The Power of MBIE - A Mutating Beast*

Under s149 of the Employment Relations Act 2000, mediated Records of Settlement are so watertight that they are being used to cover up crimes such as fraud, and threats to wreck the career of the employee under the cloak of secrecy are replacing payouts that are normally considered compensation for the loss of a job, hurt and humiliation. This enables procurement fraud especially in the public sector.

*Description confined to employment dispute resolution part of MBIE!

New Zealand, along with much of the rest of the world, is seeing public concern about conduct in the workplace, including in the legal profession. The response of both government and the legal profession is however unusual, and brings with it particular considerations for lawyers who practise in employment relations.

This area is governed by the Employment Relations Act 2000 (ERA 2000) and dealt with by a specialised court and tribunal jurisdiction. Especially in the last few years, that jurisdiction has developed a distinctive system of legal rights and powers which have established an effective separate constitutional regime, giving employers the power to override statute and established legal principles. The effects set New Zealand apart from the rest of the common law world.

For lawyers, the new regime means they have high-level de facto powers that they should be astute to use with care.

The Employment Relations Act 2000

The ERA 2000 sets out not only substantive provisions of employment law but also a regime of problem-solving. Its objectives include at sections 3 and 4 the promotion of good faith throughout the employment relationship, acknowledging and addressing the inherent inequality of power, promoting mediation as the primary problem-solving mechanism and reducing the need for judicial intervention. The employment relationship is specified in section 4 as involving employers, employees and unions and their members. Hansard and the Select Committee papers show substantial concerns principally about collective rights in relation to the original Act. The amendment Acts attracted less or sometimes almost no attention.

The procedures and institutions under the Act are described in terms of supporting the good faith obligations that underpin successful employment relationships and recognising the worth of prompt resolution of problems by the parties themselves (s 143). Initially, “expert problem-solving support, information and assistance” should be available at short notice. There will be cases where “difficult issues of law” need to be decided by “higher courts”, but otherwise the emphasis is on promoting mediation and informality.

The institutions of the ERA 2000 are threefold. Mediation and uninhibited “specialist decision-making” by the Employment Relations Authority (“the Authority”) are run by the Ministry of Business, Innovation and Employment (“MBIE”). The Employment Court is part of the court system.

Section 161 of the ERA 2000 reserves certain issues – essentially employment contracts - to the Authority, which means they cannot be heard elsewhere. The employment jurisdiction thus has complete control of the legal regulation of employment relationships. Only once employment relationship problems have been determined by the Authority is an application to the Employment Court possible, unless there is a question on a point of law that is sent upwards to the Court. Section 193 provides that the proceedings of the Court cannot be questioned, and sections 184 and 194 restrict judicial review to the grounds of no jurisdiction. No review is available on the grounds of untenable unreasonableness or procedural impropriety. Decisions of the Employment Court may be appealed to the Court of Appeal only with leave and on a point of law.

Government-sponsored mediation

The initial stages of employment problem resolution are designed for easy access. The government mediation service is free of charge and designed to conclude matters finally if possible. There is no prohibition on lawyers attending mediation, as there is say with cases before the Disputes Tribunal, and many lawyers have substantial practices based largely on such informal resolutions. Such lawyers are generally accredited by MBIE through the All of Government procurement process. The annual figure for government-mediated settlements has increased significantly to 11,000. Around 650 matters reach the ERA each year.

Mediation may be run by the government mediators as they wish (s 147) and may not be called into question (s 152). By s 148, government-sponsored employment mediation is “confidential” and the mediator can never be called to be give evidence of the negotiations. Mediation is also privileged by virtue of section 57 of the Evidence Act 2006. Mediators do not have any specified role except to advise as to the effects of the settlement contract, especially the effects of its being countersigned by the mediator under section 149 ERA 2000. This provides that the terms of a countersigned contract may not be questioned, that the contract may not be taken before the Authority or a court except for enforcement purposes, nor may it be set aside under sections 36-40 of the Contract and Commercial Law Act (CCLA) 2017, which include fraudulent misrepresentation at section 37, and a person who breaches an agreed term of a countersigned contract is liable to a penalty (s 149(4)).

The Authority’s role

The Authority’s specified role is to investigate employment relationship problems and promote a resolution between the parties – in effect, a form of public mediation – but it also has the power to make a determination should there be no such resolution. The Authority may also determine problems on the papers and without any investigation meeting (s 174D).

Process in the Authority is a mixture of informality and power. The Member’s role is inquisitorial rather than adversarial, though this may be interpreted in the Spanish style. The Authority may hold meetings or hearings, and it may hear evidence that is “not strictly legal evidence” (section 160). It may compel a party to attend and give evidence (Sch 2, para 9), or require evidence to be given on oath (Sch 2, para 8), and it may impose and enforce penalties for a range of breaches, including breaches of its own orders. It has powers to punish contempt during an investigation or hearing (s 196). On the one hand, the Authority must in principle respect the right to justice, but on the other hand, it may choose any procedures and act “without regard to technicalities” (s 157), save that it must consider referral to mediation (s 159).

A party who is dissatisfied with a determination can take the matter to the Employment Court by way of challenge or de novo hearing (section 179) of all or part of it. The Authority may also refer matters of law straight to the Employment Court, of its own motion or on application by a party (section 177). The Authority is not however required to transfer a question of law, whether employment law or otherwise. Members may decide all questions of law if they wish.

The Employment Court

There can be no challenge in the Court on the basis of the procedure the Authority chose to follow, so a lack of due process cannot of itself found an application. However a rehearing or challenge can be sought as of right provided a Statement of Claim is filed within 28 days of the Authority determination (s 179). If the time-limit is missed, a rehearing or challenge requires leave.

The Employment Court, like the Authority, has a statutory framework to its jurisdiction under the ERA 2000. Its processes are governed by the ERA 2000, which gives it the same powers as the Authority as to non-publication (paragraph 10, Schedule 3), and by the Employment Court Regulations, which are not exhaustive. By Reg 6, where some process is required which they do not deal with, the High Court Rules can be applied. By s 189, the Employment Court is a court of equity and conscience. Proceedings in the Employment Court do not, however, operate as a stay of proceedings in the Authority (s 180).

The development of a separate constitutional regime

That the employment relationship is distinct from the ordinary contractual relationship is not a new idea. It has long been recognised, for example, that a contract for personal services is not subject to an order for specific performance.

The stress and expense of formal proceedings means that most employment problems are resolved in mediation, usually ending in a contract countersigned under s 149 ERA 2000. The contracts usually include a confidentiality provision, which the Authority may readily reinforce by suppressing them as “evidence” under its “non-publication” powers: the formal legal test for enforcing “confidentiality” on a document is very high (Erceg v Erceg [2017] NZSC 28). There is also usually a mutual non-disparagement provision, which will prevent any reference to the wrongdoing of either party. The Authority may also order that the names of parties or witnesses, or evidence, not be published (paragraph 10, Schedule 2). All these reasons have combined to mean that information as to how the Authority uses its powers has been slow to emerge. The development of the separate and exclusive legal jurisdiction, with wide ramifications, can however now be seen in the case law.

The Authority’s role is as “an investigative body that has the role of resolving employment relationship problems by establishing the facts and making a determination according to the substantial merits of the case” (s 157). It “must act as it thinks fit in equity and good conscience”, but may not do anything that is inconsistent with the Act or regulations under it, or the relevant employment agreement. There is no prohibition on contravening other statutes or rules of law. It may make ex parte orders, or orders relating to any element of contract law except a Mareva injunction (ss 160, 173) The Authority exercises the power to fine and even imprison people. The determinations are reported on the MBIE and NZLII websites and used as precedents, as are the enforcements.

Authority Members are required to have a knowledge of employment law, but they are not required to have a legal qualification. Some Members, especially the Chief, are or have been lawyers, but others are for example former HR managers. Members’ knowledge of any other areas of law, such as contract law, may be limited. It is perhaps therefore unsurprising that when MBIE has established new principles of law with radical implications, that has not been heralded.

The case law on the power of contracts countersigned by a government mediator indicates however two radical new legal principles. The first is that MBIE may validate and enforce a contract that overrides primary legislation, including the criminal law: that has been confirmed by the Employment Court and the Court of Appeal. The second is that MBIE may through enforcing contracts have substantive jurisdiction over the rights of third parties to the employment relationship, though these developing powers have not yet been confirmed.

Executive creativity in the law of contract

A contract is normally ineffective if it is illegal in law or in equity as to its creation or performance (ss 70-84 CCLA 2017, formerly the Illegal Contracts Act 1970). In the context of employment, the issue classically arises in relation to the requirement that contracts in restraint of trade, or “non-competes”, be reasonable in scope, and in more recent years in relation to non-disclosure agreements. Non-competes aim to protect an employer’s business interests by restricting an outgoing worker’s ability to compete with his former employer. Although anti-competitive contracts might be ineffective for contravention of policy and statute, section 7 of the Commerce Act 1986 preserves the common law position. Non-disclosure agreements similarly began as legitimate protection of an employer’s trade secrets, but these have more recently been developed, especially in the New Zealand jurisdiction, to suppress evidence of embarrassing or offending behaviour.

The leading case on contracts to suppress evidence of public sector operations is Brown v Tauranga [2017] NZCA 126. A longstanding council IT worker settled an employment relationship problem in mediation. He had accessed council databases without authorisation to disclose information about what he considered to be wrongdoing contrary to and ultra vires the council’s legal powers and obligations of financial management under section 101 of the Local Government Act 2002. The terms of the settlement included confidentiality, the return of the evidence he had uncovered, and a liability to indemnify the Council against costs incurred in addressing or dealing with the settlement. The IT worker then accused the Council publicly of corruption, having expected to do so in criminal proceedings which did not then materialise. He was held liable by the Authority and the Court both to maintain silence and to pay indemnity costs, under the terms of the contract. The Court of Appeal rejected his submissions that the Council’s own conduct was relevant to the assessment of costs. It held there was no question of law involved or, if there was, it was of no public importance, and refused leave to appeal. Mr Brown was briefly imprisoned, and was bankrupted in August 2017.

The ability to use employment mediation to suppress information about management in the public sector was confirmed in Sawyer v Vice-Chancellor of Victoria University of Wellington [2016] NZERA 158. A university lecturer had resigned because her employer declined to prevent her managers excluding her and also declined to rectify records they had made about her. The employer’s lawyer, acting for other staff, had previously obtained her signature on a document by which it claimed Ms Sawyer had relinquished all her rights, retrospectively and prospectively, in return for a payment to her lawyer. This included her human rights and employment rights, and especially those relating to the production and rectification of records. The document contained a non-disparagement clause in favour of the employer’s staff, but not one in favour of Ms Sawyer. Ms Sawyer claimed the document was a nullity for want of a signature on behalf of the employer, and that her signature was the product of fraud, forgery and blackmail, including the use of falsified email records. Member Robinson, proceeding on the papers, accepted the University’s QC’s submission that the file of documents supplied by Ms Sawyer was not evidence. Member Robinson held that a contract countersigned under s 149 ERA 2000 is a statutory instrument. Accordingly the disputed document was valid despite the lack of consideration or any signature for the employer, and it overrode the express fixed term and no contracting out provisions in the ERA 2000 (sections 66 and 238). In a further action, the employer sought $50,000 in penalties for Ms Sawyer talking about managers falsely disparaging her, to which Ms Sawyer’s lawyer consented. Member Fitzgibbon determined that Ms Sawyer should pay the Crown $1,000 and each of the managers $3,750 for disclosing what they had done.

Ms Sawyer sought relief for constructive dismissal in the Court, raising the falsified records and the lawyers’ secret commissions. The lawyers acting in the employer’s name asserted the disputed document by way of defence but did not support its validity. Evidence that Ms Sawyer’s signature on the original document had been procured by threats to “destroy [her] entire career” using the falsified records and that the mediator had said the document was “unenforceable” were not disputed; nor was evidence of the making and use of altered and falsified records by her managers in an internal investigation from which Ms Sawyer had also been excluded. The Court, excluding usual evidential processes, relied on the University’s QC’s assurances that countersignature by a government mediator meant the document was valid and enforceable, and could not be set aside “as a matter of law” (though the law in question was not specified). No contract under the usual rules of law, or to which the employer was party, needed to be established. Disputed submissions of fact by the employer’s lawyers were accepted in refusing leave for a rehearing of the enforcement application. The Court also accepted the QC’s submissions that the case of 8i Corporation v Marino [2017] NZEmpC 69, in which HHJ Inglis had confirmed that an MBIE mediator’s countersignature did not validate a contract tainted with criminality or make an illegal contract enforceable, was confined to its subject-matter of penalty clauses: that s 149 contract related to a company director’s leaving package. The s 149 contract document itself was made subject to a permanent non-publication order. The Court of Appeal refused leave to appeal, holding there was no question of law or public importance.

Through use of its own statutory powers and the common law process of precedent, MBIE has therefore established, and the Employment Court and Court of Appeal have confirmed, that MBIE has the power to approve and enforce private arrangements outside the established rules of contract, and which contravene primary legislation made by Parliament. This substantial and substantive legal development recognises and prioritises government officials’ needs for secrecy. It is not yet clear whether the same rules would apply in the private sector, but managers accountable to shareholders might approach the issues differently in any event. Both the actions being suppressed and the suppression itself are costly, and it may be unlikely a private body would fund either.

The Authority’s powers of enforcement

The normal common law rule in relation to contracts is that it is for a court to decide on the damages appropriate for compensation in case of breach. This was the origin of the rule discussed in Marino (above) that penalty clauses in contracts themselves are illegal (127 Hobson Street v Honey Bees [2019] NZCA 122). The Authority not being a court, but s 149 being concerned specifically with enforcing a contract, the word “penalty” might be expected to indicate extension to the Authority of the courts’ power to grant the equivalent of damages for breach of contract, without implying that the Authority was being enabled to assess damages as such. The Authority itself has however confirmed explicitly that it does not recognise the law of contract, and that its powers are punitive and designed not to compensate for loss, but to enforce and punish, including for breach of written terms. This is a radical change to the philosophy of good faith and the acknowledgement of inequality of power set out in ss 3 and 4 ERA 2000, as well as to the law of contract.

In RGS v EVD [2019] NZERA 414, Member Arthur referred to “the effect of punishment and deterrence that is part of the public interest rationale for such penalties”, particularly in the case of breach of the “finality” of s 149 settlements. This finality means ending any questioning of either party’s actions, and may require emotional submission to the employer or Authority. In Sawyer, for example, part of Member Fitzgibbon’s reasoning for awarding the managers so much money from Ms Sawyer was that she showed “no remorse” for mentioning what the managers had done, and accordingly she was “punished” for her lack of contrition.

This philosophy of punishment was previously set out in elegant detail in a discussion by HHJ Inglis, now the Chief Judge of the Employment Court, in ITE v ALA [2016] NZEmpC 42, approving a series of determinations by Members Crichton and Arthur. This was another case of a public sector whistleblower who signed a detailed settlement under which he was obliged to pay for the psychological treatment of those exposed by him, to indemnify the employers’ lawyers’ bills, and to return all the documentation relating to the wrongdoing. HHJ Inglis mentions that the settlement was signed “voluntarily”, but does not specify how the worker was persuaded to sign. She confirms, however, that the functions of the penalties for breach of a settlement include to “punish the transgressor”, and discusses the potential for “transgression” in reporting issues to the Police.

MBIE’s power to validate and enforce executive orders, to punish whistleblowing, and to reward officials for exposure of their wrongdoing, is thus confirmed by the Court. The enforceability and unassailability of countersigned written terms do however raise the question of what other provisions might be executed under the ERA 2000. It appears from the cases that any internal staff member in a public sector body can arrange for written terms which validate the transfer of substantial funds to wrongdoers and others, adjunct to provisions requiring silence about those transactions and handing over any documentation, and MBIE personnel will assist in making and enforcing the documentation. There must be some concern that unscrupulous personnel would be able to make and carry out mutually advantageous arrangements contrary to ordinary law but damaging to the public interest, and suppress the evidence of, say, financial impropriety, bribery or fraud.

Development of powers in relation to third parties

The Sawyer case established the award by the Authority of money to non-parties, though in that case the named officials in question were specifically protected by a clause in the contract. The University’s general counsel, who was not protected by name, also sought a payout but was refused. The officials’ identities were protected by the Authority and the Court under a further developed provision, they being neither parties nor witnesses (Sch 2, para 10). The payout to the men was ordered even though Ms Sawyer had received no benefit from signing the disputed document.

Section 149 provides at subsection (4) that “any person” in breach of a countersigned contract is liable to a penalty. Under contract law, a person could not be in breach of something by which they were not bound, so it would be necessary first to establish a valid contract. Any person may breach a statutory provision, however, which the Authority confirmed in Sawyer was the status of a s 149 agreement.

In RPW v H and C , the unrepresented employment advocate signed a non-disparagement arrangement naming him and his company on the same document that recorded the settlement of his client’s employment relationship problem. The document was then countersigned by a government mediator under s 149 ERA 2000. The employment advocate, whose business was adjunct to a broad campaign against workplace bullying generally, then continued to discuss the employer’s alleged shortcomings on the Facebook account through which he ran his business. Member Larmer did not specify whether she was relying on Member Robinson’s elevation of a countersigned document to the status of legislation, or on some other MBIE custom, before ordering a range of controls on the advocate’s personal and business activities, and payments gradually approaching the $100,000 mark, on the basis that H had breached the “Record of Settlement”. The employer’s private lawyer, Samuel Hood of Norris Ward MacKinnon, was personally awarded $6,000. Member Larmer also made various suppression orders, under her extended powers from Sch 2, para 10, and costs orders against the lay advocate and his company ([2018 NZERA 121, 237, 250, 275; [2019] NZERA 367).

In cases based on a dispute between Turuki Health Care Services and Ms Makea-Ruawhare, another health sector employer was represented in mediation by an established commercial firm, Wynn Williams, and the same lay advocate again represented the employee client. In a settlement between the parties, the standard clause was amended to include a non-disparagement promise by the advocate’s company, although the advocate did not sign it. An employee of the company then referred publicly to the employer, though not to the settled case. The employer’s lawyer, Anthony Drake, threatened defamation proceedings, before instead seeking penalties by way of urgency against the advocate, his company and his employee, in the Authority. Instead of defamation, where the advocate might have pleaded a defence of truth, he alleged a breach of the employment settlement. Whether he claimed his powers arose under a contract or a statutory instrument embodied by the clients’ “Record of Settlement” was unclear, but Chief Member Crichton held that the company, the director and the employee were all individually in breach of something. He made orders ex parte and then permanently, on notice, variously that the advocate take down the Facebook posts, banning him from mentioning the name of the employer in connection with the proceedings ([2018] NZERA 95, 136) and, later, making costs orders for which the payers were jointly and severally liable ([2018] NZERA 177).

The Employment Court is to rehear the cases of R and Turuki, but this will not of itself affect the basis of the Authority’s underlying determinations that the third parties were bound by something, and were delivered by it into the Authority’s power to punish them for breach.

The Employment Relations Authority as Constitutional Court

The removal of the right of review of Authority determinations, save on the grounds of no jurisdiction and then only after a court decision, was made by the Employment Relations Amendment Act 2004. At Select Committee stage, the Employment Court judges submitted that such an amendment was inappropriate, given that the Authority had “wide and sweeping powers” and the removal of review would make it equivalent in power to the Supreme Court.

Since Parliament passed the 2004 Act anyway, its effects must be presumed to be Parliament’s will. There was no apparent further debate on giving the Authority, which is part of the executive, powers to develop their own jurisdiction. (There also appears to be nothing in Hansard indicating that Parliament considered the powers of the ERA 2000 being used against employees, rather than employers, let alone third parties.) Under the Act as amended, the Authority has, as Member Robinson so succinctly expressed it, given MBIE and employers in effect the power to legislate.

These statutory instruments are of the “Henry VIII” variety: they can override primary legislation. That is clear from the confirmations by Judge Smith in the Employment Court and by the Court of Appeal, from the evidence in Sawyer, and apparently from Brown (where it seems unlikely that a party would have agreed to indemnify the opposite party for future litigation), that where a disputed contract was countersigned by an MBIE mediator, the ordinary law and process of contracts did not apply. That case was distinguishable from the Marino case in that in Sawyer the Authority had previously determined that the disputed document was a statutory instrument, rather than asking the Employment Court for a decision on the law relating to contracts, as it did in Marino. However both Brown and Sawyer are also public sector cases, whereas Marino was private.

The cases also show that an MBIE statutory instrument under s 149 ERA 2000 can have more than the usual power of “Henry VIII” clauses, by which primary legislation is overridden by secondary legislation. The lack of a need to establish an ordinary contractual arrangement before enforcing it has enabled the Authority not merely to override specific elements of primary legislation but also to adopt and broaden judicial powers. It is statutorily unconstrained by “technicalities” or procedural requirements (ss 157 and 160 ERA 2000), and may choose any “procedures” besides the few that are excluded (essentially Anton Piller and Mareva injunctions (s 173 ERA 2000). Ex parte orders must be made on the papers to “the other” party, though it is unclear how this procedural limitation applies in relation third parties, especially those being punished for infraction of an arrangement they knew nothing about.

That the Authority should be able to exercise powers equivalent to the legislature or the Supreme Court, is particularly notable given that, despite having judicial immunities for their determinations (s 176), its Members, all the employers in the cited cases, and most or all of the lawyers concerned, are government officials or government-accredited suppliers. The ERA 2000 regime accordingly now allows MBIE officials to give a contract the status of a regulation, and makes available punishment by fine or imprisonment for any perceived transgressor of the terms of that document or of the rights of MBIE Members not to be criticised publicly. The countersignature of a document under s 149 ERA 2000 thus transports the parties and those around them into a different constitutional setup, somewhat unlike the picture New Zealanders generally have of their country and its legal regime.

Current directions

It does not appear that MBIE is keen to extend the suppression of administrative records to the private sector: that might excite interest from the Inland Revenue Department rather than Parliament, especially as the records suppressed routinely include those of payments to outside, private parties. Recent case law also suggests that newer Members are less keen to extend the Authority’s jurisdiction further in relation to enforcing secrecy in public bodies.

In Bay of Plenty District Health Board v Culturesafe New Zealand Limited [2019] NZERA 101, the employer was represented by Christie Goodspeed of Holland Beckett in Tauranga (a former partner of the employer’s original representative in Brown) and the employee by the same employment advocate as in the RPW and Turuki cases. Substantive applications for leave were made by the employee: the party and the advocate’s company made allegations of bullying against the employer on Facebook. The Authority refused the employee leave, and made directions. The employer sought, ex parte and then on notice, penalties against the advocate’s company, the advocate and the employee for breaching a direction that they not contact the applicant direct; for breaching a direction that the investigation be under the “rule of sub judice”, especially that there be no public comment about the employer or its staff during the investigation; and for subsequent comments about the Authority itself. Member Tetitaha referred the matter to the Court, for reasons including that the Authority’s powers in relation to contempt appeared to operate only during a hearing; that the power to impose fines and imprisonment appeared to be within the Court’s exclusive jurisdiction; that it was unclear the Authority had power to order “take down” at all; and that that scope of compliance orders under s 137 was unclear and would benefit from judicial consideration.

In Currie v Bay of Plenty Sexual Assault Support Services Trust [2019] NZERA 106, the same lay advocate was again representing an employee alleging workplace bullying. Such allegations, and allegations against the Authority itself, also appeared on his Facebook page. The employer’s lawyer asked for a direction that the advocate take down the Facebook posts, and not refer to the employer, its lawyer (Jeremy Sparrow, again of Holland Beckett), or the case itself, on the basis of its powers to regulate conduct during an investigation and its powers concerning contempt. In a detailed judgment, Member Ryan observed that she had only statutory powers, and no inherent jurisdiction, adverting to the advocate’s rights of free speech and declining BOP Sexual Assault Support Service’s applications.

Implications for practice

The regime developed by MBIE offers good opportunities to public sector employers’ lawyers in advising their clients on the suppression of wrongdoing, including serious wrongdoing, but obtaining a signature from the employee and a countersignature by an MBIE mediator of a “settlement” contract is key. The contract should include the surrender of any evidence of wrongdoing and a “non-disparagement” clause benefiting the requisite staff. Once that is achieved, the suppression of any adverse comment may be enforced by punishment of the employee and any adviser they engage. The removal of evidence and the terms of s 149 ERA 2000 will also prevent any police involvement.

Employees’ lawyers also need to stay up to date with MBIE’s regime. It is not clear that the public, or even all lawyers, are aware of the pitfalls of attending mediation – because it is secret. Government mediation is protected not only by the confidentiality in s 148 ERA 2000 but also by privilege under s 57 Evidence Act 2006. Statute provides that a countersigned document may not be set aside for reason of fraudulent misrepresentation (s 149 (3)), which is thus effectively permitted. In Rose v St John [2010] NZEmpC 163, HHCJ Colgan confirmed that blackmailing someone into signing a “Record of Settlement” in an MBIE mediation would also generally be in effect permitted, in that the mediation could only be opened to provide evidence for setting aside the signature as being procured by blackmail if the blackmail could be evidenced outside the mediation. HHJ Smith confirmed in Sawyer that threats are in any event to be expected in a government mediation, though not in Ms Sawyer’s case as she was excluded from the negotiations. A disturbing aspect of of the blackmail is that the mediation was preceded by incidents of stalking, wilful damage (tyre deflation and tyre slashing both at Ms Sawyer's home and at her workplace and threats followed by the shooting out of a balcony light), which meant Ms Sawyer entered the mediation in a fearful state. The Defendant's lawyer Geoff Davenport subsequently attended the police with a 55-page "Confidential Memorandum", following which the police refused to take any reports about crimes from Ms Sawyer. The resulting "settlement" therefore has so far been able to suppress evidence of these serious incidents from mid-2014 but defending that position is believed to have cost her former employer approximately half a million dollars.

Case law from the Authority indicates that the current regime offers public sector employers’ lawyers considerable opportunities for resolution of employment problems that might otherwise involve unwelcome publicity for either party. They may expect employees’ lawyers to cooperate in reaching such resolutions, though lawyers also admitted in England & Wales may wish to exercise caution. Even though the process used would be suppressed under New Zealand law, procuring certain types of settlements is a disciplinary offence there.

Those representing employees, however, should consider how the statutory regime might be used against their clients in future. Particularly in cases where there has been an alleged abuse of power and the employee is keen to leave, the s 149 process may consolidate the power relationship and allow the managers to continue to control or damage the employee, even after they have resigned. Even where the client appears anxious to settle to avoid further stress, or because of a payout if one is offered, such lawyers would do well to have clients sign an acknowledgement that the lawyer has explained all the risks to them, including being fined or imprisoned for whistleblowing, before advising them to sign a settlement document.

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