Case explores employer obligations in performance management situations
The Employment Relations Authority (ERA) recently dealt with a case involving a worker who resigned from his position after a prolonged dispute about the termination of his employment relationship.
The worker claimed he was constructively dismissed when he resigned in January 2024. He argued that his employer had breached his employment agreement and applied undue pressure, creating a situation where he felt he had no option but to resign. He sought remedies including payment for unpaid wages and annual leave.
The employer firmly rejected these claims. They maintained the worker had agreed to resign in November 2023 but then continued working beyond an agreed final date.
The worker started with the company in October 2022 as a food engineer working on research and development for a dairy products and pharmaceutical supplements manufacturer. His role began as part-time but became full-time in March 2023.
The employment agreement allowed either party to end the relationship with two weeks' written notice. It also included a clause permitting immediate termination if the worker failed "to perform to the standard reasonably expected by the Employer, including persistent failure to achieve targets."
By May 2023, the director had concerns about the worker's progress. He described the role as "a creative job" where performance was difficult to measure. One example involved a three-month project to improve production of a soft gel capsule that yielded disappointing results despite a $20,000 investment in imported equipment.
In November 2023, claiming the worker had agreed to resign, the director sent an email titled "Notice of resignation" stating: "According to our communication and agreement, your last working day will be December 6th. If you have any questions, please let me know."
The worker responded by requesting a formal dismissal notice in English, insisting he had never expressed any intention to resign. This triggered an exchange where both parties presented conflicting accounts of their discussions.
In a December email, the director wrote: "[The worker], a month ago, I said I wanted you to resign, and you said I would give you two more weeks. Two weeks ago, I said the two weeks were up, and the company hoped you could resign now." The worker replied: "Boss, you have never expressed your intention to ask me to voluntarily resign, and I have never said that I am willing to voluntarily resign."
Despite the director's notice setting 6 December as the worker's last day, the worker continued attending work. When the director learned of this, the dispute remained unresolved.
By mid-December, the director proposed the worker take four weeks of annual leave during the holiday period, noting there were "no new R&D arrangements from the end of this year to the beginning of next year" and that the employment relationship was "currently in dispute."
The worker rejected this proposal, citing Holidays Act 2000 provisions regarding proper notice for workplace closedowns. Company records showed the worker received his usual pay until 14 January 2024, but nothing thereafter, despite claiming his employment continued until 9 February.
On 23 January 2024, the company's lawyer wrote to the worker calling him to a "mandatory" meeting, stating: "A dispute has arisen as to whether you agreed to resign in December 2023. There have also been concerns about the amount of work that you have been able to produce since your employment commenced."
Two days later, the worker provided a medical certificate stating he was unfit for work until 5 February. On 26 January, he submitted his resignation letter, citing that the employer's actions "illegally and improperly... has constantly applied huge pressure on me and made me stressful and anxious and no way to focus on work and difficult to fall asleep at night."
The company then asked the worker not to enter the premises, effectively suspending him for his notice period.
The ERA determined that the November 2023 discussions essentially gave the worker a choice between resigning or being fired, which breached proper performance management requirements in the employment agreement.
The ERA stated: "[The director's] evidence did refer to ongoing discussions with [the worker] about expectations and hopes for the research and development work. It did not establish that those expectations had been developed into measurable targets and performance standards which [the worker] was given a reasonable opportunity to meet, with any necessary support, before a decision was made that his employment with [the company] should end."
The ERA found the employer's actions failed the statutory test of justification: "[The director's] actions were not what a fair and reasonable employer could have done in all the circumstances at the time. [The company] was not entitled to rely on whatever agreement to resign [the worker] may have given in his discussions with [the director] in November 2023."
In concluding constructive dismissal had occurred, the ERA determined: "At the time [the worker] submitted his 26 January letter of resignation, he had sufficient reason to doubt [the company] would observe the terms of his employment agreement, particularly in light of breaches which had already occurred."
The decision resulted in the worker receiving $15,000 compensation for humiliation, loss of dignity and injury to feelings, plus $4,920 in wage arrears and $8,200 for holiday pay entitlements.
