something very odd then happened in November 2009. The Department of Labour (Te Tari Mahi)
issued a practice note that effectively nullified the protections of section 150A. In the note it says:
"Legal Services has provided advice on when a 'payment' comes under sl50A and when it is excluded.
They have advised that, payment includes any monetary settlement (e.g. $5,000), but excludes any
goods or services e.g. outplacement services and arguably legal or advocacy services where such
service is a separate term of the settlement and a GST invoice for a defined sum is provided to the
So the Department of Labour has interpreted the law for us, which I’m sure is well-meaning of them
but it’s not their job and they are not empowered to do that. But back to the wording of the law: “Any
payment . . .” Any. This is as clear as it gets. Even the courts would find it difficult to justify an
interpretation that excludes some payments when the wording of the statute is so clear. It’s ANY
Lets keep in mind also, that it was absolutely not the place of the Department of Labour to be
interpreting law, they were not parliament and they were not the judiciary so why were they issuing
orders like that?
This new rule (order? Instruction?) . . . this unlawful directive allows unregulated third parties to take
payment directly from their clients’ opponents without ever revealing how much they are paid. For
some people the temptation is clearly too great and they cross the line into collusion. That’s why the
law is there in the first place!
So if your employment advocate colludes with the other party to receive payment in return for your
complicity, surely you would be able to cancel that contract? We have laws after all and transactions
like that are covered by sections 36 and 37 of the Contracts and Commercial Law Act. If for
example it’s revealed that there was a misrepresentation that induced you to enter the agreement or
if for example the other party repudiates the contract or doesn’t abide by its terms, you would
normally be allowed to cancel the contract. Obviously this makes sense because if a company
agrees to pay you $20,000 not to sue them for sexual harassment and then doesn’t pay you . . . well
of course you should then be able to sue them. But not here. Not when it comes to employment law
because here, in this civilised land, section 149 of the Employment Relations Act explicitly excludes
the possibility of cancellation for misrepresentation and repudiation.
So if your advocate takes money from your opponent to manipulate you into an agreement and then
the other party doesn’t pay, you can’t cancel the contract. Obviously the rational thing to do would
be to apply for enforcement at which point the other party apologises and pays (hopefully). If a dodgy
practitioner takes payment of the full amount and disappears, the protections of subsection 3 no
longer exist, for the victim. It’s just one more tool for dodgy people to employ in the evasion of justice.
So, thanks to advice from the Legal Services Team of the former Department of Labour, bold and
unrepentant tortfeasors are empowered to continue to abuse their employees without fear of law.
After all, it appears to be on their side!