Financially struggling employer ordered to pay employee $15,000…

An employee has been awarded over $15,000 after she was unjustifiably dismissed by her employer. The employment relationship ended when the business closed down. The employee was not given any notice or paid in lieu of the notice, nor paid any annual holiday pay.

The Employment Relations Authority (ERA) found that while the employee was aware of the financial problems of the business, she was not adequately consulted about the business closing. The employer did not give the employee an opportunity to comment on this before it occurred.

The employer had a good reason for ending the employment, which was due to insufficient funds to operate. Therefore, the employee’s dismissal was substantively justified, however, it was the way in which this process was undertaken by the employer which was unfair.

The employer sought to rely on the trial period contained in the employment agreement as normally this would prevent the employee from raising a personal grievance.

The ERA found that the employee was not prevented from doing so because the trial period provision did not meet the mandatory requirements of New Zealand law. The employee only received a copy of her employment agreement after she requested it, and the employee did not sign it until after she had started work.

The employee was awarded:

• $10,000 compensation for the humiliation, loss of dignity, and injury to feelings she suffered;
• $4,100 payment in lieu of notice; and
• $1,150 in holiday payment arrears.

The employee would have been awarded a contribution toward her legal fees but as she represented herself this was not awarded.

This is an example of an employer that could have avoided the situation had it taken legal advice throughout the process. Instead, it relied on an invalid trial period provision, and through poor process unfairly dismissed an employee in a situation that justified dismissal.

Consequently, a business that was already struggling financially was ordered to pay a significant sum.

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