The founder of menswear clothing retailer Crane Brothers has been ordered to pay a former employee close to $21,000 in wages arrears and benefits.

Murray Crane was found to be personally liable to pay the former employee of collapsed fashion store Gubb & Mackie a total of $20,956.32, including $6590 in wages, $5833 in notice, $4576 in holiday pay and $3955 in Kiwisaver contributions.

The Employment Relations Authority also ordered Crane to pay a penalty of $3000 to the Crown for breaches in the worker's employment agreement.

Crane opened the Grubb & Mackie outlet store in 2015 and hired Jordan Gibson to run it. Gibson was given a 10 per cent shareholding and the opportunity of more shares if the business met targets, the Authority heard.

Advertisement

Gibson worked as a "day to day manager" under the title of creative director.

Over the following two years the business did not meet sales targets and later went into liquidation. Prior to going into liquidation, Crane changed the way Gibson was paid from salary to "drawings".

Gibson agreed but did not expect the change to affect his employment.

He said he was only told the change would be beneficial to the company. He did not understand it meant his employment with 1949 Limited would end, the Authority heard.

Between the months of September 2016 and February 2017 Gibson's pay was delayed or sometimes short due to cashflow issues. He did not notice he was no longer paid PAYE and KiwiSaver contributions.

In February, Gibson raised his concerns about the situation, in an email he wrote: "I would prefer as per my original agreement that I would be paid in a salary rather than drawings. I wasn't aware of the implications of being paid in drawings when the change was made when you told me my remuneration was changing from salary to drawings and that nothing would change, I just took this at face value. Now I am confused about whether I have been paid a salary, is PAYE being withheld etc, because my understanding is I am still an employee."

By March, Crane began steps to close the business. Gibson proposed to take over the business, which Crane declined.

Later that month Crane told Gibson "there is no requirement for you to be at work" as the store was to close the following day, the Authority heard.

Advertisement

Gibson raised a personal grievance for unjustified dismissal and to pursue him for arrears for breaches of his employment agreement.

Gibson worked out that he was owed $6,590.55 for a shortfall in wages between September 2016 and April 2017, $5,833.33 as one month's notice on termination, $5,923.08 as holiday pay for 22 annual leave owed (reduced in the decision to 17 days), and $3,955.53 in KiwiSaver contributions.

Crane's argument was that Gibson should forfeit entitlements because he was a shareholder of the venture and that came with risks.

"Such an argument would be persuasive if an employment relationship had not been formed and they were, genuinely and from the outset, fellow venturers," Gibson said.

"However the parties had taken the care to formalise Mr Gibson's employment and had not properly extinguished it or the rights arising from it."

The Authority found Crane breached the employment contract issued to Gibson.

It ordered he pay withheld wages and benefits, and Crane was found to be personally liable to pay it as the company was in debt and not able to.

Crane was given 52 days to pay the arrears, to be paid by January 31.

Crane told the Herald he was disappointed by the ruling. He said he was considering appealing the decision.

"I believe that investing in people and developing them has always been a great strength of mine. I can't remain despondent that this time it didn't work out," Crane said. "As a business owner, you always assess the risk. This time I got it wrong."