Employers must balance their loss against reputational risk, difficulty to recover amount

Employers can bring a claim or counterclaim against an employee for a breach of their employment agreement or a breach of the duty of good faith (among other implied duties). These claims may seek compensation for damages and penalties under s. 4A of the Employment Relations Act 2000.

Employers faced with fraud or dishonesty must establish not only that the misconduct occurred but also that it led to measurable loss and that this loss can reasonably be recovered from the employee in question. This can be hard to establish.

In Houkamau v. Waste Management Limited [2025] NZERA 263, the employer sought to recover around $110,000 in losses. The Authority declined to award special damages, citing the lack of precise loss quantification, the employee’s limited financial means, and broader equity considerations. Instead, the employee was ordered to pay a $6,000 penalty for serious and sustained breaches of her employment agreement and duty of good faith — $4,000 of which went to the employer.

Reputational considerations before suing an employee

While the law provides a clear pathway for employers to bring claims against employees, in practice, such action is rare. Even with strong grounds, such as proven dishonesty or fraud, employers often hesitate to litigate.

Why? Because the optics matter. Employers are typically larger and better resourced, and suing an employee can easily be...

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