Playing by the rules of work contracts

The Dominion Post 17 October 2009

Employment contracts place obligations on both parties. Almost all cases before the Employment Relations Authority and Employment Court are brought by workers suing their employer.

One exception relates to restraints of trade. Another exception has recently had more use.

Over the years there have been a limited number of cases where the employer has sued its former employee, claiming breaches of contract and subsequent financial loss.

Northland Pathology Laboratory sued Dr Vermeulen, a South African doctor who accepted employment with the laboratory on a two-year contract. She arrived with her family and began work with Northland Pathology.

As it turned out, she worked only a little over two months. She left abruptly and said that her resignation was really a constructive dismissal. The doctor claimed that there were misrepresentations to her as to her duties and conditions and she objected to the conduct of her employer relating to a meeting that was cancelled.

She claimed she had lost trust and confidence in the employer and effectively gave two days' notice of her departure.

The authority decided that the doctor was not constructively dismissed, but had resigned from her position without proper notice.

She was ordered to pay Northland Pathology $6700 in damages, and a penalty of $2000 was also awarded. Half of the penalty went to Northland Pathology.

The authority found that Northland Pathology was put to additional costs because of the need to find a replacement locum, and was also entitled to the re- imbursement of some of the relocation costs to New Zealand paid to Dr Vermeulen.

The remainder of the money was for a portion of the recruitment costs for Dr Vermeulen and the recruitment costs of a replacement pathologist.

That case was decided in 2001.

Surprisingly, there have been very few cases in the intervening years. This year, however, there have been two cases where an employee has been required to pay damages to his employer.

Mr Kim began employment with Kenzo as a sushi chef at the Japanese restaurant run by Kenzo. Both parties were Korean nationals and spoke Korean as their first language. The restaurant alleged that it suffered financial damage because Mr Kim left, effectively walking out one afternoon, without giving four weeks notice as required in his employment agreement.

Urgent steps were required to fill the vacancy left by Mr Kim's sudden departure. Total costs of $8000 were sought.

It emerged that Mr Kim worked for a competitor in another restaurant during part of the notice period.

The Employment Relations Authority granted the employer's claim in part by deciding that Mr Kim should pay Kenzo $2200 in unworked notice as a partial contribution to the significant loss to Kenzo as a result of Mr Kim's breaches. In particular, reference was made to Mr Kim's arbitrary termination of the employment relationship without proper notice.

In August, Masonry Design Solutions sued Nicholas Bettany, a qualified and experienced computer-aided design draughtsman. Mr Bettany was ultimately dismissed for serious misconduct relating to timekeeping and the unreasonable use of the email and internet system.

AFTER his dismissal, Masonry Design discovered some of his work had been of such poor quality that it had to be redone at significant cost to the company.

Mr Bettany sued the employer for unjustified dismissal, and the employer in turn sued him for breach of his employment agreement relating to the cost of rectification of his work.

It was a term of his employment that he perform his duties with all reasonable skill and diligence and that during working hours he was to devote the whole of his time, attention and ability to carrying out his duties.

The company's claim against Mr Bettany was for $18,000, which was said to be the cost of rectifying errors in his work and for other breaches of his employment agreement.

The court found his work was error-ridden and held that the errors were attributable to carelessness, and poor attention to detail.

These were reasons that amounted to breaches by Mr Bettany of his contractual obligation to perform his work with all reasonable skill and diligence. He also breached his obligation to devote during his normal working hours the whole of his time, attention and ability to carrying out his duties.

The court found that the time it would have taken to fix Mr Bettany's work was less than the employer had estimated in its claim, and accordingly made an award of $12,000 against Mr Bettany.

The Bettany case is an interesting one because it enabled an employer to sue its former employee for the cost of fixing his work. His workmanship was below the level of the reasonable skill and diligence required by the employment contract.

The use of damages awards in employment disputes is that obligations under employment agreements can potentially be enforced through court awards of monetary damages.

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

Email: peter@cullenlaw.co.nz