Pita Pit’s franchise owner must pay $35,000, plus interest, to a former employee made redundant after it belatedly realised how much commission she might earn, the Employment Relations Authority has ruled.
Anahera Tamahori was employed in February 2020 as a business development manager, a new position to help Pita Pit franchisees grow their sales.
The job came with a base salary of $60,000 plus commission, which could lift the total salary above $125,000 a year, Tamahori was told.
PPO, owner of the master franchise for the Pita Pit brand in Australasia, expected the position to focus on growing its corporate catering business. Then Covid hit, and lockdowns began.
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Tamahori instead spent most of her time focusing on growth through the Government’s free lunch in schools programme, ERA member Pam Nuttall said in a determination dated August 30.
Covid-19 lockdowns badly hit Pita Pit’s corporate catering and dine-in business, while the school lunch programme was growing nationwide, something PPO had not anticipated when it employed Tamahori.
Four Pita Pit franchises won tenders for the school lunch programme pilot before Tamahori began work. By the end of 2021, Pita Pit supplied lunches to more than 60 schools.
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How the Employment Relations Authority works. (Video first published in June 2021)
PPO said that from June 2020, the company discussed restructuring and proposed disestablishing Tamahori’s business development manager role.
At some point, management became concerned the company might be exposed to bigger commission payments than anticipated as a result of wording in Tamahori’s employment agreement.
In an email to PPO directors in September 2020, Pita Pit NZ general manager Brett Ingham said Tamahori’s commission calculations were based on catering revenue assumptions only, and a 5% commission rate on top of royalties.
School lunches were not considered because of the programme’s small scale at the time, and Tamahori’s agreement could be interpreted as commission on all sales generated.
“I’m extremely sorry for how this has eventuated and was not anticipated at the time,” he wrote.
PPO chief executive Chris Henderson told the ERA the board at one point believed it might be able to avoid a restructure but then became aware of the issue about Tamahori’s commission.
PPO would have seen 83% of its revenue from lunches in schools paid as commission to Tamahori, Henderson said, leaving just 17% to pay operating expenses including other staff costs.
“This potential liability meant we could no longer hold off on starting a restructuring process, and we started consultation,” Henderson said.
The restructure proposal was presented on October 9, and Tamahori was given one month’s notice on December 3.
Nuttall found that the initial restructure proposal was a genuine response to the result of the Covid lockdowns in 2020, and not to provide a pretext for dismissing Tamahori.
Once the potential liability was identified, however, there was an added motivation to disestablish Tamahori’s role, she said.
“PPO’s belated apprehension of potential exposure in terms of considerably larger than anticipated commission payments was not communicated in the consultation process or directly to Ms Tamahori.”
It went ahead with a restructure process “in which its motives were not wholly genuine,” she said.
PPO denied that Tamahori was unjustifiably dismissed or disadvantaged, and denied it breached its statutory good faith duties.
Nuttall awarded Tamahori $15,000 for three months’ lost salary, and interest on that from December 21, 2020.
She found that Tamahori was unjustifiably dismissed, but not unjustifiably disadvantaged, and that PPO had breached its good faith duties. She awarded Tamahori compensation of $20,000 for the hurt, humiliation and loss of dignity as a result of her unjustified dismissal.
Tamahori also claimed commission payments on gross sales totalling $1.8 million in 2020 and $1.6m in 2021, but Nuttall ruled the relevant sales did not meet the threshold of sales over $1.5m.
Costs were reserved.
