Mechanic wins more than $19,000 following business takeover confusion

Mechanic received more than $19,000 in wage arrears. Photo / 123RF

A mechanic has won more than $19,000 in wage arrears from the new owners of his former auto repair workshop.

Diesel mechanic Allan Smith sold his Bay Of Plenty business to After Hours Automotive, claiming the deal included an oral agreement in which he would stay on to work as an employee. But the directors of the business, Alister Gray and Karen Watson, disputed this, saying they only agreed to have him 'help out'.

The Employment Relations Authority (ERA) ordered After Hours Automotive to pay Smith a total of $19,146.90 for the work he undertook, but he was also ordered to pay $5,000 for breaching the good faith of an employee.

Smith claimed he carried out more than 500 warrant of fitness's (WOFs) between April and December 2016 for directors but did not get paid wages.

While Gray and Watson agreed that Smith did do the work, they claim this was not undertaken as an employee. They claim the work Smith undertook was part of the terms of sale of the business, as a volunteer, or as an independent contractor.

The ERA ruled Smith as an employee on the basis that there was no plausible reason why Smith would work for free.

"Mr Smith was not in a financial position to work without remuneration. I do not accept Ms Watson's evidence that Mr Smith undertook the work to 'give him something to do'," Authority member Jenni-Maree Trotman said in the determination.

Smith made demands for payment of wage, which he said, were met by regular weekly payments of $500 applied towards the purchase price of the business, and then payments of $300 up until December 2017.

Trotman said she believed the payments were a "reward" for the work Smith had performed because the business' purchase price had been repaid when they began. They were also noted in records as contractor payments.

Gray and Watson filed a counterclaim that Smith breached duties of good faith.

Trotman found that Smith had breached the employee's good faith provisions by "unlawfully uplifting equipment" from After Hours Automotive.

"The taking of the chattels was done whilst Mr Smith was still an employee and
undermined the employment relationship. This breach was serious and sustained," Trotman said.

The ERA ruled that it was satisfied that a penalty for Smith should also be imposed.