Junchen Xu v Aurora Developments Limited [2026] NZERA 320

This Employment Relations Authority (ERA) determination is about a project quantity surveyor, a disputed start date, unpaid minimum wages, unpaid incentives, annual holiday pay, work performed while supposedly on annual leave, and an unjustified redundancy dismissal. Aurora Developments Limited said Junchen Xu was only learning and observing during March 2021 and did not start paid employment until 1 April 2021. The ERA disagreed. It found Mr Xu was employed from 1 March 2021, had done real project work, and was owed minimum wage and holiday pay for that month. The ERA also found his later redundancy dismissal was unjustified because the employer made the decision without consultation, without a proposal, and without giving him business information or a chance to comment. The full determination is embedded at the end of this page.

The short point

This case shows two common employment law problems. First, an employer cannot avoid wages by calling the first month learning, observation, training, or practical exposure if the person is actually doing work for the business. The ERA looked at what Mr Xu was really doing. His daily work logs, timesheet, and a message from his supervisor supported the conclusion that he was working for ADL from 1 March 2021.

Secondly, a redundancy is not justified just because an employer says a position is no longer required. The employer must still follow a fair process. That means giving the employee relevant information, explaining the proposal, consulting before the decision is made, considering feedback, and being able to explain the genuine business reasons for the proposal. ADL did not do that.

Background

Mr Xu worked for Aurora Developments Limited as a project quantity surveyor. ADL builds residential homes. Zhengyu Zhang was ADL's sole director. Wenfeng Su was a shareholder and was engaged by ADL to carry out management related tasks and duties.

The parties disputed when Mr Xu's employment began. Mr Xu said he started employment on 1 March 2021 and worked full time from then. ADL said his formal paid employment began on 1 April 2021 and that March 2021 was only a period of learning, observation, scenario work, and practical exposure.

Mr Xu's position was later made redundant. He was told on 6 January 2025 that his role was redundant and that his final day would be 27 January 2025. Mr Xu brought claims for unjustified dismissal and various wage and holiday pay arrears.

Was Mr Xu an employee before 1 April 2021?

The ERA approached this issue by looking at the real nature of the relationship. What mattered was not simply what ADL called the first month, but what actually happened during March 2021.

Mr Xu produced daily work logs, an example timesheet, and a text message from his supervisor referring to him having worked very hard over the previous days and saying that permanent employment would be moved forward. The daily work logs showed Mr Xu completing purchase orders, working on site instructions, and completing variation orders.

ADL said that March was limited to learning and observation and that Mr Xu was not doing independent billable work. The ERA rejected that as determinative. ADL had not produced learning or training records for Mr Xu. It had not shown why a one-month observation period was needed before he could be employable as a quantity surveyor. The daily work logs supported the conclusion that he was doing relevant project work for ADL.

The ERA also noted that although ADL did not bill clients for Mr Xu's March work, that did not mean ADL gained no economic benefit from it. He was working on projects ADL was involved in.

The ERA found that Mr Xu was employed by ADL between 1 March and 1 April 2021.

Minimum wage and holiday pay for March 2021

Because Mr Xu was an employee during March 2021, he was entitled to be paid. The ERA accepted, based on his work logs and timesheet example, that he was entitled to payment for 40 hours per week for each week in March 2021 at the statutory minimum wage rate then in force.

ADL was ordered to pay that gross minimum wage amount, described in the determination as the Sum Owed, together with an additional 8 percent holiday pay on that amount.

The $7,400 incentive payment

Mr Xu also claimed unpaid incentives. His employment agreement referred to an appendix called Incentive Mechanisms. Mr Xu had signed the incentive policy document. The policy said he would be rewarded $100 at the end of each project if he indirectly participated in calculation work, assisted with placing orders, applied for public services, and collected information for CCC applications.

ADL argued that the policy was not binding because it had not been signed by ADL and had not been operationalised. The ERA rejected that argument. It found the policy was binding because it was expressly referred to in Mr Xu's employment agreement, Mr Xu had signed it, and it clearly stated what he would be paid at the completion of each qualifying project.

Mr Xu gave specific details of 74 completed projects. The ERA found he was entitled to $7,400 gross under the incentive mechanism and ordered ADL to pay it.

The redundancy dismissal was unjustified

ADL dismissed Mr Xu on the basis that his position had been made redundant. A redundancy can be genuine, but the employer still needs to follow a fair process. The ERA referred to the basic redundancy principles from Grace Team Accounting Limited v Brake.

On 6 January 2025, Mr Su asked Mr Xu to attend a meeting. Mr Xu did not know what the meeting was about. During the meeting he was told that his position had been made redundant and that his final day would be 27 January 2025.

The ERA found the dismissal was unjustified for three main reasons. ADL did not consult with Mr Xu before deciding to disestablish his position and end his employment. ADL did not provide information to him or give him a proposal seeking his feedback before the redundancy decision was made. At the time, ADL did not provide information supporting its business case or explain the genuine business reasons for making the role redundant.

Work done while supposedly on annual leave

Mr Xu also claimed wage arrears for 10 September to 30 September 2023. The issue was whether he had taken annual leave during that period or whether he continued to work while overseas.

Mr Xu said he had asked whether he should take his laptop with him so that he could continue working overseas, and Mr Zhang told him to take it. Mr Xu produced WeChat messages between himself and Ms Hang to show that he continued working during the period.

The ERA accepted that Mr Xu undertook work for ADL while overseas and was not on annual leave during that period. ADL was ordered to pay the equivalent of two weeks wages gross, plus 8 percent on that amount.

Annual holiday pay was incorrectly paid with ordinary pay

During the employment, ADL paid Mr Xu annual holiday pay with his ordinary pay in each pay period. That did not work because Mr Xu was a permanent full-time employee. The ERA found ADL was not able to pay his annual holiday pay in that way.

Despite the payments ADL had already made, the ERA found Mr Xu was still entitled to annual holiday pay under the Holidays Act 2003. ADL was ordered to pay him the equivalent of four weeks paid annual holidays for each completed 12-month period of continuous employment, and for the final year to calculate and pay annual holiday pay under section 25 of the Holidays Act.

The ERA noted that the purpose of the Holidays Act and section 28B(2) required the employee's annual holiday entitlement to be restored as if the incorrect payment had not been made. ADL could bring a new application if it wanted to try to recover what it considered mistaken annual holiday payments.

Claims against Mr Su and Mr Zhang

Mr Xu also alleged that ADL had breached provisions of the employment agreement and that Mr Su and/or Mr Zhang aided or abetted breaches. The ERA found there was insufficient evidence to establish that claim. That part of the claim did not succeed.

Penalties

The ERA found ADL breached section 6 of the Minimum Wage Act 1983 by not paying Mr Xu during the first month of his employment. The breach was not committed knowingly, it was rectified after the first month of employment, and the ERA was not aware of any previous breach history. Even so, ADL had a statutory obligation to comply with minimum wage law. A $1,000 penalty payable to the Crown was ordered.

The ERA declined to impose a penalty for the Holidays Act breach. It treated that breach as technical in the circumstances, found there was no need for deterrence, and noted Mr Xu had not sustained loss because of that error.

Compensation and lost wages for unjustified dismissal

Mr Xu gave evidence about the impact of the dismissal. He sought medical advice after the meeting where he was told he was being dismissed. The dismissal came as a shock, affected his emotional and mental health, and caused sleep difficulties.

The ERA awarded $14,000 compensation under section 123(1)(c)(i) of the Employment Relations Act 2000.

For lost wages, Mr Xu sought three months ordinary time remuneration. The ERA accepted that he had taken reasonable steps to find new employment and that this was not a case where dismissal was shown to be inevitable. ADL had not explained its financial position, the alleged savings, or why the position had to be disestablished. ADL was ordered to pay the equivalent of three months ordinary time remuneration gross.

No contribution reduction

The ERA considered whether any remedies should be reduced under section 124 of the Employment Relations Act 2000. It found Mr Xu did not contribute to the situation giving rise to the personal grievance. No reduction was applied.

Why this case matters

This determination is useful for employees who are told that an unpaid beginning period was only training or observation. If the person is doing work that benefits the business, the employer may still have to pay at least the minimum wage and holiday pay.

It is also another straightforward redundancy process case. The employer may have had business concerns, but it needed to explain them and consult before making the decision. ADL did not provide the business information or a proposal before dismissing Mr Xu. That was fatal to the redundancy process.

The holiday pay issue is also important. Paying 8 percent with ordinary pay is not a shortcut for permanent full-time employees. If an employer incorrectly rolls up holiday pay, it may still have to restore and pay annual holiday entitlements properly.

Practical takeaways

• Training labels are not decisive: if someone is doing productive work, they may be an employee and must be paid.
• Keep records: Mr Xu's daily work logs, timesheet and messages were central to proving the March 2021 employment period.
• Minimum wage is mandatory: unpaid work can create both arrears and penalties.
• Incentive documents can bind: a policy referred to in an employment agreement may create enforceable wage entitlements.
• Redundancy needs consultation: announcing a completed decision is not a fair redundancy process.
• Give the business case: employees must receive relevant information and a chance to comment before redundancy decisions are finalised.
• Annual leave should be real leave: if an employee works while supposedly on annual leave, wage and holiday pay consequences may follow.
• Rolled-up holiday pay is risky: permanent full-time employees generally cannot have annual holiday pay paid with ordinary pay each pay period.
• Contribution is not automatic: Mr Xu received no reduction because he did not contribute to the personal grievance.
• Costs are separate: costs were reserved and could be determined later if the parties could not agree.

Read the full ERA determination (embedded)

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Source: Employment Relations Authority determination hosted on determinations.era.govt.nz.