He took shares instead of salary. The court said that was never legal
A cannabis startup's directors must personally cover more than $220,000 in unpaid wages after their CTO worked two years without a paycheque.
The Employment Court of New Zealand, in a judgment delivered on October 23, 2026, ordered Kariki Pharma Limited - now in liquidation - to pay $220,153.52 in unpaid wages, plus holiday pay and KiwiSaver contributions. When the company could not pay, the court confirmed the directors could be pursued personally.
From Vietnam to New Zealand - and into trouble
The worker was living in Vietnam with his wife and young child in 2018 when he was introduced to Kariki Pharma, a startup medicinal cannabis company incorporated and funded by two shareholders. He initially worked without any agreement for payment, then as a contractor, before signing on as CTO with an annual salary of $108,000 and relocating his family to New Zealand.
From the outset, the company depended on investor funding to meet its liabilities. By February 2020, the worker was told Kariki could not pay his full salary for March. He agreed to defer payments for April, May and June 2020, with everything to be caught up in July.
Some of the deferred pay came through. But after a payment on July 16, 2020, nothing more followed.
Shares are not a paycheque
In December 2020, the worker agreed to receive 3,533 shares - valued at $6.40 each - instead of salary for August, September and October 2020. The Employment Relations Authority, at first instance, found this was a genuine agreement and declined to award salary for those months, calling it a "bad bargain."
The Employment Court disagreed. Under the Wages Protection Act 1983, wages must be paid in money - defined as New Zealand coin or banknotes. Shares do not qualify. The limited exceptions cover payment by cheque or bank transfer. None cover shares.
The court found the Authority had erred by not applying the Act. That ruling added three months of salary back onto the bill.
Two years of promises, no paycheque
Meanwhile, the worker kept showing up. The company was chasing a $12 million investment from an entity referred to as EPH, and everyone involved - the board and the worker alike - genuinely believed the money was coming. Board minutes from March 2021 onward routinely noted that liabilities were being managed under "specific arrangements regarding payment."
The directors argued this language proved the worker had agreed to defer his salary until the investment landed. The court found otherwise.
There was no written variation to the employment agreement, which expressly required any changes to be in writing. There was no certainty about what would happen if the funding fell through. And the company's own records - including a liabilities report prepared by its accountant on termination - listed the worker's full salary as owing at the contractual rate.
As the court put it, any agreement to delay payment concerned timing, not the rate of pay. The salary kept accruing.
Three defences, three rejections
The directors ran three alternatives: that there was an oral agreement to defer payment, that the worker was prevented from claiming because his conduct led them to believe he would not seek payment, and that the worker had given up his right to be paid. All three failed.
On the second argument - a legal concept known as estoppel, where one party's conduct leads another to rely on a particular state of affairs - the court noted it is "generally accepted as being difficult to establish" through silence alone. The worker had not made a clear or unequivocal representation that he would forgo his salary. One of the directors was a qualified lawyer; the others were highly experienced. They knew the worker was not being paid and took no steps to verify the terms of any arrangement or whether it had been properly recorded.
The court found nothing unconscionable about the worker asking for the salary his contract promised.
On waiver - the argument that the worker had voluntarily given up his right to be paid - the court was blunt. Even if he accepted a delay, there was "nothing to support a finding that he agreed to waive his right to payment altogether." The company's own liability reporting and the ongoing negotiations between the parties made that clear.
The investment, incidentally, never arrived. In June 2022, the worker learned the founder of the prospective investor had passed away. The funding opportunity fell away with him. The worker resigned the following month.
Directors held personally liable
With the company in liquidation, the question was who would pay.
The court confirmed the directors were involved in breaches of employment standards under the Employment Relations Act. They knew the worker was not being paid. They took no steps to check the terms of any supposed deferral arrangement. They rejected the worker's own proposal to settle the accrued debt.
The directors tried to rely on a statutory defence, arguing they had acted on the company's accountant, who had assured the board the company remained solvent. The court rejected this. The accountant's advice related to solvency - not to the worker's entitlements or the enforceability of any deferral arrangement. He was never asked about those questions. And critically, he was not independent of the company - he was acting as its secretary and effectively as its agent.
The worker was granted leave to recover personally from the directors any wages or other money payable to the extent Kariki could not pay. KiwiSaver contributions were excluded from that recovery, as they are not defined as employment standards under the Act.
One claim the worker lost: a bid for penalties against the directors for aiding a breach of his employment agreement. He had originally framed the claim under the wrong section of the Act, and by the time the correct provision was identified, the 12-month limitation period had expired. The court upheld the Authority's refusal to allow the late change.
What the numbers look like
The court ordered Kariki to pay the worker $220,153.52 in gross unpaid wages for July 2020 to July 2022, $15,884.65 in gross unpaid holiday pay, and $6,789.55 in gross employer KiwiSaver contributions - all within 28 days.
For HR teams in startup environments, the case is a sharp reminder that cash-strapped does not mean obligation-free. Wages accrue whether or not the money is in the bank, shares are not a substitute for a paycheque, and directors who let salary arrears mount without proper written agreements or independent advice may find themselves personally holding the bill.
The decision is a ruling of the Employment Court of New Zealand following challenges to an earlier Employment Relations Authority determination. Kariki Pharma Limited is in liquidation and took no part in the proceedings. Costs are reserved.
