Shoddy treatment costs Just Hotel $120,000

Some employers simply fail to heed the warnings issuing forth on a weekly basis from the Employment Relations Authority and the Employment Court, about the need for justified reasons and a fair process when dismissing an employee. When you combine a messy dismissal with a two year fixed term contract that still has over 16 months to run, you end up with a big award against you. For Just Hotel Ltd, owned by Wellington property tycoons the Chow brothers, this was nearly $120,000.

James Jesudhass started as general manager of the Wellington hotel on 1 October 2004, on a two year fixed term agreement, which included a salary of $50,000, a car, a bar tab of $500 per month, and a $10,000 performance bonus. The contract specifically provided for termination on one month's notice.

When he started the hotel (on Willis St) was still under construction, and he worked long hours to ensure the opening one month later went smoothly.

In January 2005 John Chow, a shareholder and director of the company, instructed Mr Jesudhass to train his sister, Vicki Chow, to be the Assistant General Manager. Six weeks later, however, Mr Chow made her Managing Director, and told Mr Jesudhass to report to her. Several incidents followed in which Mr Jesudhass's authority was undermined, even though the hotel was making a profit and its occupancy was far above expectations. These included Ms Chow sending a memo to all staff, copying it to Mr Jesudhass, in effect demoting him to a marketing role.

Mr Jesudhass subsequently allowed a union representative to speak to staff, and because he had not told management of this, he was suspended. He was not consulted about the decision to suspend, and in a move clearly signalling his intentions for Mr Jesudhass, Mr Chow cut off his cellphone, changed the lock on his office door and took his car keys.

Less than two weeks later, an unsuccessful mediation took place. Mr Jesudhass attempted to have the contents of the discussion considered by the Court - he claimed he was told he would be sacked straight after the mediation - but this was ultimately rejected by the Court of Appeal, on the grounds that the law prevents discussion in mediation from being used in a legal proceeding.

Sure enough, on the same day as the mediation, Mr Jesudhass was sacked. He had no chance to comment on the proposed dismissal, and was dismissed without notice. The reasons given were weak, and were essentially aimed at justifying a decision that clearly had been reached some days ago. They were found by the Employment Court to be inadequate.

The Court said that both the suspension and the dismissal were unjustified. Notwithstanding the clause enabling the employer to terminate on one month's notice, the Court said Mr Jesudhass would have worked out the rest of the fixed term had he not been unjustifiably dismissed.

It awarded him $68,268 in reimbursement of lost salary for the balance of the two year fixed term, as well as compensation for lost benefits for the same period, holiday pay, and $10,000 for injury to feelings. This shows that sacking an employee on a fixed term is risky unless there is proper justification - just because a fixed term agreement has a clause allowing for early termination, it doesn't mean the employer automatically escapes having to pay out the balance of the term if they dismiss the employee unjustifiably.

Total award: $119,237. I suspect Just Hotel Ltd will take a little more care in dealing with their next general manager.

 

Greg Cain

Greg Cain is an employment lawyer at Minter Ellison Rudd Watts.

 

Picture: Wellington's Willis Street. Supplied photo