Selected cases

Employment Court of New Zealand · [2024] NZEmpC 183

Auckland Trotting Club Inc v Payne

The Employment Court case Auckland Trotting Club Inc v Payne involved a dispute over commission payments under a written employment agreement.

Employment Court of New Zealand27 Sept 2024

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Quick read

  • Employers cannot rely on verbal agreements to change written employment contracts.
  • The Employment Court case Auckland Trotting Club Inc v Payne involved a dispute over commission payments under a written employment agreement.

Use this to check

  • Written employment agreements are legally binding and must be adhered to unless formally amended.
  • Verbal agreements cannot override written contracts without clear documentation.
  • Employers must ensure that commission or bonus calculations align with the terms of employment agreements.

Decision snapshot

  1. What happened

    • Graham Payne worked for Auckland Trotting Club Inc (ATC) from 2005 to 2023, managing the TAB betting outlet at Alexandra Park.
    • His pay included a $45,000 annual salary and a quarterly bonus based on a percentage of the agency fee from TAB New Zealand to ATC.
    • In 2013, they formalised his employment terms in a written agreement specifying a performance incentive formula.
    • In 2015, TAB renegotiated its agency fee with ATC, increasing it to a flat 4%.

  2. What the court had to decide

    • The legal issue was whether Auckland Trotting Club Inc (ATC) was required to apply an increased agency fee to the employee's commission calculations as specified in the written employment agreement.
    • The Court also considered if a verbal agreement or waiver could prevent the employee from claiming arrears based on the increased fee.

  3. What the court decided

    • The Employment Court ruled in favour of the employee, Graham Payne, finding no verbal agreement or waiver that could override the written employment agreement.
    • The Court determined that Payne was entitled to arrears for the period from 2016 to 2021 due to ATC's failure to apply the increased agency fee to his commission calculations.

Practical impact

Practical read

  • Employers cannot rely on verbal agreements to change written employment contracts.
  • Changes to pay structures, particularly involving commissions or bonuses, must be documented and agreed upon in writing by both parties to prevent significant liability.

Useful next steps

  • Written employment agreements are legally binding and must be adhered to unless formally amended.
  • Verbal agreements cannot override written contracts without clear documentation.
  • Employers must ensure that commission or bonus calculations align with the terms of employment agreements.
  • Employees do not waive their contractual rights through silence or inaction unless there is clear evidence of an intentional waiver.
  • Disputes over pay and bonuses can result in significant liability for back pay and legal costs.

The story

This case involved a dispute over commission payments owed to an employee under a written employment agreement. The employer, Auckland Trotting Club Inc (ATC), argued that a verbal agreement excluded the increased agency fee from the employee's bonus calculations. The Court found no evidence of such an agreement and upheld the employee's entitlement to arrears.

The decision emphasises the need for clear documentation and adherence to written employment agreements, especially for businesses with commission-based pay structures.

What the Court decided

The Employment Court ruled that:

  • There was no verbal agreement to exclude the increased agency fee from the employee's bonus calculations.
  • The employee did not waive his contractual rights or agree to any changes to the commission formula.
  • The employer was required to apply the increased agency fee to the bonus calculations and pay arrears for the period from 2016 to 2021.

The Court's decision emphasised that any changes to employment agreements must be clearly documented and agreed upon by both parties.

What employers should learn

Employers should take the following lessons from this case:

  • Always document changes to employment agreements in writing and ensure both parties agree to the changes.
  • Do not assume that verbal agreements will override written contracts.
  • Regularly review employment agreements to ensure compliance with changes in business practices or external factors, such as changes to commission rates.
  • Communicate clearly with employees about any changes to their pay or bonus structures to avoid misunderstandings.
  • Seek legal advice if unsure about obligations under an employment agreement.

Practical checks

To avoid disputes over commission or bonus payments, employers should:

Sense check

  • Ensure all employment agreements are in writing and include clear terms for pay and bonuses.
  • Document any changes to pay structures and obtain written agreement from the employee.
  • Regularly review and update employment agreements to reflect current business practices.
  • Communicate any changes to pay or bonus structures clearly and promptly to employees.
  • Keep detailed records of all agreements and communications related to pay and bonuses.

Common questions

Can a verbal agreement change the terms of a written employment contract?

No, verbal agreements cannot override a written employment agreement unless they are formally documented and agreed upon by both parties.

What should employers do to avoid disputes over commission or bonus payments?

Employers should ensure that any changes to pay structures are clearly documented and agreed upon in writing by both parties to avoid disputes.

Does an employee's silence mean they have waived their contractual rights?

No, silence or informal discussions do not constitute a waiver of contractual rights unless there is clear evidence of an intentional and informed decision to waive those rights.

What was the outcome of the Auckland Trotting Club Inc v Payne case?

The Court ruled that Mr Payne was entitled to arrears for the period from 2016 to 2021, as there was no valid agreement or waiver to exclude the increased agency fee from his bonus calculations.

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