A man has been awarded $15,000 compensation by the Employment Relations Authority (ERA) after he was made redundant from an Auckland advertising agency he had once owned.
Until mid 2007, Sergio Guida and his wife owned Virtus: Officine di Immagine. He then sold the business for $100,000 to Ogilvy New Zealand, subject to a number of conditions.
One condition was Mr Guida would continue to work for the company and for the first three years would be paid $50,000 per year, so long as he was not made redundant.
Shortly before the end of his first year of employment Ogilvy made Mr Guida redundant, therefore negating the clause in which they were to make future annual $50,000 payments.
Mr Guida took the company to the ERA and argued that when he signed the contract Ogilvy had guaranteed they would not be making him redundant.
Ogilvy denied this.
ERA member James Wilson said on the balance of probabilities Ogilvy had not guaranteed Mr Guida would not be made redundant.
However, considering the clause was part of the contract, it was likely company director Greg Partington probably indicated there was no intention to make Mr Guida redundant, Mr Wilson said.
"Mr Guida, perhaps naively but in the light of the other conditions set out in the sale and purchase agreement and the proposed employment agreement, accepted...Mr Partington's assurance." Mr Wilson accepted the global recession had resulted in the downturn in the advertising industry and Mr Guida's redundancy was for genuine commercial reasons.
"...(but) the way in which he was made redundant by Ogilvy was not what a fair and reasonable employer would have done in all circumstances," Mr Wilson said.
While not contractually obligated to do so, Mr Partington should have considered a far more generous severance payment including the three $50,000 annual payments Mr Guida would have received if he had not been made redundant, Mr Wilson said.
He accepted that Mr Guida felt there had been an "unprofessional betrayal of trust", which had a major emotional effect on him.
He awarded him $15,000 compensation.