My Client Was Deceived!

Question to Ask the Workplace Doctors about New Zealand labor policies:

As an avid reader of your site, comparing the problems you exemplify with employment relationship problems here in New Zealand, I am interested in your views on a situation I have dealt with as a Lay Advocate. My client saw a very attractive advertisement for a position as a Contracts Manager with a company boasting 17 years experience, market leadership, advanced technology, employee benefits and profit share possibilities. The business deals in short term contracts quite often being a case of quote, acceptance, deposit paid, completion and payment, in 3 days. There was even an opportunity, for my client, to earn extra money as an agent doing sales for commission. I will use the pseudonym “Bloggs Ltd” (BL) because the matter has been settled confidentially, by mediation.When my client received his employment agreement it was under the heading Bloggs Management Ltd (BML).

My client asked the MD who BML was he was told that the full name of the company was BML but for ease of marketing they use the shortened title and even when answering the telephone simply use the title Bloggs. My client was a top line performer and at nights and weekends performed sales agent duties building up a sizable commission in earnings. Management came up with all sorts of excuses for not paying my client his commission and spasmodically direct credited his bank account with only his salary payments. There were other concerns my client had with the business in that his record of company sales was not registered on the monthly figures. There was clear evidence that a number of cash jobs were being done and that management was soliciting cash payments to avoid Goods & Services Tax obligations. My client came to me for advice and I suggested he formulate a document of issues and make an appointment with the MD to discuss this relationship problem.

This strategy is the statutory requirement of NZ Employment Law under the Employment Relations Act 2000.My client made his appointment scheduled for the Monday. In the course of a sales and contractors meeting the Friday prior, my client was subjected to a raft of abuse and baiting by the MD. The next day, Saturday, my clients petrol card was dishonored. On the Monday the MD rescheduled the meeting for Tuesday morning, then Tuesday afternoon and finally noon Wednesday. At 11 am prior to the meeting my client was issued with a disciplinary notice, claiming that my client was commencing a company in conflict with his employer and was recruiting staff and contractors of his employer to join the venture.

My client invoked all the appropriate legislated statutory obligations and called for a disciplinary meeting, with my representation, the following week. In response my client was summarily dismissed. The matter ended up in the Employment Court and was resolved by mediation prior. Our investigation found that BML was actually a facade and had only been incorporated days prior to my client signing his employment agreement. My client was the only employee of BML. BML was a tax dodge operating as a loss adjusted write off to enable cash to be withdrawn in the guise of a 10 year rental contract for the premises. BL was the only business with whom any of the contracts, clients, staff, contractors and creditors, conducted business. Because the fraud was internal only the IRD were able to take exemplary action while the Employment Court is unable to punish fraud under statute.

Ultimately my client accepted a settlement in which he did forsake tens of thousands of dollars in commissions which were due from BL the entity with whom he had no legal contract. BML was liquidated as an insolvent company with no assets. NZ law does not allow my client to sue for defamation and any and all employment issues are the domain only of the Employment Court. The matter was extensively investigated and my client was beyond reproach in his evidence and performance as an employee. The MD was found to be a rogue with a high turnover of staff and an extensive case history of employment problems, adverse judgments and payouts. Simply, with the average payout from the Employment Court being $4500.00, this rogue employer plays the odds of weak employment legislation saving him hundreds of thousands in contracted staff commitments. Personally he is protected by family trusts, which are unable to be accessed for compensation and of course BL is still trading. How would this matter have been dealt with in your neck of the woods?

Signed, Down In Down Under

Dear Down In Down Under:

Being a Lay Mediator must be a challenging and time consuming activity! I have done workplace mediation but it has all involved employee-organization, employee-supervisor or employee-employee issues, out of court. Nothing as complex as your work sounds! None of The Workplace Doctors are attorneys and would refer something of this nature to employment lawyers. However, I can give you some general information about how such matters are handled in the United States. Contract law–specifically employment contract law–is often litigated under what is called the “common-law of contracts” rather than legal doctrines specified in law. Most cases are won or lost based on precedent setting cases of the past or specific aspects of those cases that can be applied to a current one. Thus, contract litigation is very much a case-by-case situation. One such as you describe would have to be considered by comparing issues regarding it to similar cases–that is what a judge would do.That is also why it is so important that anyone signing an employment contract spend the money to have an attorney specializing in employment law, review it. Job candidates should also do research on their own about the history of the company, past practices and official records.

It appears to me that your client could have saved himself a lot of trouble by doing such research–and I’m sure he will handle situations differently in the future. Then, after hiring, attorneys here would advise a client to act quickly when any aspect of the contract is not honored. In your client’s situation, if this happened here and an attorney had been consulted, after the first commission wasn’t paid the employee would have asked for a meeting with the appropriate people in his organization to find out what was happening, then document the meeting and what was discussed. If no changes were made immediately, he would inform his attorney and a breach of contract suit would likely be started. In your client’s situation, the delay allowed the company to do their usual act of getting rid of the employee who questions things. If your client had acted immediately, he might still have been fired for a bogus cause, but he wouldn’t have amassed so many unpaid commissions.

In the United States a situation such as this could have become a civil suit in either a district court (state court) or a federal court, according to the nature of the business, whether or not it was regulated by federal laws or if some aspect of federal regulations were involved. Laws and regulations about employment contract issues vary state by state. In fact, that is a frequent complaint of employment attorneys—that each state has a slightly different set of guidelines. For example, California, the state of Washington, Oregon and some east coast states such as New Jersey and New York, have more complex laws, providing more protection for employees, than do some other states–particularly those in the south, such as Mississippi, Arkansas and Georgia. If the work of the company crossed state lines and there were fraudulent practices involving consumers or clients, there might very well be federal law or regulation violations. In the United States more businesses are charged federally for postal violations (using the mail in their fraudulent practices) than for the practices themselves! Or, if the actions of the company were designed to reduce their tax obligation illegally, the Internal Revenue Service would be involved.

The Department of Labor would only be involved if the violations involved federally mandated wages, benefits and unemployment issues–that is why the other agencies would be more helpful. There would not be a requirement for the type of mediation you provide until the lawsuit had been filed and if the court specifically thought it would be useful. Mediation is often suggested as a way to save time on court dockets. The details of this case might call for some other court-ordered response, in addition to or instead of the trial process, but I don’t think so.In NZ, It appears that the lack of severity in punishing egregious and chronic patterns of fraud does little to prevent the kind of actions that caused such financial harm for your client. However, there are likely similar case histories in the United States, according to the circumstances. That is why we have become such a litigious country. We tend to go to attorney’s about many matters, because civil remedies seem much more likely to help than legal remedies. I’m sorry that I can’t provide specific information for you, but I hope my thoughts will at least provide a fundamental basis for comparison. My own research about this and other employment law issues, often discloses few specifics. That is why I usually refer the letter writers to an attorney who knows the intricacies of the law, since I do not!Best wishes in your work. Thank you for contacting us and for visiting our web site!WEGO is sharing what we learn.

Tina Lewis Rowe