Employment Relations Authority – Bonus payment – Wage increase – Arrears – Remedies

At issue was: 

• Whether the employer owed a bonus payment and wage increase to the employee.
• If so, what remedies should be awarded to the employee. 

The employer had two directors, K and L. K took care of “governance”; L had the responsibility for day-to-day operations, including tasks relating to staffing, customers and contractors. The employee was hired by and reported to L.

L wrote to the employee informing him of a $40,000 bonus and a 5% pay rise as a “cost-of-living raise”. The letter had the company letterhead and L signed the letter as “Managing Director”.

K disagreed with the bonus and pay rise. K disputed L’s ability to authorise them without gaining K’s prior consent. K claimed the company constitution required all significant payments to be approved by both directors. Since K did not agree to the bonus award and wage increase, L could not commit to these payments alone. The employer never paid the bonus or the wage increase.

The employee lodged a claim in the Authority and sought: 

• payment of the bonus and wage increase
• interest on the amounts owing
• compensation.

The Authority found that the employer entered into “a binding promise” to the employee on the payments of the bonus and pay rise, as set out explicitly in the letter signed by L, on the company letterhead (see paras 24, 32). The Authority took into account that:

• the employee accepted and acted on the promises and performed additional duties and made an extra effort in response to them. Such promises amounted to a “binding contractual agreement of the employer in the employment relationship, which had the special characteristics of being a fiduciary relationship, and with the mutual statutory obligations of good faith” (see para 32).
• The employer could not automatically avoid its obligations by arguing that the promise was entered in a manner that did not comply with the company constitution or its own internal requirements (see paras 31, 33, 34).
• The employee “had no actual knowledge” of the specific provision which K relied on to prevent L from properly awarding her bonus and pay rise (see para 36).
• K also never communicated his views to the employee that L was not “authorised” to make decisions around staff payments without his consent (see para 39).

The Authority concluded that the employer owed the employee the bonus payment and the 5% wage increase. The Authority ordered the employer to pay the employee the $40,000 bonus payment, wage arrears, interest, and $5,000 compensation for hurt and humiliation (see paras 42, 56).

Ong v Comsol (Computer Solutions) Ltd [2022] NZERA 667 [PDF, 285KB]