Not all employment advisors are created equal.
The Employment Relations Act 2000 allows for employees and employers to be represented by ‘any person’. However, there are fundamental differences between employment lawyers and employment advocates that you should consider before selecting who will represent you.
For someone to call themselves a lawyer in New Zealand, they must:
- Have a law degree;
- Complete a professional training qualification;
- Hold a current practising certificate issued by the New Zealand Law Society.
To be issued with a practising certificate, they must either:
- Be working under the supervision of a suitably experienced lawyer; or
- Have the authority to practice on their own account (to get this authority they must, amongst other things, have sufficient experience working as a lawyer and have undertaken further training).
Lawyers are obligated to comply with legislation, regulations and professional and ethical standards. The public has the right to complain to the Law Society if they believe a lawyer has not met that standard.
For someone to call themselves an employment advocate, they do not have to have any legal background. Some advocates do have some legal training, including a law degree and experience in a law firm. Still, they are either not qualified to hold a practising certificate, or they have chosen not to be bound by the same legal and professional standards as lawyers.
Employment advocates are not regulated and there is no professional body that the public can complain to about the service they have received from an advocate.
It is a common misconception that advocates are cheaper than lawyers. It is important to remember that the majority of advocates work on a ‘no win no fee’ basis -also known as a contingency fee.
Some work is done on a fixed fee basis, so if they resolve your matter with one letter or one phone call, you may still need to pay the fixed fee or a significant portion of the settlement funds. The majority charge a percentage of the overall settlement (anywhere up to 40% of the settlement funds). Some will not only take the costs the employer contributes towards the advocate’s representation agreed as part of the settlement but also one third plus GST of the settlement funds.
We provide a hypothetical example of how some advocate’s costs are calculated below.
Let’s say the settlement is reached after 6 hours’ work which includes a meeting to understand the issue, drafting a letter, some settlement negotiations and reviewing a record of settlement.
The settlement versus the cost of an advocate’s representation may look like this:
Some advocates could charge:
$1,500 gross lost wages
$2,833.33 plus GST (taken from the settlement funds);
$7,000 as a contribution to hurt and humiliation
$1,500 plus GST from the employer
$1,500 plus GST as a contribution to the advocate’s costs
Total: $10,000.00 plus GST
Total: $4,333.33 plus GST
That is an hourly rate for that job of $722.22 plus GST. While lawyers’ hourly charge-out rates vary, that is almost double the rate of many highly experienced specialist employment lawyers.
Though an advocate may seem cost-effective at the outset (sometimes requiring no payment upfront), the overall cost can be significantly higher than a lawyer.
Conversely, if a lawyer charges a contingency fee, they are still required to ensure that their fee is fair and reasonable in the circumstances and in light of the work undertaken.
Those advocates that do charge an hourly rate often price their hourly rate in line with lawyers.
Employment Relations Authority consideration of costs for advocates
In January 2018, the Employment Relations Authority looked at employment advocate costs. The employee, Sian Lucas, believed that her employer, Te Rito Daycare Limited, had unjustifiably dismissed her and the Employment Relations Authority agreed. Ms Lucas was awarded compensation of $5,000.
However, this amount was reduced by 50% to $2,500 to reflect the degree to which her behaviour was found to have contributed to the situation giving rise to the grievance (what is referred to in the Employment Relations Act 2000 as “contributory conduct”).
Ms Lucas’s representative in the Authority was an employment advocate and owner of Sacked Kiwi, Alex Kersjes.
Mr Kersjes applied to the Authority for costs of more than $7,000 on behalf of Ms Lucas. The Authority referred to Sacked Kiwi’s terms of engagement as specifying an hourly rate that “fluctuates from $150 to $350 plus GST per hour.” It noted that:
“In the case of an unregulated advocate, without the expenses and obligations carried by qualified and registered professionals, a rate of $350 was not reasonable for the purposes of the Authority’s assessment of costs.”
It also pointed out that the “fluctuating” hourly rates were substantially higher than the applicable legal aid rates for employment advocates. The legal aid payable to an employment advocate for the matter would have amounted to $2,531.
The Authority said that it was:
“evident from the submissions that there was a lack of specialist knowledge about the law relating to contributory conduct and how it may apply to the applicant. If properly advised, the applicant should have expected a reduction of any award for contributory behaviour. The invoice of $7,048.39 was therefore out of proportion to any reasonably expected award”.
The investigation hearing took a full day, although the Authority said it could have taken only a half-day if the advocate’s briefs and statement of the problem had been properly prepared. Taking all of these factors into account, the employer was ordered to pay Ms Lucas $2,250 towards her actual costs.
It is vital to get informed advice about the legal merits of a claim, and what the realistic prospects of success might be. As the Authority said, cases must be “conducted in ways that are…proportionate to the likely compensation award”, otherwise you can, like the applicant, in this case, find yourself out of pocket even though you might have notionally “won” the case.
For more information
Our team are specialist employment lawyers. They have the experience and knowledge to deal with the full range of employment issues and provide advice that can be relied on.
For practical and experienced advice, contact our employment lawyers on 04 472 0020.