Limei Wang v Serenity Float Clinic Limited [2025] NZERA 599

This case is a reminder that "we are insolvent" does not remove the duty to consult in a redundancy. Serenity Float Clinic Limited said it collapsed financially, lost its lease and equipment, and could not keep trading. The Authority accepted the business failure was real, but held the dismissal was still unjustified because there was effectively no redundancy consultation. The determination also applied the "persons involved" regime (ss 142W and 142Y) to make the director personally liable for unpaid minimum standard entitlements when the company could not pay. The full determination is embedded at the end of this page.

What happened

Ms Wang began work for Serenity Float Clinic Limited (SFC) on 10 January 2022. SFC later said it became insolvent in early December 2023 with substantial debts (including personal guarantees by the directors and a significant Inland Revenue liability). SFC's lease was terminated and its plant and equipment were seized, leaving it unable to continue trading.

On 11 December 2023, SFC transferred its business to an independent third party (Serenity Wellness Centre Limited). SFC introduced Ms Wang to the incoming owners and said the new business would negotiate with staff about transferring employment. However, on 24 December 2023 Ms Wang received a letter from SFC ending her employment and stating her outstanding wages would not be paid.

The Authority accepted there was not much dispute about how the employment ended: the company could not trade and terminated employment on redundancy grounds. The key problem was process. The Authority found there was little or no consultation or engagement with Ms Wang before termination, and Ms Wang was not aware of the severity of the financial position until it was effectively too late.

Why the redundancy dismissal was unjustified

The Authority accepted SFC's underlying reason (business failure and insolvency) may have been genuine. But redundancy consultation is mandatory. Section 4(1A) requires employers to provide relevant information and a meaningful opportunity to comment in redundancy situations.

In this case there was effectively no consultation process before the termination letter on 24 December 2023. Measuring the employer's actions against the s 103A standard (what a fair and reasonable employer could have done), the Authority held the termination process fell below the minimum standard. The dismissal was therefore unjustified.

Money owed and compensation

Ms Wang said she had been paid up to 10 December 2023, but was not paid wages for 12 December to 24 December 2023. The Authority accepted arrears of wages of $2,035.50 were owing, and also accepted unpaid holiday entitlements of $4,714.67. The Authority also ordered one week's notice of $970.20 as part of the remedy package.

For the emotional impact of the unjustified dismissal, the Authority awarded compensation of $15,000 for humiliation, loss of dignity and injury to feelings.

Director liability: "persons involved" and s 142Y

SFC said it would not be able to pay any award because it was insolvent. The Authority therefore considered the "persons involved" regime. Under s 142Y, the Authority can grant leave for an employee to recover employment standards arrears from a person involved in the breach.

The Authority concluded the evidence showed Charl Eksteen was the decision-maker who decided to stop paying wages and holiday pay. He said he believed paying Ms Wang would be an unlawful payment to a preferred creditor. The Authority accepted he made the decision, and held he was "involved in the breach" (s 142W) for the unpaid wages and holiday pay. Jodi Eksteen was treated as much less directly involved on the evidence.

The practical result was that, if SFC could not pay, Mr Eksteen could be pursued for the employment standards arrears (wages and holiday pay). The Authority did not treat the unpaid notice as an employment standards breach for the purposes of personal recovery, although the company was still ordered to pay notice as part of the overall orders.

Penalties and costs

Ms Wang sought penalties, particularly against the director respondents. The Authority declined penalties, taking the view that the insolvency-driven situation led to an unfortunate outcome for all parties. Costs were reserved, with the usual memorandum timetable and daily-tariff approach if costs could not be agreed.

Practical takeaways

• Redundancy consultation still applies in a collapse: even when the business is failing, employers must communicate and consult as far as reasonably possible.
• Insolvency does not automatically excuse process failures: genuineness and process are separate questions under s 103A.
• Directors can be personally exposed for minimum standards arrears: unpaid wages and holiday pay can be pursued under ss 142W and 142Y if the director is "involved in the breach".
• Be careful with "preferred creditor" assumptions: if money is withheld, the Authority may still treat minimum standards as enforceable and may shift recovery to persons involved.

Read the full ERA determination (embedded)

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