A case of Just how not to manage staff

The Dominion Post 25 April 2009

The Employment Court at Wellington recently delivered a further decision in a case bought by James Jesudhass against Just Hotel Ltd.

Mr Jesudhass was awarded significant compensation for an unjustified suspension and an unjustified dismissal.

Just Hotel Ltd was, at the relevant time, owned by Wellington businessmen John and Michael Chow. In addition to owning Just Hotel in Willis St, Wellington, they have business interests in several other enterprises in the city.

Mr Jesudhass began employment as general manager of the Just Hotel in October 2004. He was dismissed by letter on May 18, 2005. Work at the Just Hotel was far from happy for Mr Jesudhass.

Three months after he started work, John Chow (the then managing director) told Mr Jesudhass that he was to train Mr Chow's sister, Vicky Chow, to be the assistant general manager. She had no previous experience in running hotels.

After six weeks' training, John Chow appointed Vicky Chow to the position of managing director and instructed Mr Jesudhass to report directly to her.

This was done without any consultation with Mr Jesudhass.

Ms Chow took over many of the duties listed in Mr Jesudhass' employment agreement. He complained but John Chow did nothing about it.

Matters were further complicated by Vicky or John Chow hiring migrant workers or students without work permits. They could not speak much English and did not appear to have the requisite skills for the jobs they were doing.

This again undercut Mr Jesudhass' job description and duties, as he was responsible for training and hiring new staff.

This made it difficult for Mr Jesudhass to prepare proper costings for the restaurant, as John Chow refused to provide their wage details. He complained and John Chow told him not to worry about it.

Matters unravelled further when John Chow's personal assistant was found to be sitting in the hotel reception area monitoring the front-of-office staff.

Mr Jesudhass had not been consulted or made aware of this. This caused further friction between him and the Chows. Mr Jesudhass was asked to attend a performance counselling meeting.

Mr Jesudhass requested assistance from the Mediation Service of the Labour Department. When John Chow learned of the involvement of the Mediation Service, he told Mr Jesudhass there was "no turning back".

He told Mr Jesudhass to improve his performance over a one- month period or else offer his resignation. He said he would remove his sister from the hotel during that period.

The next day, John Chow sent a memorandum to staff saying that Mr Jesudhass would be concentrating on marketing and would work with the marketing manager in the downstairs office.

The memorandum advised that Vicky Chow would be based in Mr Jesudhass' office to direct the new restaurant manager. This was not discussed with Mr Jesudhass, who considered that the memorandum demoted him from general manager to marketing manager and further removed key duties from his job description.

As you might expect, things went from bad to worse. John Chow changed his mind about the one-month performance period, saying it was too long to wait and that he wanted to meet Mr Jesudhass within 24 hours.

Mr Jesudhass said he had spoken to the Mediation Service and it would contact him directly. John Chow took Mr Jesudhass' response as a refusal to meet and disobedience of a direct order.

That same day, Vicky Chow claimed that when she arrived at the hotel there was a staff meeting going on from which she was excluded. This was a meeting with a union representative.

The court found that Mr Jesudhass had given permission for the meeting and it was the union representative who had excluded Ms Chow from the meeting. John Chow then went to Mr Jesudhass and told him he was suspended pending mediation and was to leave immediately. There was no discussion before he was told of the suspension.

Mediation occurred on May 18, 2005, and later that day, Mr Jesudhass was given a letter dismissing him. The letter contained six grounds of termination, all of which were said to have caused the hotel to lose trust and confidence in its general manager.

Besides matters canvassed at mediation, there was no further discussion on the dismissal.

This case earlier made legal history because Mr Jesudhass tried to provide evidence in court of what had occurred at mediation.

He claimed in the earlier case that the hotel indicated to him at mediation that he would not be permitted to return to work and that he would be dismissed immediately at the end of the mediation.

While the Employment Court held that evidence of conduct at the mediation could be provided so long as it did not relate to communications made in attempting to resolve the employment relationship problem, this was overturned.

The hotel appealed to the Court of Appeal, which held that all communications for the purposes of mediation attracted statutory confidentiality, the only exception being where public policy dictated otherwise (for example, evidence of serious criminal conduct occurring at a mediation).

However, there were no public policy reasons in this case and confidentiality was upheld.

This end result of this sorry saga was not surprising. The court awarded Mr Jesudhass lost wages for the remainder of his two-year fixed-term contract - almost $70,000.

Holiday pay that had not been paid by the hotel was awarded. The loss of use of a company car to the value of $20,000 was awarded. A further sum of $8000 (being the cumulative benefit of $500 per month spending at the Eclipse Restaurant and Bar) was awarded.

A bonus of $10,000 for the hotel meeting the required occupancy rate was awarded. Compensation for humiliation and distress of $10,000 was awarded (reduced from $15,000 due to some contributory conduct on Mr Jesudhass' part).

The awards given are significant but not surprising, given the poor treatment Mr Jesudhass experienced. So far, the total bill to Just Hotel for the illegal suspension and dismissal has come to approximately $120,000. Costs are still to be resolved.

The decision is a very good case study for employers of how not to handle matters.

There seemed to be a complete lack of communication by the hotel owners with their general manager and multiple breaches of employment obligations. Life at Just Hotel was very unjust indeed.

Peter Cullen is a partner at Cullen - the Employment Law Firm

Email: peter@cullenlaw.co.nz