Big bill follows oil and gas firm’s ‘harrowing’ Covid related staff sackings

The management firm of oil and gas giant New Zealand Energy Corporation must pay four staff it sacked “out of the blue” more than a quarter of a million dollars in lost wages, reimbursements and compensation.

In a damning decision around process, the Employment Relations Authority has found NZEC Management Limited guilty of breaching good faith as an employer.

The Taranaki based management arm of the oil and gas exploration firm blamed its precarious financial position, and the Covid pandemic for the way in which it carried out what were initially pay cuts, but which soon after became job cuts.

The failure in process has resulted in a combined compensation order for the hurt caused of $74,000. The remainder is in compensation for lost wages and reimbursement of pay that was cut prior to the layoffs, leading to a total $278,589 order.

Staff members Alison McKnight, Barry Watkins, Stewart Angelo and Ray England told the ERA their jobs were gone “out of the blue” in 2020, soon after a decision to cut their pay.

Angelo, the company’s former engineering and maintenance manager, was shocked to hear his job had gone while taking leave at the company’s request.

For Watkins, the effects were “catastrophic”, financially, emotionally, physically and mentally, leading to a marriage breakdown, which left him living in a motel at his lowest physical and mental point.

McKnight, who believed the redundancies were personal, spent five days training the accountant who was left to take over her tasks.

She told the ERA the loss, which took a long time to get over, was extremely stressful, especially when she could not understand the reasons for it.

England, who had spent 28 years in the industry, felt betrayed. He said the process left him sick, distressed enough he was unable to eat or sleep, and strained close relationships.

Chief executive Michael Adams, who has since resigned, had also been impacted by what happened, the ERA noted.

“He found the process distressing and made the comment that all the applicants had been valued employees and he struggled with the prospect of redundancies,” ERA member Geoff O’Sullivan said in his just-released decision.

The four former staff argued that their dismissals were unjustified and the process – or lack of it unjustifiably disadvantaged them because they were not given a chance to consult on the redundancies.

Adams said he didn’t consult because he was hoping to avoid the redundancies.

Twelve of the company’s 32 staff were laid off in the first tranche followed by another three.

In April 2020 the four staff members who challenged the decision were told about the company’s plans to cut pay to address the challenges brought about by the pandemic. They were also asked to take annual leave, but if no agreement could be reached then it could be directed.

A few days after the pay cut plan was announced, it was put in place, and weeks later each of the four were phoned with the news their jobs had gone.

O’Sullivan said NZEC did not dispute this was how the process unfolded, and said the company was communicative with staff, at least on the macro level. It issued press releases and kept staff aware of the financial difficulties the company was facing.

It therefore argued that none of the applicants could say they were not aware that the company was facing difficulties and that redundancies were a possibility.

Its defence also relied on provisions in its employment agreements which provided a redundancy process in exceptional circumstances.

NZEC said that the sudden drop in oil prices combined with the pandemic meant that because of its poor financial performance leading up to early 2020, the company found itself facing exceptional circumstances which it said justified the lack of consultation.

The company said it needed to put in place an immediate and truncated process which simply left no time for consultation.

The company also had a collective agreement with a union, which contained contractual consultation and notification provisions.

The chairman and chief executive of New Zealand Energy Corporation, which holds all the shares in NZEC Management Limited, told the ERA urgent steps were needed to reduce costs and losses. James Willis said redundancies were “absolutely necessary” to restructure the business.

He said decisions and implementation had to be undertaken at very short notice and only after consultation with personnel, but because he was not “hands on” he did not know if this had happened.

The ERA said evidence showed it had not. It said NZEC’s justification for the redundancies was “inextricably tied to the exceptional circumstances provision” contained in the employment agreement and case law dating back to 2003, but it failed to notice a subsequent law change.

At the end of 2004, consultation in a redundancy context became mandatory, and NZEC did not consult, the ERA said.

O’Sullivan said it was possible the applicants might have been dismissed on the basis of wrong information when consultation might have corrected that. That meant that each of the applicants had been unjustifiably dismissed.

While he accepted NZEC’s submission that redundancies were inevitable, there was no inevitability that it would be the four applicants who were made redundant.

O’Sullivan also found that the decision to deduct 30 per cent from each of the applicants’ salaries was done without informed consent of any of them.

Angelo, who had worked for NZEC since 2012, said that while he had agreed to a pay cut, he had not wanted it to begin until a date later than advised.

The ERA also said that the manner in which it was done constituted a variation to the employment agreement.

“The tenor of the employer’s letter of 6 April was not seeking agreement, it was seeking feedback on what it intended to do. In any event, the 30 per cent reduction in salary seemed to be linked in the letter to a form of assurance that those who accepted the reduction would have their employment continued.”

The ERA said that because the deductions were in essence made unilaterally, and not in accordance with the employment agreements, they were unlawful, and therefore the applicants were entitled to reimbursement.

NZEC Management Limited was ordered to pay Angelo four months’ salary of $112,200 plus reimbursement of the $5600 cut from his salary from April 15 to May 15, 2020, and $18,000 compensation for the hurt and humiliation which was evident from the “harrowing evidence”.

The hurt and humiliation compensation order for Watkins was even higher, at $20,000. The company was also ordered to pay remuneration of $1587 for the pay cut, and three-months’ lost salary of $22,932.

The order for McKnight’s was two months’ salary of $10,200, plus $3530 as reimbursement for the pay cut and $18,000 compensation for what she suffered as a result of the job loss.

NZEC was ordered to pay England $41,379 for lost wages, $7,161 reimbursement for the pay cut and $18,000 for hurt and humiliation.

A decision on costs was reserved.