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The Need for Employment Agreements

Published 01 Apr 2010

In this article we will explain exactly why it is so important to have employment agreements in place for all of your employees.

Here is a case which serves to emphasise the importance. The case and point of Goldfinch v Lockey is a true story of how one unprotected business landed in an employment dispute that cost it - and this is only the financial price - the loss of an estimated $500,000 business venture, in addition to the many thousands of dollars in lost time, arguing unnecessarily, about what notice periods should be, or whether deduction can be made for debts, and unnecessary legal fees, apart from monies that were due to the employee anyway.

Whilst we all like to be friends and act informally and it seems easier not to bother with forms, when you have significant money on the line, a little insurance is a wise move.

In EAL's opinion a situation like this could easily be avoided. When a written employment agreement is used, you not only cement basic dos and don'ts in place, but most importantly, the process for the early formal hearing of complaints is straightforward and accompanied by a STEP BY STEP dismissal instruction guide & support.

Read on to learn how avoidable problems can lead to a big loss.
Incidentally, this employer avoided penalty payments for breaches of standard laws only because these were not sought by the plaintiff. Please note it is illegal not to have a written Employment Agreement.


Employment Relations Authority - 11 March 2010
Mr Goldfinch was employed as a truck driver, commencing in October 2008.
  • There was no written employment agreement or organised disciplinary process.
  • Mr and Mrs Lockley counterclaimed the sum of $500,000 in respect of a contract they say their business lost because of Mr Goldfinch's actions.
  • Mr and Mrs Lockley said they often received complaints from customers about late deliveries of freight. They said the driver at fault when these complaints were received was Mr Goldfinch. They believed that Mr Goldfinch devoted considerable time to other activities out of work, particularly to animals he raised on farm land he leased and to an agricultural contracting business, to the detriment of his work. These activities meant that he did not receive enough sleep. Deliveries were late because he would stop the truck and sleep at the side of the road.
  • Mr Lockley said that twice he saw Mr Goldfinch asleep in his truck just outside Taupo. Although he said he warned Mr Goldfinch, the warnings amounted to little more than drawing a concern to Mr Goldfinch's attention. There were no disciplinary warnings.
  • The late delivery was the last in a number of late deliveries the customer was no longer prepared to tolerate. The $500,000 p.a. contract was cancelled.
  • Mr and Mrs Lockley decided to terminate Mr Goldfinch's employment by way of redundancy.
Pay Deduction in respect of tie down straps taken
  • There was no written authority for the deduction. It was unlawful, and in breach of the Wages Protection Act 1983.
The counterclaim
  • Mr and Mrs Lockley's counterclaim in respect of the loss of the contract required detailed evidence ... None of that was provided.
Summary of orders
  • J E and I M Lockley are ordered to pay to Mr Goldfinch approximately $2,500
If you do not have an up to date written Employment Agreement, please see our Employment Contracts Creator

If you need assistance with correct disciplinary & dismissals process see our software How to Dismiss Staff

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