Easy Money for Dodgy People - by Che van Lawrence

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

other manner.

“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

other party."

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!

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