ERA looks into settlement agreement entered into by parties
The Employment Relations Authority (ERA) recently dealt with a case involving a dispute between a former branch manager/business development manager and his employers over unpaid wages and a subsequent settlement agreement.
The worker claimed he had loaned significant sums to his employers at their request and was owed substantial unpaid wages and entitlements. He argued that a binding settlement had been reached to resolve these issues, but the full amount agreed upon had not been paid.
The employers, while acknowledging a settlement, disputed some claims and said they couldn't afford to pay the full amount. This case raised important questions about employment entitlements, record-keeping, and the enforceability of settlement agreements in employment disputes.
The case involved a branch manager/business development manager who started working for two related donut shop companies in March 2020. His role involved tasks related to expanding the business. The worker said that at the request of the manager and his wife, who was a director, he made payments to them totalling $25,000.
In December 2020, the worker resigned via email. He claimed he asked for payment of his outstanding employment entitlements but did not receive them. This led to the company director signing a document labelled as a "loan agreement" acknowledging $45,000 was owed to the former employee.
The worker argued that a binding settlement had been reached and he was entitled to the outstanding amount. The employers accepted a settlement had been reached but said they could not afford to pay the full amount.
They also disputed some of the worker's alternative claims about his entitlements and said he had not performed the work required by his employment agreement.
The ERA's investigation of the case took place over several months and included multiple case management conferences. The hearing was initially adjourned shortly after it started because the basis of the worker's claim changed significantly.
He now argued that the parties had reached an "accord and satisfaction" rather than making his initial claims as alternatives.
During the investigation, both the worker and the manager gave evidence under oath. The ERA also received written submissions from both parties.
After examining the evidence, the ERA determined that a binding settlement agreement had indeed been reached. Despite being labelled a "loan agreement", the document signed by the company director was meant to fully resolve all issues related to the worker's employment.
The ERA noted:
"[The worker] and [the manager] gave evidence that the Agreement was intended to resolve the employment issues and any outstanding payments that would otherwise have been due. I am satisfied that that was the case, that the total sum payable under the Agreement exceeded any minimum entitlements due, and that in return for payment due under the Agreement that [the worker] was to forgo any claim for the relevant entitlements."
The ERA found that the employer parties and the manager were jointly responsible for meeting the obligations under the agreement, including paying the $45,000.
The ERA determined that after accounting for partial payments already made, $34,900 remained due to the former employee under the binding settlement agreement. The Authority ordered this amount to be paid within 28 days from the decision.
Additionally, the ERA awarded interest on the outstanding sum, to be calculated from the date payment was originally due in November 2021 until the date of full payment. The determination stated:
"I am satisfied that it is appropriate that interest be awarded on that sum in accordance with the Interest on Money Claims Act 2016, from the date the payment was due, that being 21 November 2021, until the date on which payment is made in full."
The ERA declined to order repayments by instalments, noting that previous attempts at partial payments had not been successful.
In this case, the ERA noted:
"[The manager] accepted in questioning that it was he who was ultimately running the business, he asked [his wife] to be the name behind the business and authorised person on the relevant accounts."
Employers should be cautious about entering into informal loan or payment arrangements with employees and ensure all agreements are properly documented and understood by all parties.
