Employment dispute in Christchurch where a business faced consequences for dismissing an employee before their start date, resulting in an $18.5K payout.
Business Pays Employee $11k After Post-lockdown Redundancy
Mar 03 2022
A restaurant has been ordered to pay a former employee just over $11,500, after the Employment Relations Authority ruled her dismissal, during the period a wage subsidy was being paid for her, was unjustified.
From early 2018, Warissa Matajod was employed as front-of-house staff in a restaurant called Thai Orchid, owned by Crazy Horse.
In May 2020, after the nationwide Covid-19 lockdown, she was told the business could no longer continue to employ her on the same number of hours.
Matajod asked for more hours than were offered but was refused and her employment terminated.
She claimed unjustified dismissal, lost wages, holiday pay and compensation.
Crazy Horse denied the claims, saying the employment ended because there was no work available.
The authority heard that at the beginning of 2020, Julian Stokes, the owner of Crazy Horse, became worried about the impact of Covid-19 on the restaurant industry. He applied for the wage subsidy for staff when it was made available.
When the country went into level 4 lockdown, Matajod was paid 80 per cent of her wages, which was calculated at normally 36 hours a week, to be paid at her rate of $19 an hour.
For the first week, she was paid this as ordinary pay. But for the next four weeks, the amount was taken from her annual leave entitlements.
Stokes accepted this was not what he intended and was incorrect. But he said he only expected 80 per cent of the 29 hours would be paid and the rest would come from leave. The authority said there was no evidence that she had been told this.
On April 25, staff were asked to move to casual agreements so they were only paid for hours worked, to reflect the uncertainties of the business.
Matajod was concerned about this because there was very little work available, particularly for the front-of-house staff. It was agreed that there would be a minimum payment of 20 hours a week.
On May 8, Matajod was paid just 20 hours rather than the 29 she expected because the wage subsidy was still in place. The next week, she was paid the same amount. On May 26, she was told she could choose to be paid for 20 hours minimum each week or to have her contract terminated with one week’s notice.
She emailed back and said there were 27 hours of pay outstanding, and she wanted to be paid 29 hours for the rest of the subsidy period and would discuss the possibility of renegotiating after that time.
Stokes remained firm in his position that he was not able to offer more than 20 hours per week, although he intended to pay for any hours actually worked beyond that.
The authority ruled the dismissal was unjustified and ordered Stokes to pay Matajod $5000 for hurt and humiliation, and a further $6695 in unpaid wages.
It found Stokes did not have a clear reason for dismissing Matajod, beyond the disagreement about her proposed contract.
Authority member Claire English recognised the business had faced financial challenges, but said more should have been done to retain staff considering the wage subsidy had been received.
In the case of Matajod the payment was $585 a week, which was in excess of her weekly wage of $551.00 per week, English said.
During the period of the subsidy payment Stokes had an obligation to retain Matajod’s employment, which he failed to do when he terminated her contract, she said.
“Stokes provided no particular reason why he could not have continued Matajod’s employment through to the end of the subsidy period,” English said.
English said the redundancy process was flawed because the employer had not discussed the details of the wage subsidy payments with his employee or the effect it would have on her employment.
Stokes also did not give Matajod a reasonable opportunity to respond to the redundancy proposal as it seemed he was frustrated by the situation, she said.
One of the reasons Stokes gave for not disclosing more information to Matajod regarding the redundancy was financial sensitivity.
But English said this was not good enough.
“There were various steps Stokes could have taken... which would not have required the inappropriate disclosure of sensitive financial information.”
“This reinforces that if you are thinking about redundancies, then consultation is key. Employers need to make sure that if they are considering a restructure then they give staff opportunity to provide feedback.”
Duncan Cotterill employment lawyer Alastair Espie said the case reinforced the importance of the obligations of employers who took the wage subsidy.
“In this case an employer received the wage subsidy for an employee so was subject to make their best endeavour to keep that staff member employed. It seems they were seven days short of that obligation and the authority has taken issue,” Espie said.
Espie said the case also raised broader points around the importance of going about redundancy in the correct way, even if a business was under strain.
“Even if you are a business in dire circumstances considering making redundancies you still need to consult your staff properly. You need to outline in sufficient detail exactly what the issues you are facing and the reasons you are considering redundancy.