When is the owner of a company personally liable to an employee?


Lessons from the deli: when is the owner of a company personally liable to an employee?

In a recent case, the Employment Relations Authority held that a company director was personally liable because, during pre-employment negotiations, he did not mention the company, and the employment agreement was not in the name of the company.

Stacey Sissons, a deli worker at Nosh Mount Maunganui, was dismissed in November 2016. She raised a personal grievance.

The owner of Nosh Mount Maunganui was a company called Good Food Trading Company Limited. Ms Sissons filed a personal grievance against Good Food Trading Company Limited but it then went  into liquidation. That meant it could only have been pursued for remedies with the agreement of the liquidator or permission from the court.

Ms Sissons then sought, successfully, to add Jamie Blennerhassett, one of the company directors, as a party to the proceedings. The Employment Relations Authority held that Dr Blennerhassett was personally liable for all remedies awarded to Stacey Sissons on the grounds that during the pre-employment negotiations, the company had not been mentioned at all.

Ms Sissons  had applied for the deli job through a TradeMe ad. After an interview with the deli manager, she was offered the job. She came in to collect her employment agreement from Dr Blennerhassett. That employment agreement stated that it was an agreement between Ms Sissons and Nosh Mount Maunganui. Dr Blennerhassett had signed the agreement “for and on behalf of Nosh Mount Maunganui.”

At no point during Ms Sissons’ pre-employment discussion was the company identified as the employer or as the owner of Nosh Mount Maunganui. In fact, all indications to Ms Sissons were that Dr Blennerhassett and his wife owned the store in their personal capacity.  The company name appeared on pay, bank, and tax records. While this was a clear indication that the company was the legal employer of Ms Sissons (and she did, in fact, issue her proceedings against the company), the crucial fact is that this information was never disclosed to her during the pre-employment process. In law, the company was the principal, and Dr Blennerhassett was acting as its agent. The Authority found that Dr Blennerhassett had a legal duty to disclose this to Ms Sissons.

This case stands as a warning to employers large and small to ensure that employment agreements are properly drafted and do not leave room for personal liability. In the end, Dr Blennerhassett was personally liable to pay Ms Sissons $10,000 as compensation for humiliation, loss of dignity and injury to feelings, $3,177.50 in reimbursement of wages lost as a result of her grievance, $1,684.94 as arrears of wages and holiday pay due to her at the end of the employment, and $2071.56 towards her legal costs in pursuing the claim, a total of nearly $17,000.

If you need help drafting employment agreements, call Workplace Law on 027 270 1057.