Employer claims major financial distress after unpaid wages
The Employment Relations Authority (ERA) recently dealt with a case where a worker argued he was unjustifiably dismissed and disadvantaged after his role unexpectedly ended.
He also sought to hold the company's directors personally responsible for unpaid wages and compensation.
The case raised questions about when employment legally ends, what makes a proper termination during a trial period, and whether company directors can be personally liable for employment-related payments.
Background of the case
The worker started as national sales manager at a finance company in January 2023, reporting to the chief executive officer.
While his employment agreement was with the Australian parent company, he actually worked for their New Zealand subsidiary. He was meant to take over from the head of customer relations after a handover period.
His employment agreement included a 90-day trial period from January 30 to April 30, 2023, with one week's notice required during this period. Outside the trial period, four weeks' notice was needed.
The agreement also said notice and payment wouldn't be required if the company entered receivership or liquidation.
The non-executive director wasn't involved in hiring the worker or drafting his employment agreement, which became relevant later in the dispute.
Employer allegedly fails to follow procedure
Problems started on March 23, 2023, when the head of customer relations found out there wasn't enough money to pay staff.
After failing to reach the chief executive officer, he contacted the non-executive director, who discovered major financial issues across the entire company group.
On March 27, 2023, the chief operating officer organised an online meeting with both Australian and New Zealand staff.
The non-executive director told everyone about the financial situation, saying: "no one has a job any longer."
The worker later wrote to the non-executive director: "[The worker] wish[es] to state, with no formal notification made in writing, [the worker] is owed as of today's date, to Friday 14th April 2023 NZD$7,236.62 nett, because technically [the worker] is still employed by an operational business in New Zealand."
Dismissal ‘without any formal notification’
The worker said he kept working until June 2023, following instructions from the head of customer relations. However, the head of customer relations denied this, saying any work done was the worker's own choice and for his own benefit.
On April 13, 2023, the worker wrote: "I am open to suggestions of settlement... Now that without any formal notification, I am no longer employed or receiving salary just like that. Regardless of the status of the financial affairs of the business it still has an obligation to me as its employee."
Evidence showed the worker received a brokerage fee for helping clients move to other financial institutions. He also worked with others to try buying the New Zealand company, though this plan was later abandoned.
Lack of proper notice
The ERA found the worker was unjustifiably dismissed, emphasising that proper notice procedures weren't followed during the trial period.
The Authority explained: "Notice requires more than simply advice of dismissal... it will be advice of when, in future, the dismissal will take effect."
The ERA particularly noted: "[The employer's] actions and how it acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred."
Regarding compensation, the Authority stated: "Having regard to the spectrum of harm... an award of $18,000 under section 123(1)(c)(i) is appropriate."
The ERA ordered the company to pay $18,000 in compensation to the worker, though payment was uncertain due to the liquidation.
The worker's claims against the directors weren't successful, as there wasn't enough evidence to prove they were personally responsible for breaching employment standards or the employment agreement.
