Big bill follows oil and gas company’s ‘heartbreaking’ Covid-related staff layoffs
The management division of a major Taranaki-based oil and gas company has been ordered to pay more than $278,000 to four employees it fired. Photo / Provided
The management company of oil and gas giant New Zealand Energy Corporation is to pay four employees it “unexpectedly” dismissed more than a quarter of a million dollars in lost wages, reimbursements and compensation.
In a damning ruling over the process, the Employment Relations Authority found NZEC Management Limited guilty of breaching its good faith as an employer.
The Taranaki-based management arm of the oil and gas exploration company blamed its precarious financial situation and the Covid pandemic for the way it carried out what were initially salary cuts, but which soon became job cuts.
The failure of the process resulted in a combined compensation order for the harm caused of $74,000. The remainder is compensation for lost wages and reimbursement of wages that were cut before the layoffs, leading to a total order of $278,589.
Staff members Alison McKnight, Barry Watkins, Stewart Angelo and Ray England told ERA their jobs disappeared “unexpectedly” in 2020, shortly after the decision to take a pay cut.
Angelo, the company’s former engineering and maintenance manager, was shocked to learn that his job had disappeared as he took leave at the company’s request.
For Watkins, the effects were “catastrophic”, financially, emotionally, physically and mentally, leading to a breakdown in marriage, which left him living in a motel at his physical and mental lowest point.
McKnight, who believed the layoffs were personal, spent five days training the accountant who was to take over her duties.
She told ERA that the loss, which took a long time to recover from, was extremely stressful, especially when she couldn’t 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 that he could not eat or sleep, and strained his close relationships.
Chief executive Michael Adams, who has since resigned, was also affected by what happened, ERA noted.
“He found the process painful and commented that all the applicants were valued employees and that he was struggling to cope with the prospect of layoffs,” ERA member Geoff O’Sullivan said in its decision which has just been published.
The four former staff members argued that their dismissals were unjustified and that the process – or lack thereof – unfairly disadvantaged them because they had not had the opportunity to consult on the dismissals.
Adams said he did not consult because he hoped to avoid layoffs.
Twelve of the company’s 32 employees were laid off in the first tranche, followed by three others.
In April 2020, the four staff members who challenged the decision were informed of the company’s plans to cut wages to meet the challenges posed by the pandemic. They were also asked to take annual leave, but if no agreement could be reached, it could be ordered.
Days after the pay cut plan was announced, it was put in place and weeks later each of the four received a phone telling them that their jobs were gone.
O’Sullivan said the NZEC did not dispute how the process was going and said the company was communicating with staff, at least at the macro level. She issued press releases and informed staff of the financial difficulties the company was facing.
She therefore argued that none of the candidates could say that they were unaware that the company was in trouble and that layoffs were possible.
His defense also relied on the provisions of his employment contracts which provided for a process of dismissal in exceptional circumstances.
NZEC said the sudden drop in oil prices combined with the pandemic meant that due to its poor financial performance through the start of 2020, the company found itself facing exceptional circumstances which it said justified lack of consultation.
The company said it had to put in place an immediate, truncated process that simply left no time for consultation.
The company also had a collective agreement with a trade union, which contained contractual provisions for consultation and notification.
The chief executive of New Zealand Energy Corporation, which owns all the shares of NZEC Management Limited, told ERA that urgent action was needed to reduce costs and losses. James Willis said the layoffs were “absolutely necessary” to restructure the business.
He said decisions and implementation should be undertaken at very short notice and only after consultation with staff, but as it was not “practical” he did not know if this had happened.
ERA said the evidence showed no. He said the NZEC’s justification for the redundancies was “inextricably linked to the exceptional circumstances provision” contained in the employment contract and case law dating back to 2003, but he did not notice any subsequent change in the law.
At the end of 2004, consultation in the context of dismissal became compulsory, and the NZEC did not consult, the ERA said.
O’Sullivan said it’s possible candidates were fired based on misinformation when consulting could have corrected that. This meant that each of the applicants had been terminated without justification.
While he accepted the NZEC’s argument that the redundancies were inevitable, it was not inevitable that all four candidates would be fired.
O’Sullivan also found that the decision to deduct 30% from each of the claimants’ wages was made without the informed consent of any of them.
Angelo, who had worked for NZEC since 2012, said while he had taken a pay cut he had not wanted it to start until later than advised.
The ERA also said the way it was done constituted a change to the employment contract.
“The tenor of the employer’s letter of April 6 was not to seek an agreement, he was seeking feedback on what he intended to do. In any event, the pay cut for 30% seemed to be linked in the letter to some form of assurance that those who accepted the reduction would have their jobs maintained.”
The ERA said that since the deductions were essentially made unilaterally and not in accordance with the employment contracts, they were unlawful and therefore the claimants were entitled to reimbursement.
NZEC Management Limited was ordered to pay Angelo four months salary of $112,200 plus reimbursement of the $5,600 reduction in his salary from April 15 to May 15, 2020, and compensation of $18,000 for the injury and the humiliation that emerged from the “heartbreaking evidence”.
The injury and humiliation compensation order for Watkins was even higher, at $20,000. The company was also ordered to pay compensation of $1,587 for the pay cut and three months of lost wages of $22,932.
The order for McKnight’s was two months’ salary of $10,200, plus $3,530 in pay cut reimbursement and compensation of $18,000 for what she suffered as a result of the job loss.
The NZEC was ordered to pay England $41,379 for lost wages, $7,161 in reimbursement for the pay cut and $18,000 for injury and humiliation.
A decision on fees has been reserved.