ERA finds pattern of forced resignations before leave at Subway franchise
The owner of a Subway franchise in Christchurch has been found to have unjustifiably and constructively dismissed an employee after repeatedly requiring her to resign before taking annual leave, then making her redundant when the store was sold.
Sophie Kennett began working as a Sandwich Artist for Polygon GY Developments Limited, which operated three Subway franchises in Christchurch, in March 2023. She was later set for promotion to Assistant Restaurant Manager after moving to the company's Bishopdale store.
The dispute traces back to October 2023, when Kennett first applied for leave over the Christmas and New Year period, the beginning of a pattern that recurred a year later, according to the Employment Relations Authority (ERA).
When Kennett raised the leave request with director Stan Greene, she was told she needed to resign and sign a new employment agreement in order to take the time off, with a promise of an Assistant Manager role on her return. Greene disputed this account, saying resignation was only ever presented as an option.
A near-identical situation arose in December 2024, when Kennett again sought extended leave. Following a heated exchange at the Bishopdale store on December 11, Kennett resigned, effective December 20, after what she said were assurances she would return to work in mid-January 2025.
The day before that resignation took effect, Greene signed a Sale and Purchase Agreement to sell the Bishopdale store to Wealthjoy Limited.
The purchaser elected not to take Kennett on, and on January 10, 2025, Polygon informed her that her employment could not continue and that it considered her employment to have ended by resignation the previous month.
Kennett brought a personal grievance to the ERA, claiming unjustified dismissal, constructive dismissal, unpaid wages, and breaches of the Holidays Act 2003.
Pattern of engineered resignations
ERA member William Fussey found Greene's evidence "more inconsistent" than Kennett's, and found that Greene had required Kennett to resign on both occasions while promising continued employment.
On the 2023 resignation, Fussey found this amounted to a dismissal followed by re-employment within a month under section 85 of the Holidays Act, meaning Kennett's employment was legally continuous.
"It would be contrary to the purposes of the legislation for me to find otherwise," Fussey said in the decision.
"Parliament cannot have intended for an employer to be able to evade its obligations by engineering a resignation as a means of avoiding the dismissal label pursuant to section 85."
Fussey also found Kennett remained employed beyond her December 2024 resignation, on the basis that Greene's assurances of ongoing work were "definitive" rather than merely a possibility, and that her employment was only terminated with the January 10, 2025, letter.
The dismissal was found to be both substantively and procedurally unjustified.
At the time Kennett was let go, the sale of the store remained conditional and uncertain, and Fussey found Polygon had failed to properly consider redeploying her to available roles at its other stores.
He further found Polygon had not consulted Kennett before deciding to sell the business, had not given her contractual notice, and had wrongly withheld information relevant to the restructure.
The ERA also found Kennett's December 2024 resignation itself amounted to a constructive dismissal, noting that resignation "was presented as the only viable option in the context of a heated exchange in which Ms Kennett felt intimidated."
The ERA ordered Polygon to pay Kennett $2,657.85 in outstanding statutory entitlements, $237.98 in unpaid wages, $3,898.80 in lieu of notice, $5,848.20 in lost wages, and $19,000 in compensation for humiliation, loss of dignity, and injury to feelings.
A $2,000 penalty was also imposed for Holidays Act breaches, to be split between Kennett and the Crown, along with $448.22 in interest. Costs were reserved.
