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Practice process - please!

7 October 2019

A recent ruling in the Employment Relations Authority highlights for the umpteenth time the costly consequences of an employer’s mistake in dismissing an employee without following the proper process and the significant cost of such a failure to follow process.

The Job Offer

Mr Baxter who had a company Scorpion Europarts Limited, approached Mr Holwood with an offer of employment. The job was to assist Mr Baxter across his various business ventures including dealing with security and theft issues. Mr Holwood knew Mr Baxter, as the two had previously been involved in a transaction regarding a sale and purchase of two dogs.

Mr Holwood did not immediately accept the job offer as he was due to go on a holiday and was also considering another opportunity. However, after further discussions Mr Holwood he decided the job was a good fit for him and agreed that he would be paid $25.00 per hour, have the use of a company vehicle and would start the job two days before his scheduled holiday was due to start.

The First Mistake

No Employment Agreement was provided to him and Mr Holwood understood that Mr Baxter directly employed him. Nothing was said during this short employment period that changed his understanding of this fact.

On his return he worked for Mr Baxter for another five days.

The Second Mistake

The following Monday, Mr Holwood sent a text to Mr Baxter to advise him he could attend work that day as he was too unwell. Mr Baxter responded to that text as follows:

“Okay mate, I’m going to take over your position mate. Sorry it’s not worked out. The place is on its last legs and I need to get involved fulltime now. I will sort your pay out on Wednesday.”

Mr Holwood said he was in no doubt Mr Baxter gave him notice in that text message. His final pay and holiday pay were deposited into his bank later that week.

Mr Holwood raised a personal grievance with Mr Baxter for unjustified dismissal. Mr Holwood believed Mr Baxter was his employer and he also raised a personal grievance against Scorpion Europarts Limited to protect any legal position Mr Holwood had with that entity.

The Result

The key issue was whether Mr Holwood’s dismissal was justified.

The test of justification to be applied was to consider whether Mr Baxter’s actions were what a fair and reasonable employer could have done in all the circumstances. Predictably the ERA agreed that there was no evidence of any process being undertaken by Mr Baxter before dismissing Mr Holrood.

It is clear that Mr Holwood was:

  • not put on notice by Mr Baxter that his job was in jeopardy;
  • not provided with any allegations warranting his dismissal; and
  • not provided with any information about the business being on its last legs and what effect that might have on the future of his employment.
  • not given an opportunity to answer or comment on any of these points

Th ERA consequently found that Mr Holwood had been summarily and unjustifiably dismissed by Mr Baxter.

The Cost

Mr Baxter was directed to pay Mr Holwood $5,000.00 as reimbursement for his lost wages along with a payment of $15,000.00 for the hurt, humiliation and injury to feelings as a consequence of the termination of his employment.

Mr Baxter was also penalised $2,000.00 for failing to provide an Employment Agreement.

Again this is a reminder to employers that if you are considering dismissing an employee no matter what the circumstances are, you simply must follow the correct process or risk significant financial penalties.