Employer penalised over $140,000 for breaching employee rights…

The Employment Court has penalised an employer for significant breaches in underpaying minimum entitlements and failing to provide employment agreements.

The Labour Inspector investigated the employer and requested copies of all wage and holiday pay records. Limited records that had been poorly maintained were provided by the employer.

After piecing together the available records, the Inspector established that several employees had been paid below minimum wage and hundreds had not received correct holiday pay or employment agreements.

Despite the arrears of over $45,000 being repaid in 2019, the Court imposed further penalties of $86,400 on the company and $40,800 on the Director personally.

The Court accepted the breaches had not been deliberate, accepting the Director understood limited English and had a poor understanding of employment law practices, but maintained this was no excuse. The breaches were significant and extensive, affecting over 300 employees.

It is vital that employers maintain their records to a high standard and adopt appropriate employment practices. Failure to do so can result in significant penalties.

If you are unsure of your employment practices, or are concerned your minimum entitlements are being breached, it pays to consult a professional experienced in the area.

 

Alan Knowsley

Employment Lawyer

Wellington

Employers ordered to pay more than $15,000 for sub-standard redundancy process…

The Employment Court has ordered an employer to pay an employee $15,000, and one week’s wages, after following a sub-standard redundancy process.

The employee had been working for the employer for over two years. During this time, the business did not perform well. The employer called a meeting with the employee and a colleague. During the meeting they discussed the business’s viability and the likelihood of closure.

A few days later other workers told the employee that the employer had decided to close the business and that they were to be made redundant.

The employee requested another meeting with the employer. During the meeting she was provided with written notice to work out her two-week notice period before being made redundant. The employee raised personal grievances for unjustified dismissal and lost wages.

The Court noted that despite the business having legitimate financial grounds to undertake a redundancy process, the process undertaken did not comply with the law.

It explained that a fair redundancy process requires an employer to meet with staff and discuss the process and impacts of the process.

The Employer must then accept input from all affected staff and genuinely consider it before coming to a conclusion. This includes meeting individually with employees.  Once a conclusion has been reached, employees may then be given notice of redundancy.

In this case, the Court decided the failings were significant, and a $15,000 penalty and one week of lost wages should be paid to the employee.

When undertaking a redundancy process, it is vital that all stages are followed correctly, otherwise employers may be leaving themselves vulnerable to personal grievances.

If you are considering undertaking a redundancy process, or think your employer has failed to follow the correct process, it is advisable to consult a professional experienced in the area.

 

Alan Knowsley

Employment Lawyer

Wellington

Holiday pay calculation to include bonus scheme payments…

The Employment Court has found an employer liable to include bonus payments to employees in total remuneration when calculating holiday pay.

Holiday pay is calculated on gross earnings, being the greater of the earnings at the time the annual leave is taken or the average over 12 months.  The issue for the Court in this case though was whether a payment under a bonus scheme fell within the definition of gross earnings.

There is an exemption from gross earnings for discretionary payments that an employer is not obliged to pay an employee.  In this case the employer had called its bonus scheme a discretionary payment and had specifically said that any payment under it was not to be included in the calculation of gross earnings.

The Court decided, however, that the discretionary payment exemption in the Holidays Act applies only to a payment which is truly discretionary, for example, a gift given at Christmas time by the employer that it has no obligation to do and that would include a monetary gift.  In this case the “discretionary” payment was referred to in the employment agreement and was said to be in exchange for a longer restraint of trade period.  The Court held that it was therefore a contractual obligation and not a discretionary payment.

The outcome of the case, therefore, is that if you want to maintain a payment to employees as being truly discretionary, it should not be in the employment agreement, there should be no formula for working out what a discretionary payment should be, it should not be based on any performance issues and it should not be in exchange for any promise by the employee.

In this case the employer will now have to calculate annual leave based on the salary plus bonus.  The employees will therefore receive a higher rate of annual leave pay with the bonus taken into account.

 

Alan Knowsley

Employment Lawyer Wellington

Payments for annual leave during a close down.

The Employment Court has ruled that an employer has no choice, but to pay employees who have been employed for less than 12 months, 8% of their gross earnings at the start of a closedown.

The employee’s service is then treated as starting (for annual leave purposes) on the date the closedown commences, so they are not entitled to any leave for a further 12 months.  The Court has said that employers and employees can agree for leave to be taken in advance. 

Many employers have a closedown period, for example, for seasonal work or over the Christmas holiday period.  The Holidays Act provides that if an employee is not entitled to annual holidays i.e. they have not worked for the full 12 months before the closedown commences, then they must be paid 8% of their gross earnings at the start of the closedown.

If any employee does not have enough leave, then if the employer agrees, they can take leave in advance for the balance of the period, or they will be on leave without pay.

The group of employees who will be most affected by this ruling are those who have earned more leave before the closedown commences than they need for the closedown, but are not yet entitled to that leave because they have not worked for 12 months. 

For example, if a closedown is to last one week, but the employee has earned 3½ weeks of annual leave because they have been employed for almost 12 months, then the employer has no choice under the Act, but to pay them 8% of their gross earnings at the start of the closedown period. They then treat their service for annual leave as having commenced on the date the closedown period commences. The employee will be paid out for the full 3½ weeks of annual leave, even though they are only taking one week of annual leave, and they won’t be entitled to any more annual leave for a further 12 months.

This unintended consequence results in the employee being paid for all of their leave, but missing out on the ability to actually take leave without the employer’s consent.   That leave, when taken, will then be without pay or in advance of the next year’s entitlement, because the employer has already paid for the leave in the 8% they have to pay out at the start of the closedown.

An employer that allows employees to keep leave up their sleeve and to only pay them for the leave used in the closedown is not complying with the Holidays Act.  As the employer in this case found out, the Labour Inspector will take them to Court no matter that they were complying with employees’ wishes and paying (over time) all of the entitlements the employees had at the time the employees wanted to receive them.

However, as the Court has pointed out the Act provides no alternative in this situation.

Alan Knowsley

Employment Lawyer Wellington

Enforcement of the wage subsidy scheme…

Since the wage subsidy became available in early April, vast numbers of employers have taken up the scheme to help retain staff when revenue has significantly declined due to coronavirus.

There are requirements which employers must comply with in order to receive the subsidy, including using their best endeavours to pay staff at least 80% of their normal pay during the 12 weeks of the subsidy. A full list of the requirements can be accessed on Employment New Zealand’s website.

Any employer that is granted the subsidy is placed on a public register. Employers are searchable by name, and if they have been granted the subsidy, the register will show the amount paid out and how many employees this is in relation to. The register may be accessed on the Ministry of Social Development’s website.

Making public information on employers receiving the subsidy allows employees to determine if a subsidy has been claimed on their behalf.

If, for example, an employer had claimed the subsidy and subsequently made some of their workforce redundant, they would not be entitled to the compensation for the redundant workers.

Employees can check the register to determine how many employees had been claimed for, and if fraud is suspected, notify the Ministry through their website.

It is important, during these uncertain times, to ensure that employment law is being observed and neither employer nor employee is unfairly taking advantage of the system.

If you are concerned about any of the actions or employment practices of your employer during the lockdown, it is wise to consult an experienced professional in the area.

Alan Knowsley

Employment Lawyer

Wellington

Employer penalised over $76,000 for breaching employee rights…

The Employment Relations Authority has penalised an employer for failing to pay its employees correctly and not providing employment agreements.

A Labour Inspector opened an investigation and requested all pay and employment records from the employer. A number of employees were being paid less than the minimum wage, several were not receiving the correct holiday pay, and nearly two hundred employees had not been given employment agreements.

The employer has to pay $16,532 to employees for breaches of holiday and minimum wage entitlements. Additionally, the business must pay a further $50,000 in penalties for the breaches.

The Managing Director, as the person directly responsible, was also personally fined $10,000 for failing to keep adequate records and provide employment agreements.

It is vital that employers utilise effective record keeping systems and adhere to employment standards. Failure to do so may result in steep penalties being imposed both on the employer and personally where appropriate.

In the case of uncertainty it is wise to speak with an experienced professional in the area.

Alan Knowsley

Employment Lawyer

Wellington

Director’s assets frozen over unpaid wages…

The Employment Court has frozen $14,000 of a Director’s assets to prevent them being removed from the country. This order was made after the company failed to pay its employee for several months.

The employee had continued working under the promise they would be paid in the near future. The company was then placed into liquidation.

The Employment Relations Authority held the Director personally liable for the unpaid wages.

The employee learned that the Director was about to travel overseas. This prospective travel was concerning to the employee as they had recently also learned the Director sold their home in a mortgagee sale.

The business also lacked assets to pay off its creditors. The employee believed the Director was attempting to leave the country in order to avoid paying any potential debts.

The Employment Court found the Director still had assets that were at risk of being transferred outside New Zealand. The freezing order was granted preventing their removal from the country subject to review after the fuller hearing in the Authority.

If you believe there is a risk that your debtor is trying to move assets overseas, it is important to consult with a professional quickly, before any potential transfers take place.

It is too late once the assets have left the country and you then have to consider taking potentially slow, difficult and expensive action overseas to enforce the debt.

Alan Knowsley

Employment Lawyer

Wellington

Employer penalised $69,500 for breaching worker entitlements to wages and holiday pay…

The Employment Relations Authority has ordered an employer to pay $25,000 in wage arrears, a $40,000 penalty, and $4,500, in costs for breaching its worker’s minimum entitlements.

The employer had been issued with a compliance notice by a Labour Inspector. 18 months later, the Labour Inspector initiated an audit and requested copies of all timesheets, records of holiday pay and leave, and pay records.

The employer provided a number of incomplete or incorrect documents. In respect of holiday pay and leave entitlements, they provided none at all. Additionally, it had become apparent during the audit that there were completed timesheets that had dates allocated to days that had never occurred in the corresponding calendar year.

The Authority found there were breaches in the requirement to maintain accurate time records in either a written form, or a way that could easily be accessed and converted into written form. The workers had also been significantly underpaid in their wages and holiday pay.

Furthermore, the employer failed to accurately record hours worked, or holiday and leave entitlements.

When it imposed the penalties, the Authority categorised the breaches as intentional, rejecting explanations from the employer.

It is essential that employers maintain accurate and up to date records of all hours worked and pay-related matters. Employers must be able to produce these records on request, and if unable to do so may face significant penalties.

If you are concerned you are not receiving your minimum entitlements, it pays to consult a professional experienced in the area.

Alan Knowsley

Employment Lawyer

Wellington

Employer fined for breach of settlement…

The Employment Court has imposed a $10,000 fine, plus costs, on an employer for breaching a mediated settlement, and ordered compliance with the settlement.

The settlement arose as the result of a claim by the employee that they had been unjustifiably dismissed. The employer agreed to pay $25,000 in compensation and a $2,500 contribution toward legal costs, as part of a confidential settlement.

The employer only paid $6,000 of what was agreed. The employee brought proceedings in the Employment Relations Authority, but the employer failed to appear.

The employee then sought to enforce the judgment in the Employment Court. The Court found that failing to attend at the Employment Relations Authority was acting contemptuously. In addition, failing to take any steps in the Employment Court, failing to honour the settlement agreement, and the prejudice to the employee by way of financial loss, were held to be aggravating factors in the Court hearing.

Had the employer complied with the settlement, they would have paid the employee $25,000 plus the $2500 costs, and the contents of the settlement would have remained confidential.

However, as a result of failing to pay fully, the total penalties now exceed $42,000.

When dealing with mediations and settlements it is important to understand your rights and the consequences of any agreement you sign. It is important to get advice from someone experienced in this area.

Alan Knowsley

Employment Lawyer

Wellington

Employer fined $18,000 for failing to follow process…

The Employment Relations Authority has upheld a personal grievance for unjustified dismissal and disadvantage, and ordered the employer to pay $18,000 in compensation.

Following an altercation at their workplace, the employee sent a threatening message to one of the business owners. A short time later, the employee was given a letter and informed they had been suspended, pending investigation. The employee was given another letter a few days later informing them they had been dismissed for serious misconduct.

The Authority decided although the suspension was likely warranted, the employee should have been given the opportunity to give their opinion.

Furthermore, no process had been followed during the investigation. The employee was given no opportunity to respond to the allegation and therefore their explanations could not have been genuinely considered by the employer. The employer also failed to adhere to their good faith obligation owed to the employee.

The Authority described the deficiencies in the process as “significant” and ordered the employer to pay the employee $6,280 in lost wages and $11,700 for hurt and humiliation.

Had the employer sought advice and followed the correct process, this outcome may have been avoided and the grievance not been raised.

When involved in disciplinary matters, it is essential the correct process is followed and all obligations between the employer and employee are met.

It is wise to seek advice from a professional experienced in this area and avoid potentially costly mistakes.

Alan Knowsley

Employment Lawyer

Wellington

Director liable if company fails to pay $3,440 owed to employee…

The Employment Relations Authority has upheld a claim for unpaid wages and holiday pay and ordered an employer to pay wages and holiday pay owed to the former employee. The Authority also ordered that if the company was unable to pay the money, the director was personally liable to pay.

The employee had been employed for 9 months before they resigned to pursue another role. The employer failed to pay the employee their final week of wages and holiday pay. The Authority decided the director of the company was a person involved in the debt as they were the sole director and shareholder of the company, accepted timesheets and organised the wage payments.

If you are unsure of your rights or obligations it pays to get advice from a professional experienced in the area.

Alan Knowsley

Employment Lawyer

Wellington

Former employer ordered to pay holiday pay…

The Employment Relations Authority has ordered a former employer to pay an employee $16,425 in holiday pay. The employee had worked for the employer over a period of 17 years during which time a separate business was set up by the parties. After a few years of growing the new business, the employee decided to resign his current employment and focus on the new venture. At this time his holiday pay was transferred as a liability to the new business.

The employee raised the issue with his former employer but the employer ignored the letter. The ERA held that the employee was entitled to be paid his holiday pay upon resignation from the former employer and the transfer of the obligation to the new entity did not relieve the former employer of its obligation to pay.

If you are unsure about an employee’s entitlements, it is wise to obtain advice from a professional experienced in this area.

 

Alan Knowsley

Employment Lawyer

Wellington

Employer Fined For Treating Young Employee As A Contractor...

The Employment Relations Authority has fined an employer after it treated one of its employees as a contractor.

Following the resulting disagreement, the employee refused to return to work and raised a personal grievance for unjust constructive dismissal. This resulted in fines for unpaid KiwiSaver, holiday pay, sick pay, hurt and humiliation, and a general penalty. This totalled over $19,700.

The young man met the employer as a connection through his father, and was taken on as a general labourer. During this time the employee began an apprenticeship under the employer.

After 10 months, the employee’s father contacted the employer demanding payslips, and an employment agreement, as one had never been provided to the employee.

After the employer agreed to provide the documents and failed to follow through, the employee refused to return to work and engaged a solicitor.

The Authority applied a test in order to determine whether an individual is a contractor or employee. This test comprises consideration as to the parties’ intentions, degree of employer control over the individual, and who pays the taxes during the work engagement.

The ultimate decision was that the employee was not a contractor, and by breaching their employment agreement terms by paying incorrectly, and failing to provide payslips or formal employment agreement, the dismissal was considered constructive and unjustified.

It is important when entering an employment arrangement to understand what capacity an individual is employing, or being employed, in.

Awareness around the different rights and obligations between contractors and employees are also vital. Individuals experienced in employment should be consulted to avoid ambiguity and potentially costly mistakes.

Alan Knowsley

Employment Lawyer

Wellington

$23,000 penalties and costs following personal grievance claim…

An employer that attempted to impose “draconian” drug testing requirements upon an employee, that were not recorded in their Employment Agreement, has been ordered by the Employment Relations Authority to pay the employee damages of $13,000 and costs of $10,000 when it upheld their personal grievance claim.

 

The employer had attempted to impose the drug testing, after it had concerns about the employee’s behaviour, by adding the testing requirements to a new policy.

 

This cannot be done. The policy must be in place before the events complained about. It is too late to put a policy or amended policy in place after the event. It can only apply to new events and cannot be used to discipline an employee for past actions.

 

This decision shows the reality of an outcome for employers that fail to follow procedure or breach employee rights, and fail to accept that they did not get it right.

 

Failing to settle the case has seen the payment to the employees go from $13,000 to $23,000. This does not include the employer’s own costs of legal representation.

 

If an employer has got the process or decision wrong wise advice from a professional who is experienced in this area can lead to the settlement of a grievance by negotiation or mediation, well before going to Court.

 

Alan Knowsley

Employment Lawyer Wellington

Employment Court awards increased damages for unjustified dismissal…

The Employment Court has increased damages awarded to an employee by the Employment Relations Authority for his unjustified dismissal.

The employee was employed in the public sector in a role which required him to have a driver’s licence. His employment agreement required him to inform his manager should his licence be suspended.

During his employment, the employee was involved in two incidents with a departmental vehicle which he did not advise his manager of. His licence was suspended but he continued to drive and receive compensation for the mileage. There had also been complaints from co-workers and significant frustrations around working with the man.

The Employment Relations Authority found that the manager had used the driving infringements as a means of engaging in a process to remove the man. Consequently, he did not approach the process with an open mind, and following email evidence did not act in good faith.

The Employment Court awarded the man 13 weeks lost wages and reduced the deduction for behaviour from 50% to 20% which increased his award by $5,400. The Court declined reinstatement.

When involved in a disciplinary process, it is essential proper procedure is followed and anyone involved acts in good faith, otherwise the employer runs the risk of employees raising personal grievances.

 

Alan Knowsley

Employment Lawyer Wellington

Compliance order against past employer who breached confidential settlement…

The Employment Court has ordered a past employer to comply with terms of a confidential settlement after its employees made disparaging remarks about the woman who was party to the agreement.

The woman contracted with an employer in an engineering role. After several months hostilities arose between herself and other employees. After mediation failed, an employment advocate helped her negotiate an exit settlement in which one of the clauses stated neither party would disparage the other to any third parties.

Subsequently, the woman took up work with another engineering firm. This firm contracted with the woman’s previous employer. Despite this, she worked on the project for several months in a satisfactory manner.

When the past employer moved staff onto the project that there had been earlier hostility with they asked the firm remove the woman from the project.

In requesting reasons why, the past employer’s employees revealed to the firm there had been employment issues, and repeatedly stated they could not say any more. It was conceded that the ways in which these statements were made carried negative connotations. Upon removing the woman from the project, the firm said to her, “You must have done something really bad for them to request this”.

The Employment Court construed the conduct of the past employer’s employees to have the effect of disparaging the woman, resulting in her removal from the project. This resulted in her having to seek employment elsewhere and moving away from family.

The Employment Court ordered the past employer to comply with the terms of the settlement through a compliance order, effective immediately. Costs were also awarded against them.

As an employer, it is important to ensure all parties adhere to confidential settlements, otherwise you run the risk of protracted litigation, damages and cost awards.

 

Alan Knowsley

Employment Lawyer Wellington

Employer ordered to pay $46,000 over withheld payments…

The Employment Relations Authority has ordered an employer to repay employees and Inland Revenue over $46,000 including unpaid wages, holiday pay and KiwiSaver. The employer had made almost $10,000 in deductions for KiwiSaver and student loan repayments from employees but failed to forward the deductions to the IRD.

The employer was placed into liquidation and all employees were terminated without notice. The ERA ordered that the employer is to pay $34,000 to the dismissed employees in lieu of notice and for unpaid wages and unpaid holiday pay.

As the employer has been placed into liquidation, the Directors may be personally liable for the sums ordered by the ERA.

If an employer is insolvent, the correct redundancy process must still be followed, which includes providing the employees with sufficient notice.

 

Alan Knowsley

Employment Lawyer Wellington

Branch manager justifiably dismissed following rental in company name…

The Employment Relations Authority has rejected a personal grievance claim for unjustified dismissal of a branch manager who was sacked for serious misconduct after he rented accommodation in his company’s name.

The manager rented the accommodation and told the letting agency that he was arranging accommodation for another manager who was moving over from Australia to New Zealand.  No such manager existed and he lived in the property himself with his family.  The company name was down on the lease as tenant and payments were made in the company’s name although these were actually paid personally by the manager.

The employer followed a good process in dealing with the matter.  It raised the issue of suspension with the manager and gave him an opportunity to comment on suspension before it decided to suspend.  It also told him what the allegation was and provided him with a fair opportunity to respond to the allegation.  When he attended the disciplinary meeting, without representation, it reminded him of his right to be represented and gave him an opportunity to seek representation, which he declined.

After concluding that the manager had been dishonest in his actions by renting the premises in the company name, it indicated to him that this was serious misconduct and that it was looking to dismiss him, and gave him an opportunity to comment on that proposed action.

The ERA held that the company’s actions were what a reasonable employer could do in the circumstances and that they were justified in dismissing the manager.

The ERA said that even if it had found flaws with the company process, that the manager’s actions were so bad, he would have had no remedies, even if he had been unjustifiably dismissed because of some process issue.

It is really important to not only be able to justify your decisions on the facts, but also to follow a fair and reasonable process in arriving at conclusions and giving the employee every opportunity to respond fairly to any allegations before decisions are made as the employer did in this case.

Alan Knowsley

Employment Lawyer Wellington

Dismissal unjustified but no remedies awarded…

The Employment Relations Authority has found that an employer’s investigation of serious misconduct allegations was defective, but that the behaviour of the employee was so bad no remedies would be awarded. 

The employee had got into an argument with his supervisor and had stormed off slamming the door of a work vehicle, shattering the window.  The employer suspended the employee after giving him an opportunity to comment on the suspension and then conducted a serious misconduct investigation. 

The ERA held that most of the process followed by the employer was satisfactory, except that it did not properly investigate allegations by the employee that he reacted as he did because of constant bullying by his supervisor.  The employer’s failure to adequately investigate the allegations of bullying meant that its decision to dismiss for serious misconduct was wrong. 

The ERA went on however, to find that it would not award any remedies to the employee because of his behaviour.  In relation to the events being investigated, he had covertly recorded a meeting with his employer which, although not illegal, was a breach of good faith.  He had also lied to his employer about breaking the vehicle window.  In relation to other incidents he had unwanted, inappropriate and offensive interactions with other employees, some of which were of a highly sexualised nature.  He had also made unnecessary, inappropriate and excessive use of his mobile phone at work, including taking pictures of other employees and sending them to those employees outside of the workplace.  That conduct meant that it was inappropriate for the ERA to award any damages for the unjustified dismissal.

Alan Knowsley

Employment Lawyer Wellington

Redundancy without consultation costs employer $23,000…

The Employment Relations Authority has upheld a personal grievance claim for unjustified dismissal after an employee was dismissed for redundancy.  No consultation was undertaken with the employee before she was advised that her position was being made redundant.

The suddenness of the termination of her employment after 15 years working for the employer resulted in an award of $10,000 compensation plus three months lost wages of $13,000.

The employer was ordered to pay $4,200 wage arrears and holiday pay and was penalised $4,500 for having no employment agreement and for failing to provide wage and time records when required.

If the employer had merely raised the possibility of a redundancy with the employee and given her an opportunity to comment on the proposed redundancy then the employer would have saved themselves the $23,000 awarded.

In addition employers must provide employment agreements for all employees and provide wage and time records.  A failure to do so will result in fines from the ERA.

Alan Knowsley

Employment Lawyer Wellington

Employer banned from employing staff…

An employer and the director of the employing company have both been banned for 18 months from employing staff after the Employment Court found them guilty of exploiting workers by not paying wages.

In addition to the banning order the company was fined $300,000 and the director $150,000 personally for her actions.

In addition the company is liable for $230,000 in unpaid wages.

The employer which runs a camping ground used employees from China who were working illegally on visitor visas.  It failed to pay any wages for the work done.  The employer claimed that none of the workers were employees and that they were merely undertaking tasks to keep them from getting bored while they waited for their working visas to come through.  The Employment Court did not believe the employer and found that text messages clearly showed that each of the workers was working full time at the holiday park.

The Court has warned any employers that seek to exploit workers by non-payment of wages and other entitlements can expect penalties far larger than anything they might save by their underhand conduct.

Alan Knowsley

Employment Lawyer Wellington

Employee penalised for breaches of restraint of trade clauses…

The Employment Relations Authority has upheld a claim by an employee’s former employer for breaches of confidentiality and breaches of the restraint of trade provisions in her employment agreement.

The ERA agreed that the employer had a proprietary interest to protect in information about its clients and operating systems and practices and that the restriction on being employed for two months within a 10 kilometre radius of the employer’s premises was reasonable.  These restrictions were therefore enforceable.  The employee tried to get around the 10 kilometre restriction by working from a café just outside the 10 kilometre limit, but the ERA held that her new employer’s offices were within the 10 kilometres and therefore it was a breach of the restraint.  She was in breach by commencing employment and continuing to compete within the 10 kilometres inside the two month period.

In addition the employee breached her confidentiality obligations by, on the last day of employment, emailing herself confidential information from her former employer and using that in her new employment.

The ERA found that both of these breaches were deliberate and ordered that a penalty of $5,915 be paid by the employee to her former employer.

It also issued a compliance order requiring her to comply with her confidentiality obligations going forward.

It was too late to prevent her from working for the new employer because the two month restriction on employment had already passed.

If employers have a real proprietary interest to protect and are reasonable in the duration, geographical limit and nature of the restriction then they will be able to enforce restraint of trade clauses.

Confidentiality clauses are enforceable as a separate requirement.

Alan Knowsley

Employment Lawyer Wellington

Employer gets everything wrong in disciplinary investigation…

The Employment Relations Authority has upheld a personal grievance claim for unjustified disadvantage and unjustified dismissal following the sacking of an employee for serious misconduct.  The employee was investigated for failing to follow health and safety procedures and was summarily dismissed following the investigation.  The ERA found that the employer got virtually every step of the process wrong. 

It suspended the employee without informing him that it was considering suspending him and giving him an opportunity to respond.  There was no justification for this and therefore he suffered a disadvantage, despite the fact he was on full pay during his suspension.

In relation to the dismissal for serious misconduct the ERA found that the employer had pre-determined the employee’s guilt prior to the disciplinary meeting.  The employer had already decided it was serious misconduct and that the employee should be dismissed.  Evidence of this could be found in the letter of termination, which was prepared before the disciplinary meeting.

In relation to the disciplinary meeting the employer failed to inform the employee that it was a disciplinary meeting.  He also failed to inform the employee of what he was alleged to have done wrong and that it could serious misconduct.  The employer also failed to inform the employee that the serious misconduct could lead to his dismissal. 

In addition no supporting information, which the employer had gathered, was provided to the employee to consider and comment on.  There was therefore no fair opportunity for the employee to respond to the disciplinary allegations and no opportunity was given to him to comment on the proposed dismissal.  The dismissal was therefore carried out in an unfair manner and was unjustified.

The ERA considered that the employee had contributed to the dismissal because he had carried out his work in an unsafe manner and had not followed the health and safety procedures.  The level of contribution was set at 30%.  After deducting 30% the employee was awarded $6,000 lost wages and $15,400 compensation for hurt and humiliation.

If the employer had carried out a proper process to investigate and reach conclusions, then it would have been fully justified in dismissing the employee and saved itself over $21,000 plus the costs of defending the claim.  It pays to get your processes right. 

A free guide to carrying out a disciplinary process is available on our website for downloading.

Alan Knowsley

Employment Lawyer Wellington

Dismissal under 90 day trial period valid…

The Employment Relations Authority has rejected a claim for unjustified dismissal and upheld a 90 day trial clause provision.  The ERA found that the wording of the trial clause was lawful and rejected an argument from the employee that he had not signed the employment agreement until after he had commenced work. 

The employer gave evidence that it was signed before the employee commenced his employment and also called other employees who confirmed that they were present when the employee signed and that this took place before he commenced work.  This meant that the dismissal under the trial period was lawful and the employee’s claim for unjustified dismissal was rejected.

Alan Knowsley

Employment Lawyer Wellington

Employer fined for breaching confidentiality agreement…

The Employment Relations Authority has upheld a claim of breach of confidentiality brought by a former employee against her employer.

The employee had left their employment following a confidential settlement agreement being reached. 

In breach of that settlement agreement the employer sent a copy of the settlement agreement to the Teaching Council when it reported that the employee had resigned (which it is required to do).  The attachment of the settlement agreement to its mandatory report was contrary to the instructions from the Teaching Council which specifically says not to attach settlement agreements to mandatory reports.

The report from the employer also specified (in another part of the form) how much was paid to the employee by way of settlement.  The ERA held that that too was a breach of confidentiality.

The maximum fine for these breaches was $40,000, but the ERA decided that the breaches were not deliberate as the employer had taken legal advice as to what it should send to the Teaching Council.  Unfortunately, that legal advice was incorrect.  Neither a copy of the settlement agreement, nor the amount of the settlement should have been disclosed to the Teaching Council.  They do not need that information under a mandatory report.

The employer was fined $2,000 with $1,500 of that to be paid to the employee.

Alan Knowsley

Employment Lawyer Wellington

Labour inspectors targeting directors and employers personally for breaches…

During 2019 the Labour Inspectorate has taken 20 cases to the Employment Relations Authority or Employment Court to make directors personally responsible for employment law breaches.  This is part of a focus by the Labour Inspectorate on ensuring that employers cannot avoid personal liability by closing their businesses.  Many of the cases involved failure to pay minimum wages and failure to keep wage, time, holiday and leave records.

The 20 cases have involved penalties and pay arrears of $760,000 to be paid by individual directors and employers, in addition to penalties imposed upon companies as the employer.

Keeping accurate employment records and providing those to the Labour Inspectors, when requested, without delay is a legal obligation that the Labour Inspectors are determined to enforce and employers who attempt to delay the provision of material or provide inadequate records are likely to face prosecution and significant penalties.

Alan Knowsley

Employment Lawyer Wellington

Dismissal by text after holidays unjustified…

The Employment Court has rejected a challenge by an employer to the Employment Relations Authority finding that an employee had been unjustifiably dismissed.

The employer alleged that the employee was due to return to work after the Christmas holidays on 8 January and failed to do so.  He dismissed the employee by text on 9 January.

The Court found that there was no proper process followed by the employer to raise allegations of not returning to work on the correct date with the employee.  Because the allegation was never raised with the employee, he was given no proper opportunity to respond to it before the employer decided to dismiss him by text.

The Court also said that even if the matters had been raised by the employer with the employee and a proper opportunity given to respond, that the failure to return would not have justified a dismissal in this case.  The employer attempted to say that prior warnings had been given for absences, but provided no proof of any of these prior warnings.

The employer also attempted to justify the dismissal by showing that he had made phone calls to the employee later in the week, after he failed to return, to ascertain why he had not returned.  The Court found that those phone calls were irrelevant, because they followed the dismissal and did not precede it.

The employer also tried to justify the dismissal on the basis of a social media post by the employee, which alleged that the employee knew he was supposed to return to work the previous week, but did not bother doing so.  The Court found that the social media post was also irrelevant because it was not made until after the dismissal and so the employer could not have taken that into account in reaching its decision to dismiss.

If you want to deal with a disciplinary issue, you must tell the employee of the allegations and give them a proper opportunity to respond before you reach any decisions.  A failure to do so will be fatal to the decision to dismiss.  A free guide to handling a disciplinary process is available on our website.

Alan Knowsley

Employment Lawyer Wellington

Costs awarded against parties who turned down settlement offer…

The Employment Relations Authority has ordered costs against two claimants who alleged they were employees.  The claim went to mediation, but did not settle.  Following mediation the alleged employer offered the parties $10,000 in settlement, but that was rejected by the two claimants.  A short time later they discontinued their claim against the alleged employer.

The alleged employer then went to the ERA seeking costs and the ERA awarded $2,000 costs against the claimants. 

$1,500 of those costs were to cover the mediation, which had been ordered by the ERA.  Costs will be awarded when the ERA orders mediation, but are not recoverable if the parties attend mediation voluntarily.  $500 was added to the costs because of the parties turning down the settlement offer, which was a reasonable one, and they did not achieve a better result, because they abandoned their claim.

If the two parties had taken the $10,000 offered they would have been $12,000 better off.  We are left to wonder why they turned down the offer and then discontinued their claim. They would have been so much better off if they had accepted the offer made.

Alan Knowsley

Employment Lawyer Wellington

Employee’s signature forged on employment agreement…

The Employment Relations Authority has held that the signature of an employee on an employment agreement was forged by the employer. 

The employer claimed that the employee had signed the agreement and was therefore bound by a 90 day trial period, whereas the employee denied ever having signed an employment agreement.

The original agreement was not produced, but a photocopy of the agreement was available and that was submitted to a handwriting expert for analysis.  The expert’s evidence was that the signature on the individual employment agreement was an exact copy of the signature on another document signed that day by the employee for the employer and had been electronically cut from one document and inserted on the employment agreement. 

The ERA held therefore that the document was not signed by the employee and therefore there was no 90 day trial period.  The employee can therefore bring a personal grievance for her unjustified dismissal claim, which is to be heard in due course.

One suspects that, given the fraudulent conduct by the employer in attempting to forge the signature of the employee on the employment agreement, their evidence may not be believed in relation to the unjustified dismissal claim, but we must wait and see the outcome of that case.

 

Alan Knowsley

Employment Lawyer Wellington

Chief Executive of Charitable Trust loses constructive dismissal claim…

A Charitable Trust uncovered potentially improper payments to a supplier.  It raised the matter with its Chief Executive as to why he had not had systems in place to prevent such an occurrence.  The matter was raised as an issue of serious misconduct and during the Charitable Trust’s investigation into those allegations, the Chief Executive resigned and claimed constructive dismissal.

He alleged that the Charitable Trust should not have begun an investigation into his actions because he claimed it knew that he was not responsible for the financial performance of the organisation at the time.  He also alleged that the Trust had predetermined the outcome of the investigation and had failed to act fairly by not providing him with full information of the allegations.

The Employment Relations Authority had rejected all of the Chief Executive’s claims and awarded costs against him.  The Chief Executive brought a claim in the Employment Court and the Employment Court has upheld the ERA decision and also found that the Chief Executive had no basis for claiming constructive dismissal.

The Court held that the Charitable Trust was entitled to commence an investigation into the Chief Executive.  Also that there had been no predetermination of the outcome by the Board and that all information had been provided, with a reasonable opportunity to the Chief Executive to consider the information and respond to it.  The Chief Executive resigned part-way through the process before the Board had an opportunity to reach any final conclusions on the allegations.

The Chief Executive argued that there was a breach by the Trust because it was adversarial and accusatory in its attitude to him.  The Court rejected that argument and held that the Trust was robust and plainly stated its concerns but that was “to do no more than to communicate effectively.  That action was consistent with the duty of good faith”. 

The Chief Executive also criticised the Board for accepting his resignation too quickly.  The Court rejected that argument and held there was no reason for the Trust to assume that the resignation was hasty or that it was a product of an ill-considered or intemperate act by him.  The Trust was aware that the Chief Executive was legally represented and was “entitled to treat his resignation at face value.”  The Court held that there was no duty on the Board to invite the Chief Executive to reconsider his resignation or to retract it.

Alan Knowsley

Employment Lawyer Wellington

Personal grievance upheld for delay in organising return to work after significant illness…

The Employment Court has found that an employee’s personal grievance was justified in relation to delays by the employer in arranging the employee’s return to work.  A second personal grievance was also upheld in relation to the employee’s failure to remove a manager from the process, who the employee felt had caused, or contributed, to the original illness.

Considering the two personal grievances in a global manner the Court awarded $30,000 for humiliation, loss of dignity and injury to feelings. 

Between 2016 and 2018 the employee was off work on unpaid sick leave.  At the end of 2018 the employee and employer entered into a settlement agreement, with a planned return to work.  There were several delays in arranging the return to work and the employee brought these proceedings claiming unjustified disadvantage for those delays and in relation to the manager involved in the return to work planning.

The Court found that there was an unjustified delay by the employer in failing to arrange a timely appointment for the employee to see the medical practitioner of the employer’s choice.  The employee had already provided medical reports from her medical practitioners.  

The Court also found there was an unjustified delay by the employer following receipt of the medical practitioner’s report in February 2019 and that there was no advancement of the return to work following that.  Further delays occurred while the employer spoke to another employee, but the Court found that those discussions should have taken place much earlier.  There was also a delay by the employer in organising mediation.

The Court held that the psychiatric treatment required by the employee, due to the delays, was not of the employee’s making and her health was significantly affected by the delays.

In relation to removing the manager, who the employee felt had caused or contributed to her original illness, the Court held that the employer should have recognised from mid-January 2019 that involving this manager was inappropriate, but they did not take any action to remove her from the process until mid-April 2019.  That led to an unjustified disadvantage to the employee.

The employee also claimed that they were discriminated against because of their disability.  The Court held that that disability related both to her psychiatric and psychological illnesses.  The Court found that for discrimination purposes it would compare the employee with the disability, to an employee without a disability.  It was not appropriate to compare the disabled employee with another disabled employee in the work place.  Such a comparison would be a disparity claim which was not pleaded in this case.

In relation to remedies for the disadvantages the Court said “Where a disadvantage grievance involves very serious health issues, it is appropriate to conclude that the claim justifies a higher award”.  The Court awarded $30,000 for the hurt and humiliation.

The employee also brought a claim in relation to what rates of pay she should have been on following the settlement. The Court increased the hours that she should be paid from 15 hours per week, which the employer had paid for, to 30 hours per week from April and 40 hours per week from June. This was because the return to work was supposed to have been a graduated return and therefore the employee should have been paid for those hours, had the return to work gone ahead in a timely fashion. 

The Court rejected claims that the employee should have been on a higher base salary because of the settlement agreement. Any arguments of that nature had already been settled in 2018.  The Court also rejected the employee’s claim that she should be paid for a full 40 hour week from the time of the settlement.  The Court held that the employee was not fit to return to work fulltime and that her medical evidence supported only a graduated return to work.

It is important for employers to act reasonably and fairly and not delay implementing any agreed return to work programme or delay designing such a programme.  If serious health issues arise from such delays significant damages will be awarded by the Court.

Alan Knowsley

Employment Lawyer Wellington

Immediate termination under 90 day trial period invalid…

The Employment Court has upheld the Employment Relations Authority in deciding that a nil termination period under a trial provision was invalid.  The 90 day trial provision provided that the notice of termination could be immediate. 

The ERA and the Court both concluded that wording in the Employment Relations Act of notice of termination means giving advance notice, or a notice period.  It did not mean immediate termination, which only applies to serious misconduct.  The Court held that Parliament would have said so, if it intended to allow a period of notice to mean immediate termination, which is really no notice.  This finding was supported by the obligations of good faith and the acknowledgement of the inequality of power when bargaining and working under a trial provision.

A trial provision which provided for immediate termination, therefore did not comply with section 67B(1) and was invalid.

Because a proper process had not been followed for the employee’s termination, their dismissal was unjustified and the Court upheld the $15,000 compensation award made by the ERA.  It also upheld the calculation of lost wages, except that wages earned following termination should have been deducted from the lost wages set by the ERA.

The Court specifically said it was not making any comment on whether a short notice period would suffice, for example, one hour or one day.  It left open decisions on those matters for any future cases on trial provisions which provide for such short notice.

If employers want to be certain as to the length of notice required, they should provide either for the same notice period as applies for any other terminations in the employment agreement or a reasonable period of notice, for example, at least one week.  However, what is reasonable in the circumstances, will depend on the particular facts in each case.

Alan Knowsley

Employment Lawyer Wellington

$27,000 penalties for poor record keeping by employer…

The Employment Relations Authority has penalised the employing company and the sole director for failing to keep compliant wage and time records and holiday and leave records.  In addition the employer failed to provide the correct public holiday entitlements.

The ERA found that the breaches were as a result of negligence, rather than intentional, and that all arrears had been paid to all employees.  As the business had made a loss and ceased trading and the director’s income was modest, it reduced the penalties from a maximum of $240,000 for the company to $18,000 and from a maximum of $120,000 for the director to $9,000.

Alan Knowsley

Employment Lawyer Wellington

COVID-19 no excuse for breaching settlement agreement…

The Employment Relations Authority has refused to accept the effects of Covid-19 on an employer’s business as an excuse for failing to comply with a settlement agreement.

The employer and employee entered into the settlement agreement for $9,000 in order to resolve an employment dispute. It was agreed by the parties the sum could be paid by instalments.

The employer paid the initial January instalment but failed to pay those for February or March. The employer cited health concerns and the effects of the Covid-19 pandemic on his business as reasons for being unable to pay.

Regardless, the Authority determined the settlement had been breached, although not deliberately. The employer was ordered to pay the remaining instalments to the employee within 14 days. Additionally, costs were awarded against the employer.

Despite the lockdown and further measures implemented by the Government during the lockdown, it is important to remember neither employment law nor obligations under existing agreements have been suspended.

If you have any concerns about the effect of Covid on your employment or any existing agreements you have entered into, it pays to consult a professional in the area to understand your rights and obligations.

Alan Knowsley

Employment Lawyer

Wellington

$200,000 penalties for short-paid wages…

The Employment Court has convicted and imposed penalties on two employers who were in partnership in the hospitality industry.  They intentionally short-paid wages and holiday pay over many years to their staff, amounting to over a quarter of a million dollars. 

After an investigation by the Labour Inspector they paid the staff the short-paid wages and holiday pay.  The Court also imposed penalties totalling $200,000 on the husband and wife for these intentional breaches, which involved not paying the minimum wage rate and not paying holiday pay.  They also failed to keep wage, time, holiday pay and leave records. 

The Court commented that the failure to pay the proper wages and holiday pay was a complete breach of good faith.  The wife was involved in the short payments to a lesser extent and her penalty was assessed as $20,000.  The husband, who more involved, was fined $180,000.

Alan Knowsley

Employment Lawyer Wellington

Unjustified dismissal for poor drug testing process and botched disciplinary process…

In a recent case, a worker was asked to undertake a drug test following accusations by a co-worker.


The worker’s employment agreement required drug testing to be in accordance with the employer’s drug testing policy, but there was no policy in existence.

When the employer suspected the employee was using drugs at work, they tried to introduce policies the next day, but would not give the employee a copy to take away and get advice on.  They only allowed her to read it overnight.  This was because where they had bought the policy from prohibited copying of it and would have charged $100 for a further copy (which they did not want to pay).The employer subsequently invited a drug tester on site. The worker refused to take the drug test, and as a result disciplinary proceedings were initiated and the employee was terminated.

The Employment Court upheld the personal grievance claim and found it was an unjustified dismissal of the worker because:

 (1)   Retrospectively implementing a drug testing policy and immediately requiring the    employee to undergo screening was in bad faith; and

(2)    The dismissal of the employee for refusing to consent to the drug test was “not the fair and reasonable actions an employer could have done in all the circumstances”, nor did they comply with procedural requirements in the Employment Relations Act.

The Employment Court found that the dismissal of the employee was both procedurally and substantively unjustified.  The Employment Relations Authority had found the dismissal to be procedurally unjustified, but substantively justified and therefore had only awarded compensation for the poor process, rather than any lost wages.  The Employment Court overturned that finding and decided to order payment of six weeks lost wages because of the substantive problems with the dismissal.

This poor process made the dismissal unjustified.  In addition to having no actual policies in place the employer should not have terminated the employee for refusing to undergo a drugs test.  There was no policy in place, so there was no right to insist on a test and the employee could not be dismissed for standing by her right not to undergo the test.

The ERA had originally awarded $10,000 compensation for the poor process reduced by 10% for contributory conduct by the employee.  The Employment Court would have increased the deduction off the remedies for the employee’s behaviour, as it believed her contributory conduct was more serious.  It involved drug taking at work and bad behaviour towards other staff and the employers.  However, the Court felt that the compensation of $10,000 awarded was too low to start with and so it left both that award of compensation and the limited 10% deduction unchanged.

The Court has for some time been signaling that the compensation awards would be significantly increased over what has happened in the past and even for a low level of hurt and humiliation, awards are likely to be around $20,000.  For more serious matters the awards will be significantly higher.

The Employment Court found the summary dismissal was unjustified, and the employer was required to pay a compensation payment of $10,000 (discounted by 10% for the employee’s part in the process), and six week’s wages.

It is essential to have your policies in place, and to follow proper procedures in accordance with those policies.

Alan Knowsley

Employment Lawyer Wellington