No win no Fee!
New Zealand employment law, when a "no win, no fee" firm or an inexperienced advocate brings a meritless or "nuisance" Personal Grievance (PG) that a well defended employer refuses to settle, the Employment Relations Authority (ERA) has a well documented track record of punishing the claim.
Because the ERA operates on a "loser pays" tariff system, it is the individual employee who gets hit with the bill, regardless of what their advocate promised them.
Several distinct types of cases illustrate exactly how this happens:
1. The Frivolous or Vexatious Claim Backlash
The ERA has explicit powers under the Employment Relations Act to throw out claims that are deemed "frivolous or vexatious" (meaning they have no actual legal merit and were brought simply to annoy, stress, or extract money from an employer).
What happens: If an advocate uses a boilerplate template to allege "severe bullying" but has absolutely no documentation, timelines, or witness statements to back it up, the employer's representative can ask the ERA to dismiss the case.
The Outcome: The claim is struck out, and the employee is ordered to pay the employer's legal costs. The ERA daily tariff for a basic investigation meeting benchmark starts at $4,500 per day, but the ERA can issue an "uplift" (a higher penalty) if they determine the employee's advocate acted in bad faith or wasted everyone's time.
2. The Abrupt Withdrawal Trap
High volume advocate firms rely on a quick settlement at mediation. If an experienced defence advocate stands firm, exposes the lack of evidence, and refuses to offer a "go-away" payment, junior advocates often panic. Realising they have no chance of winning a formal ERA investigation, they will abruptly withdraw the client's claim.
The Catch: Withdrawing a claim does not wipe the slate clean. New Zealand case law establishes that if an employee raises a PG, forces an employer to incur legal costs defending it, and then drops the case at the eleventh hour, the employer is still legally entitled to chase the employee for costs.
The Result: The employee walks away with $0 from the employer, but receives a ERA order demanding they pay thousands to cover the employer's defence costs.
3. The "Calderbank Offer" Trap
This is the ultimate weapon an experienced defence advocate uses against a nuisance PG, and it completely blindsides junior advocates.
During the dispute, the employer might issue a formal, confidential settlement offer called a Calderbank Offer (e.g., "We did nothing wrong, but we will offer you $2,000 to settle this quietly. If you reject this and take us to the ERA and lose, we will use this letter to claim maximum costs against you").
An inexperienced or greedy advocate will often tell the employee to reject the offer, falsely promising they can get much more money.
The Reality: When the case goes to the ERA and the employee loses, the employer produces the rejected Calderbank letter. The ERA can penalises the employee for their "unreasonable rejection," often doubling or tripling the standard cost award levied against the worker.
4. The Turuki Health Care Precedent
The Turuki Health Care case remains the textbook example of advocacy severely damaging the client.
In that dispute, a mediated settlement had been reached. However, the advocate pushed an aggressive, public agenda that directly violated the confidentiality and non disparagement terms of the agreement.
The ERA didn't just penalise the advocate; the individual employee was held legally liable and hit with major financial penalties for the actions their representative took on their behalf.
Why the Advocate Safely Walks Away
Employees are frequently shocked to find that when these disasters happen, the "no win, no fee" firm simply closes their file and moves on to the next lottery ticket. Their contract usually states that "no win, no fee" only means the employee doesn't have to pay the advocate's bill. It never guarantees that the advocate will pay the Crown ordered costs awarded to the employer. The advocate goes home scot free; the employee is left facing financial ruin.
The Hidden Trap: "Reasonable Offers" and Mediation Fine Print
A significant, often overlooked danger of "No Win, No Fee" agreements (Conditional Fee Agreements) lies buried deep within the fine print that many clients fail to read thoroughly. Most of these contracts contain strict clauses regarding mediation and formal settlement offers. If the opposing side makes a settlement offer during mediation that covers your accrued legal costs and is deemed a "reasonable offer" by your own representation team, you are under immense pressure to accept it.
If you refuse the offer because you want to push for a higher payout at the ERA, the agreement often stipulates that you have breached the terms of the contract. As a result, you can become personally liable to pay your own legal fees and disbursements from that point forward, regardless of whether you eventually win or lose the case. By rejecting what the contract defines as a reasonable resolution, you effectively strip away the "No Win, No Fee" protection and inherit massive financial risk.
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