An employee who worked as a finance director was made redundant following a restructure. The employee’s individual employment agreement contained a redundancy compensation clause entitling him to receive $116,400.  The employer discovered that a mistake had been made in the contract and that if calculated correctly the employee was only entitled to receive $13,430. The employer paid the employee $42,778 in redundancy compensation but refused to pay the balance.

The Employment Relations Authority held that the employee was entitled to the full $116,400 redundancy compensation.

The ERA held that there were no grounds to change the contract signed by the parties. The employee was unaware of the error when he signed the agreement in 2008 and again when a new contract was signed in 2011 with the same error.

The ERA ordered the employer to pay over the additional $73,600 redundancy compensation to the employee, being the difference between the $116,400 he was owed and the $42,778 he had already been paid.

All taxpayers will be delighted to know that the employer in question was a government entity.


Alan Knowsley

Employment Lawyer Wellington