Taking legal action against your employer - or employee - can cost your dearly even if you win, research shows.
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A survey by a Wellington law firm of more than 600 cases in the Employment Relations Authority (ERA) since 2011 found that even under recently raised payouts, most people recover less than half of their costs.
Median costs for employees was about $8000, $5000 more than what the ERA awards them, and for employers the gap was around $8500.
In one case, Auckland label printing company Hally Labels went up against a senior employee who left and joined a rival company.
They ended up spending more than $500,000 each on legal costs.
An Employment Court judge said in a ruling last year that it appeared "totally excessive" compared to any possible damages payout, and it was clear they had both lost all sense of proportion.
David Fleming of HarrisonStone Lawyers said the case illustrated a danger in employment disputes.
"Why would you get yourself in a situation where you are spending, between you, a million dollars on trying to resolve a conflict that surely could have been dealt with in a more cost-effective way?," Mr Fleming said.
"If you look at a conflict and say, 'We are going to take it to the highest law in the land', and make everything into the biggest battle you can, it can cost you an enormous fortune.
"But if you say, 'well, what's the most sensible and practical way to deal with this conflict', you can manage costs."
Mr Fleming said it was not uncommon for people to spend $20,000 to $30,000 on a dismissal case, when the ERA's daily tariff was designed to result in costs awarded to be about $8000 for a typical two-day hearing.
That tariff was recently raised by $1000 to $4500 for the first day, while remaining at $3500 for each day after that.
Mr Fleming said the Employment Authority did not need to raise rates further.
Instead, people needed to think hard and, if they proceeded with a case, try to make savings by doing some of the work themselves in getting information in order, he said.
'People can't afford to take a claim' - Lawyer
Wellington barrister Karen Radich is not so sure. She did the survey of the ERA cases along with mediator Peter Franks.
"It really comes down to an access to justice issue for employees," she said.
"It's not fair in a lot of cases because it does mean people can't afford to take a claim through to the Authority knowing that they might come out empty-handed."
She cited the case for one employee who won $22,000 split evenly between damages and costs, but was still $25,000 short on their actual costs.
Ms Radich said the research showed the ERA mostly stuck to the daily tariff and so the signals were clear.
"You get the impression it's to rein in the lawyers a little as well so that there isn't a sense of a case becoming bigger than Ben Hur by the time it hits the actual hearing date. The idea is that if a party incurs costs above that tariff, then really that's their responsibility."
But if costs awarded were to be raised, whoever lost ended up paying those costs, so that could be a disincentive to go to the ERA.
Ms Radich said the latest recent rise in the first-day tariff was the first time it had been done in a formal way. It had been slow to rise, lagging increases in legal fees, she said.
Mr Fleming said a sober look needed to be taken at whether what was at stake justified the costs.
"Some people will think that a settlement is ... almost a sign of weakness but often it can be in both parties' interests."
People are getting that message: 80 to 90 percent of employment cases go to settlement, and not to the ERA.
