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14 Employment Relations Act 2000

226 THE ISSUE is whether any amendment should be made to the Employment Relations Act 2000 so as to provide that the Arbitration Act 1996 applies to arbitrations arising out of employment disputes. In paragraph 65 of our preliminary paper we said:

65 Section 155 of the Employment Relations Act 2000 permits arbitration but provides that the Arbitration Act 1996 does not apply. The concern was apparently a fear that the provisions in the Arbitration Act 1996 for recourse to the High Court would undermine the Employment Court’s specialist jurisdiction. Disapplying the 1996 statute means that some other (unspecified) law applies; but what law?

227 We received only two submissions on this issue. Both took the view that the Arbitration Act 1996 should apply to arbitration of employment disputes permitted by section 155 of the Employment Relations Act 2000.

228 Our concern, like those of the two submitters, is that if arbitration of disputes is permitted, but the Arbitration Act 1996 is disapplied, there is no statute which governs the arbitration; so presumably the common law would apply. It would appear that the common law position was as follows:

• If the parties participated in an arbitration, and an award was made, that award was binding upon them as a matter of contract. Conceptually, the award had the character of an accord and satisfaction and was enforceable by bringing a separate action in debt.²²⁹
• An agreement to determine a dispute by arbitration was not specifically enforceable; neither was it a defence to an action brought in breach of the agreement because such clauses were invalid as agreements to oust the jurisdiction of the court.²³⁰ A drafting technique was, however, available to overcome this rule: If the arbitration clause stated that no cause of action arose until arbitration had been completed, then there would be a complete defence to any court action brought in breach of the clause.²³¹ So, the validity of arbitration clauses depended not on what the parties really intended, but rather the technical form of the clause.
• Breach of an arbitration agreement would, however, give rise to an action for damages.²³² Further, the court appeared to have an inherent jurisdiction to stay proceedings commenced in breach of an arbitration agreement.²³³

229 We have concerns as to the inaccessibility of common law dealing with an arbitration that is not governed by statute.²³⁴ We also have concerns as to the technical, and often inconsistent nature of the common law in relation to arbitration. We agree with those who have made submissions to us that the most appropriate remedy is to make an arbitration conducted under the Employment Relations Act 2000 subject to the provisions of the Arbitration Act 1996 with one important qualification. The qualification would be that all references to the High Court should be replaced by references to the Employment Court, so that the supervisory jurisdiction is carried out by that specialist court. Thus, for example, an application for leave to appeal on a question of law would be brought to the Employment Court and the appeal would be heard in that court if leave were granted. If there were a subsequent appeal it would go to the Court of Appeal which, in all matters under the Employment Relations Act 2000, is also the final arbiter.

230 If this recommendation is adopted we see merit in repealing section 155(3) of the Employment Relations Act 2001 so that submission of an employment relationship problem to arbitration (after it has arisen) will prevent access to the Employment Relations Authority or the court for adjudication, but will not prevent the use of mediation services.²³⁵