An Auckland retail manager is crying foul after her former boss made 15 people redundant, put the business in liquidation and then kept on trading with a newly formed company.
Mahima Shokeen had been working as a store manager in furniture retailer Jory Henley's Botany store since October last year but shortly after the Christmas sales period the business, which was recently transferred to a new company with the same director, started making changes following a drop in sales.
In June, Shokeen was informed by a co-worker that she had been asked not to come into work by management.
She was then asked to work in the retailer's Manukau store instead of the Botany one she was contracted to work in.
Shokeen noticed "a lot" of stock was coming into the Manukau store, and asked the company's operations manager if there was anything she should be worried about. Her concerns were met with a 'no'.
A month later she and around 14 others at Jory Henley were made redundant without warning.
"I was one of the last people she spoke to and she told me I'd been made redundant and the company was going into liquidation," Shokeen told the Herald on Wednesday.
"I asked her when the company would be going into liquidation and she said it could be within two days or two weeks."
She was told the reason for her redundancy was her "performance" but earlier told she had not been chosen to stay with the company as 'the new people who had bought the company had decided not to proceed further'."
Around 15 staff from the company were retained and she later found out Jory Henley, now trading under recently registered company JCD NZ Ltd, had hired new employees.
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Shokeen found out about the transfer in business ownership through invoices that showed Double Star Ltd, trading as Jory Henley, had been changed to JCD NZ Ltd.
Companies Office records show JCD NZ Ltd and Double Star Ltd have the same company director, Kai Zhang.
JCD Ltd was registered in May, a month before staff at Jory Henley were told about the liquidation and that they would be made redundant.
Zhang referred the Herald to the company's liquidator when contacted for comment.
Shokeen was verbally told she had been made redundant but received no formal written notice, she said, her name was instead removed for the roster within a few days of being told.
"It's OK that they didn't want to keep me and that they wanted to proceed with other people but they should have followed the correct procedure.
"Notice of termination requires four weeks notice to be given by either party, none of that has been complied with," Shokeen said.
"They clearly did not act in any good faith."
Shokeen is owed wages for the last fortnight she worked for Jory Henley and 180 hours of annual and alternative holidays leave worth $2163.
Shokeen wants to claim personal grievance but as the company is in liquidation she is unable to proceed to mediation - the first stage of the process.
She said she had spoken to lawyers who told her there was no case against Jory Henley as the company was in liquidation. A reply from the Ministry of Business, Innovation and Employment also confirmed this.
"When I spoke to lawyers they told me this happens often because there's a loophole in the law and they cannot take any action against these employers," Shokeen said. "She told me she had dealt with many companies which keep opening different parent companies and keep on transferring businesses over just to kick out some people to avoid liabilities."
Waterstone Insolvency liquidator Damien Grant said the company behind Jory Henley was placed into liquidation as part of an organised restructure.
He said the redundancies happened immediately prior to liquidation. He said this was not standard practice but was not uncommon.
Grant refuted Shokeen's claims that directors had transferred the business to a new company to avoid liabilities around staff redundancies.
He could not comment on claims of the company not following the correct redundancy process.
"It was quite a messy and technical restructure, as part of the process, safeguards were put in place by me to ensure that staff would get paid their holiday pay and any other employee entitlements."
Liquidator Michael Turner also working on Double Star Ltd's liquidation said the situation around transferring the business to a new legal entity "seemed more dramatic than it was".
"Letting the staff go was not the primary motive. They were downsizing the operation from five stores to two, and because of time constraints, not related to the employees, they had to act fast," Turner said.
"By doing a downsizing operation the warehouse in Mt Wellington was essentially too big. The overheads were too huge and he wasn't getting the scale so the reason he had to do this was because it was all under one company," Turner said, adding the decision to liquidate the company would be more expensive than going through the standard restructure process.
"The problem was he had too many non-performing stores and he needed to act now. He had all of his eggs in one basket."
The liquidator's first report shows the company's assets were sold to a general security agreement holder for $1.025 million. Staff who were collectively owed $47,000 would be paid out of this transaction within the next two months, Turner said.
Lawyer Sebastian Bisley, partner in Buddle Findlay's commercial litigation and insolvency team, said there did not appear to be anything unlawful about the transfer of the business to a new entity with the same director.
"The transaction plainly would require very careful scrutiny by the liquidators and creditors to ensure that employees' and creditors' rights are protected. However subject to that scrutiny taking place, there does not appear to be anything unlawful about it," Bisley said.
The business would have been transferred to clear debts, he said.
Bisley said a person could claim personal grievance against a liquidated company if they had the permission of the liquidator or court.
Jory Henley previously had stores in Wairau, Newmarket, Westgate, Botany and Manakau. Just the Wairau and Manukau stores remain open today.