Employment Law Alert: The Costly Danger of "Predetermined" Redundancies and Slack Record-Keeping

A recent decision from the Employment Relations Authority (ERA), Sasha Lee v JNJ Management Limited & National Holdings Limited [2026] NZERA 309, serves as a stark, cautionary tale for Kiwi business owners. The determination highlights how messy corporate structures, poor record-keeping, and procedural shortcuts can culminate in a massive financial headache.  

In this case, the employer was ordered to pay well over $150,000 (plus 13 weeks of lost wages) due to basic compliance failures.  

Here are the critical dangers for employers exposed in this ruling, and how you can avoid the same traps.

1. The Danger of "Predetermined" Redundancies

The single biggest mistake an employer can make during a restructuring process is treating consultation as a rubber-stamping exercise.  

In this case, JNJ Management Ltd (JNJ) attempted to justify Ms. Lee’s redundancy by citing a steep 500% drop in profit. However, the ERA found the dismissal completely unjustified due to clear signs of predetermination:  

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  Stripping duties first, consulting later: Two weeks before even launching the restructure process, the director had already stripped Ms. Lee of her core management and HR responsibilities and handed them to other staff.  

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  Flawed consultation packs: The consultation documents failed to provide actual financial evidence of the profit decrease, failed to explain why making her role redundant would fix the issue, and failed to consider any alternatives.  

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  Rushing sick employees: JNJ pushed ahead with the process while Ms. Lee was away on sick leave, refusing to pause the timeline.  

The Lesson

A redundancy must always be about the position, not the person. If you strip an employee's duties before you've even asked for their feedback, the ERA will see right through it and deem the outcome predetermined. You must provide the business case (including necessary financial data) and genuinely listen to alternatives.  

2. The Multi Entity Maze (Who is the Actual Employer?)

Ms. Lee acted as a Personal Assistant to the Group's sole director, but her everyday reality involved jumping between different entities, acting as a General Manager for a subsidiary company, National Holdings Limited (NHL).  

Ms. Lee claimed she was "jointly employed" by both companies. While JNJ narrowly escaped this because they handled 100% of the payroll obligations, the confusion added massive complexity to the investigation.  

The Lesson

If you operate a group of companies or interconnected entities, ensure your employment agreements explicitly state who the employer is and what entities the employee is permitted or required to support. Blur the lines too much, and you risk dragging multiple entities into joint-employer liability claims.  

3. The "Salaried Worker" Overtime Trap

Perhaps the most financially devastating blow to the employer was a $105,342.25 order for wage arrears.  

Ms. Lee was a salaried employee. Her employment agreement contained two conflicting clauses:  

1. One stating her salary covered all hours worked to complete her duties.  

2. Another stating she would receive extra payment for "reasonable and mutually agreed additional hours."   

The director argued that Ms. Lee never asked for express approval to work overtime. However, because the director worked closely with her (and even lived with her for a period), the ERA ruled that he impliedly approved the overtime simply by knowing she was doing the work and failing to stop her.  

The Lesson

If your employment agreements state that overtime will be compensated, you must enforce a strict, written pre-approval process. More importantly, if you know a salaried worker is consistently working around the clock to keep your business afloat, you cannot just look the other way and assume it is covered by their base salary.  

4. The Nightmare of Slack Time Keeping

Compounding the overtime issue, JNJ failed to keep a robust, legal wages and time record for Ms. Lee's extra hours.  

Because the employer failed in their statutory duty to keep accurate records, the ERA allowed Ms. Lee to reconstruct her hours using her personal business diaries and spreadsheets. The ERA accepted her reconstructed data on the balance of probabilities and ordered the back-pay.  

⚖️ The Lesson

Under the Employment Relations Act 2000, keeping accurate wages and time records is non-negotiable. If you don't keep them, and an employee claims wage arrears, the ERA is highly likely to accept the employee’s reasonable estimation of their hours, leaving you defenseless.  

The Damage Breakdown

To put into perspective how severe the penalties can be, here is what the ERA ordered JNJ to pay:  

Remedy Type	Amount Ordered
Wage Arrears	$105,342.25 (Gross)
Annual Holiday Pay Owing	$34,373.75 (Gross)
ERA Compensation (Hurt & Humiliation)	$17,500 (Reduced from $25,500 due to post-employment tenant issues)
Lost Wages Reimbursement	13 weeks of lost wages
Costs	Reserved (To be paid later)

Summary Checklist for Employers

To ensure your business doesn't end up on the wrong side of an ERA determination, review your practices immediately:

• [ ] Clean Up Contracts: Ensure salary clauses clearly define expectations around hours and that conflicting "overtime pay" clauses are removed or rigidly managed.  

• [ ] Track the Time: Implement formal time-tracking for all staff—even salaried management—if they regularly work beyond standard hours.  

• [ ] Slow Down Restructures: If an employee goes on sick leave during a consultation process, pause and seek legal advice. Never make role changes before consultation ends.  

• [ ] Show Your Math: If making redundancies for financial reasons, you must be prepared to back it up with data in the consultation pack.