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Judge Orders Employee To Pay Penalty For Giving Insufficient Notice

Published 19 Sep 2012

Pure New Zealand Foods Ltd v Mr. P Prakash - ERA - August 2012.

Mr Prakash obtained residence in New Zealand under the Skilled Migrant Category as an ethnic chef. He made naan bread.

Mr Prakash’s signed employment agreement required three month’s notice. The resignation letter gave two weeks’ notice. Soon after his final day of work at Pure Foods he commenced employment as a naan bread chef elsewhere.

Pure Foods claims Mr Prakash has breached the covenant of restraint and notice period provisions contained in their employment agreement.
Pure Foods sought a restraining order and to recover alleged loss of profits and penalties against Mr Prakash for breach of his contractual notice period.

Mr Prakash made counterclaims alleging he was subject to unfair bargaining by Pure Foods during negotiations for an individual employment agreement in 2009, and therefore not obliged to comply with the written agreement.

Mr Prakash said in circumstances of unfair bargaining a penalty for breach of s63A of the Act and compensation to him for unfair bargaining should apply.

The bargaining process was held to be fair.

The written agreement with three month’s notice was binding. Mr Prakash was ordered to pay $500 as a penalty for breaking the three month notice provision.

The restraint of trade was held to be unreasonable because it covered all of New Zealand, was for 24 months, and covered “any other business” relating to food manufacture. Pure Foods also were unable to demonstrate a “proprietary interest” in knowledge that Mr Prakash had acquired whilst working for them.

Pure Foods had lost some business. However, insufficient evidence relating Mr Prakesh’s actions to the financial losses, their cause(s) and the remoteness of the loss had been provided.

“Should Pure New Zealand Foods Limited wish to pursue its claims for loss of profits the parties are required to attend mediation in good faith within six weeks of this determination. If the parties are unable to resolve the matters at mediation between them the claim for losses will be set down for investigation by the Authority.”

This is one of the first cases, post the landmark Blackmore case (see February 2012 Newsleter), where the bargaining process has been held up to the judicial microscope for examination. Expect more cases on alleged unfair bargaining process.

In this case Mr Prakash has an English speaking friend to help him with language difficulties, so he was deemed to have understood the legal implications. Pure Foods had considerable difficulty in establishing enough proof that the bargaining process was fair, as they had to rely in part upon verbal conversations which were contested.

However, Mr Prakash had also signed a written acknowledgement that he was aware he could take independent advice and was allowed reasonable time to do so. This alone would not suffice, but it was backed up by the reality of Mr. Prakesh having taken advice.

The EAL document called "Putting Employment Agreements In Place For Job Candidates" contains detailed information on how to do this correctly and it also includes sample letters of offer. This is available to Employers Support Package subscribers and is located in the Library Section of the Employers Toolbox at