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Employment Court Throws Out Second Attempt by Singapore-Owned NZ Company to Cut Down CEO’s Rights on Dismissal

The Employment Court has thrown out a second attempt by a Singapore-owned Auckland medical clinic to cut down a chief executive’s rights on dismissal following “loss of confidence” by a board of directors.

In February 2004 Centre for Advanced Medicine Ltd (an Auckland chelation therapy clinic wholly owned by Master Projects Pte Ltd, Singapore) summarily dismissed Chief Executive Dr Adrian Sprott. Dr Sprott has issued legal proceedings for unjustified dismissal.

At a hearing held before the Employment Court on 6 April 2005, Centre for Advanced Medicine Ltd claimed that the issue whether a board could summarily dismiss a chief executive in whom they had lost trust and confidence raised “an important question of law”, warranting removal of the proceedings from the Employment Relations Authority to the Employment Court for that issue to be determined.

In a Decision issued on 10 May 2005 (Judgment AC20/05) the Employment Court rejected this claim. Judge Coral Shaw stated:

"While the basic law for determining whether a dismissal is unjustified is common to all dismissals, all employees, and all employers, the application of those tests will necessarily depend on the individual circumstances of each case... That does not mean that a question of law arises from the differentiation. It is a question of fact as to whether an employer meets the standard of fair process...

"There is no question about the legal test to be applied by the [Employment Relations] Authority and the Court... The legal test which is relevant to this case is one which is applied daily by the Employment Relations Authority when investigating claims of unjustified dismissal... The Employment Relations Act 2000 does not differentiate between classes of employees or employment relationships in its personal grievance provisions. These afford legal remedies to all employees and employers."

At an earlier hearing before the Employment Relations Authority (held on 21 February 2005), Centre for Advanced Medicine Ltd had claimed that in view of Dr Sprott’s particular responsibilities, high salary and position as chief executive, the employer-employee relationship was ended as soon as the Board had “lost confidence” in him as CEO, and that therefore the dismissal procedures under the Employment Relations Act did not apply.

In a Decision issued on 25 February 2005 (Determination AA 71/05) the Employment Relations Authority had rejected this claim. Authority Member Marija Urlich stated:

“The [Employment Relations] Act makes no distinction between employees seeking resolution of their employment relationship problems on the basis of position, responsibility or level of remuneration. The principles to be applied to a claim of unjustified dismissal by an employee who holds the position of CEO are the same as for any employee.”

Dr Sprott welcomed the decisions of the Employment Relations Authority and Employment Court. “Perhaps now Centre for Advanced Medicine Ltd will accept that the dismissal procedures under the Employment Relations Act do apply to all employees,” he said. “It’s perfectly clear from the statute that this is the case."

Centre for Advanced Medicine Ltd is wholly owned by a Singapore corporation. “I can’t imagine there are any New Zealand-owned employers who take the view that summary dismissal of a CEO can sometimes fall outside the scope of the Act,” said Dr Sprott. "The Act is quite clear that its provisions cover all employees and all occasions of summary dismissal.”

ENDS

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