Blurred lines: Sponsorship agreement, 'cultural hierarchy' affect employment issue

ERA looks at claims of unjustified dismissal, unjustified advantage and wage arrears

Blurred lines: Sponsorship agreement, 'cultural hierarchy' affect employment issue

The Employment Relations Authority recently dealt with a complex case involving a Korean fashion designer’s claim of unjustified dismissal, unjustified disadvantage, and wage arrears against her former employer, a New Zealand skincare company.

The case highlights the challenges that can arise when an employment relationship becomes blurred with other business arrangements, especially in the context of the close-knit Korean business community in New Zealand. Cultural norms around hierarchy, reputation and saving face played a significant role in how events unfolded.

The worker, a fashion designer with her own brand Cecilia Kang Couture, was employed as an administrator at the skincare company Nellie Tier NZ Limited from September 2020 to December 2021.

Despite being given the title "Creative Director", her day-to-day role involved mainly administrative and factory tasks, which she felt did not match her skills and experience. 

Concurrently, one of the company directors sponsored the worker's entry into New Zealand Fashion Week (NZFW) in 2021 under her own fashion brand name.

The employer said that her motivation was to “[support] a young up-and-coming Korean designer,” adding that it was “consistent with her desire to support Koreans to succeed in New Zealand and helping others also aligns with her core values.”

‘No choice’ but to resign

This sponsorship and mentoring relationship sat alongside but separate from the employment relationship. However, later on, the worker claimed this arrangement was used to unduly influence and take advantage of her.

"I had to resign because the working conditions and environment became so intolerable that I could no longer stand to work for [the director]," the worker told the Authority. "Therefore, I was put in a position where I had no choice but to resign."

After her resignation in December 2021, the worker raised personal grievances of unjustified disadvantage and constructive dismissal, along with claims for wage and holiday pay arrears.

She said she had been underpaid, treated unfairly, pressured into entering NZFW and made to do tasks outside her job description.

It should be noted that the COVID-19 pandemic also added a burden to the relationship between the parties since it caused a fashion show that they were preparing for to be cancelled.

Meanwhile, the company denied any wrongdoing, arguing the worker had been paid and treated appropriately as per her employment agreement. It said most of her claims were raised out of time, and the personal grievances should not be allowed to proceed.

The Korean cultural context

The Authority heard evidence that Korean cultural norms impacted significantly on the dynamics between the parties. Hierarchy, deference to elders and those in authority, maintaining harmonious relations, and avoiding loss of face are common features within Korean society and business.

Witnesses described how the employer’s director, as an older Korean woman in a position of seniority, was able to exert influence over the worker, who felt compelled to follow her guidance without protest in order to preserve their relationship and her own standing.

The worker, a younger Korean woman, "was vulnerable by virtue of being a transgender woman in the workplace and as a member of the Korean community she was deferential to those senior to her in the workplace," according to submissions on her behalf.

It was argued these cultural factors made it challenging for the worker to freely raise issues or complaints. The worker said she feared retribution within the Korean community if she spoke out against the director, whose position and networks gave her significant power and influence.

However, the company submitted the worker was far from a vulnerable employee, noting she had raised issues during her employment and told a new employee that "working for [the company] is good and to voice any suggestions as the people at [the company] are kind and approachable."

The Authority carefully considered this cultural context but emphasised the employment relationship still had to be determined based on New Zealand employment law.

The Authority's findings

The Authority investigated the worker's various claims and found that the worker was employed as an administrator, despite the Creative Director title. Her sponsorship arrangement and preparation for NZFW sat outside the employment relationship “but the lines between the two became blurred.”

It also said that most of the personal grievance claims were raised outside the 90-day time limit. The Authority did not allow them to proceed out of time, as the high threshold of the worker being "so affected or traumatised" by the workplace issues that she could not raise her grievances earlier was not met.

It also said that the worker had agreed to reductions in her work hours prior to and during the 2021 Covid lockdown, so she was paid correctly during this period, even if some variations were not fully documented.

Moreover, the claims around improper deductions from the worker's annual leave and sick leave were not upheld based on the company's records.

It further found that the overtime claims related to activities to do with NZFW and the mentoring relationship fell outside the scope of the employment agreement.

"Having heard all the evidence, it was clear there was another relationship that also broke down and was in my view most likely the catalyst for the breakdown in the employment relationship," the Authority stated.

"This was not in writing so difficult to define, however, it nonetheless existed. [The director] provided ‘sponsorship’ and support in various ways, including the introductions to sponsors and half the NZFW entry fee. Many of the meetings and events outside of work hours were about raising [the worker's] profile as a fashion designer with [company] products provided as giveaways."

Cultural norms and business arrangements

The Authority found that while both parties benefited from their association, once the NZFW show was cancelled due to COVID-19, this strained all aspects of their relationship.

Ultimately, the Authority did not uphold the worker's personal grievances or wage arrears claims, finding they were either raised out of time, not supported by the evidence, or related to matters outside the employment relationship.

The case discussed the risks when an employment relationship becomes entangled with other business dealings, and how cultural dynamics can add layers of complexity.

While the Korean cultural context helped explain some of the worker's actions and her delay in raising concerns, the Authority said it determined the matter based on the legal framework of the New Zealand employment relationship that existed.

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