New employers need trainer wheels

Moses v Fully Synced Ltd

New Zealand is a nation of small businesses, many of them are started by an enthusiastic young person with a good idea. When they are successful they take on staff and grow our economy, so it is really important that we support and encourage them. Unfortunately too many make costly mistakes when they become employers, this story is about one of them.

Fully Synced repairs mobile phones, laptops and other computer devices. The Director, Nick Kane, recruited Jon-Paul Moses, a WINZ client to be his first employee.  Jon-Paul had completed a business degree and had been looking for permanent work for three years, before this opportunity arose. He was excited about the role and training to be an electronic technician.

The day after Jon-Paul started work, Nick gave him a written employment agreement that he had drawn up using the Department of Labour (now MBIE, the Ministry for Business Innovation and Employment) website and adding his own requirements that a return of service of 15 months will commence after completion of the three month trial period. (The sharp-eyed among you will have already identified that the three month trial period was not valid as the employment had started before the agreement was written.) The concept of the return of service, seemed to be a bond period for training which the employee was paying for, not the employer.

Jon-Paul, prudently, said he needed to read the agreement before he signed it. After discussing the agreement with is parents, he advised Nick that the trial period was not valid and asked for it, the return of service clause and a restraint of trade clause to be removed.

Nick declined to make the changes and said that he was to bring the signed contract in, on Friday, or not come in at all. Jon-Paul’s parents both discussed the issues with Nick, but he was not going to shift his stance.

Nick was right that he wanted a trial period, and right that he wanted the employment agreement to be signed, but was horribly wrong in his understanding of how negotiations work and the need to complete the negotiations before employment commences.

The Employment Authority concluded that Jon-Paul had been unjustifiably dismissed and awarded compensation. After working only four days, Jon-Paul was awarded 13 weeks’ pay (with interest) and $2,000 hurt and humiliation, along with $3,000 legal costs, in round figures a total of $12,000. All in all, a very costly lesson.

This case is typical of many with small employers having insufficient knowledge of employment law. I see employment agreements built using the clauses from the website, with no real understanding of what they mean, so they include contradictory clauses or clauses that are not relevant for the type of work. This is often done to save on costs, but if they have to be relied on in the court, you really want carefully constructed agreements. In a bit to save a few hundred dollars, he has ended up with a $12,000 bill.

Nick could have got free advice from the MBIE, the community law centre, or could have enlisted with the business mentors programme for a small fee. You can find on the web, the one in Hamilton is based at Innovation Park.

The government desperately wants small businesses to succeed, but directors have to apply themselves to understanding how to manage all aspects of a business, not just the services and products they provide to customers. If you know of anyone starting out in business, get them to sign up with the business mentors programme, they will really benefit from it.