Sophie Kennett v Polygon GY Developments Limited [2026] NZERA 405

This Employment Relations Authority (ERA) determination concerns a Subway employee who was repeatedly told that, to take extended summer leave, she needed to resign and could return to work in the new year. The Authority found that Polygon GY Developments Limited had required Sophie Kennett to resign in 2023 while assuring her of a return as an Assistant Manager. That arrangement was not a genuine ending of employment. For Holidays Act purposes, Polygon had manufactured a termination at its own initiative and re-employed Ms Kennett within a month, so her employment had to be treated as continuous. In late 2024, Polygon again required Ms Kennett to resign to take leave while assuring her of future work. It then terminated her employment by redundancy while the sale of the Bishopdale Subway store was still conditional, without notice, without properly considering redeployment to its other stores, and without supplying relevant restructure information. The ERA found both a constructive dismissal arising from the December resignation and an unjustified redundancy dismissal on 10 January 2025. Polygon was ordered to pay statutory entitlements, unpaid wages, notice pay, lost wages, $19,000 compensation, a $2,000 penalty split equally between Ms Kennett and the Crown, and interest. The full determination is embedded at the end of this page.

Background: annual leave, resignation and promised re-employment

Ms Kennett began working for Polygon in March 2023 as a Sandwich Artist. Polygon owned several Christchurch Subway franchises, including the Bishopdale store where she later worked. The Authority accepted that she was a diligent employee, and that Polygon intended to promote her to an Assistant Manager position.

In October 2023, Ms Kennett asked for extended leave over the Christmas and New Year period. Polygon's director, Stan Greene, was not prepared to approve the leave because of operational requirements and the period requested. The parties gave competing accounts of their November discussion. Ms Kennett said she was told she had to resign to take the trip and was assured she would return in a new Assistant Manager role. Mr Greene said resignation was only offered as a practical option.

The documentary record was important. After the meeting, Mr Greene asked Ms Kennett for her proposed December finish date and January start date, asked whether the next agreement should be for a Team Leader or Assistant Manager role, and promptly offered to draft the new agreement once she gave notice. Ms Kennett resigned with two weeks' notice, Polygon paid out her annual holiday balance, a new agreement was signed during the holiday, and she returned to work in January 2024.

Continuous employment under section 85 of the Holidays Act

Section 85 of the Holidays Act 2003 treats employment as continuous when an employer dismisses an employee and re-employs them within a month. The point matters because an employer cannot avoid annual holiday, sick leave and public holiday obligations by ending employment, cashing out entitlements, and promptly re-engaging the worker.

The Authority found that Polygon initiated the 2023 termination by requiring Ms Kennett to resign. It described the position as an employer-manufactured termination: Ms Kennett was asked to resign under a promise of future work, while Polygon used the arrangement to pay out leave and minimise statutory liabilities. The Authority held that it would be contrary to the purpose of section 85 to treat this as a voluntary resignation.

Ms Kennett was re-employed within a month. In fact, the Authority found that the assurances of ongoing work were sufficiently definite to make her a person intending to work immediately after the resignation, and the new employment agreement signed on 29 December 2023 reinforced that conclusion. Her employment was therefore continuous for Holidays Act purposes from December 2023 through January 2024.

The second resignation and the pending sale of the Bishopdale store

Ms Kennett sought leave again for the 2024-25 summer period. She said she had specifically asked whether she would have to resign again and was initially told that this should not be necessary. In December 2024, the issue came to a head in a verbal disagreement at the Bishopdale store.

The Authority accepted Ms Kennett's evidence that Mr Greene presented resignation as her only viable option if she wanted to take the leave, while assuring her that she would return to work in January. It found she was not given a genuine choice: the discussion was heated, she felt intimidated, Mr Greene did not suggest that she take time to reflect or seek advice, and she resigned by email the following day.

Polygon had meanwhile signed a conditional sale and purchase agreement to sell the Bishopdale store. On 20 December 2024, it sent Ms Kennett a restructure proposal. It said it would try to secure suitable alternative employment with the purchaser but that, if this did not happen, her position might be disestablished by reason of redundancy.

Ms Kennett remained an employee after 20 December 2024

Polygon later asserted that Ms Kennett's employment had ended on 20 December 2024 because she had resigned. The Authority rejected that position. It found that Polygon had assured her of continuing employment following the holiday and that she had relied on those assurances. This meant she remained a person intending to work and therefore an employee for the purposes of the Employment Relations Act.

The sale proposal itself reinforced the conclusion. Polygon's 20 December letter referred to the potential effect of the restructure on Ms Kennett's employment and to its employment obligations on a sale of business. The Authority also noted that Polygon only sought the return of her door key for the holiday period and did not require her to return her uniform permanently.

The Authority held that the employment relationship ended only when Polygon issued its final outcome letter on 10 January 2025. That was the point at which Ms Kennett was told with certainty that her employment was at an end.

Why the redundancy was not substantively justified

A sale of a business can provide a genuine commercial basis for disestablishing a role. Here, if the purchaser did not take Ms Kennett on, Polygon would no longer require an Assistant Manager for a store it no longer operated. But the sale was not complete when Polygon dismissed her.

The purchaser had not completed required franchisee training and the franchisor had not approved the change. The sale agreement itself allowed for the possibility that the deal might not proceed. If it had failed, Polygon would have continued to operate the Bishopdale store and Ms Kennett could have remained employed under the assurances already given to her.

The Authority also found that four weeks' notice would have given Polygon time to know whether the transaction had completed. It could not justify an immediate redundancy dismissal when the event said to make the role redundant remained uncertain.

Redeployment was not properly considered

Polygon told Ms Kennett it had no alternative roles. Its final letter did not address a Restaurant Manager vacancy at another Polygon Subway store that Ms Kennett had applied for. Polygon later said that role had already been filled, but it accepted that Sandwich Artist roles were available at its other stores.

Those roles were lower paid, part-time and involved shorter shifts. That did not end the inquiry. The Authority held that Polygon's redeployment obligation extended to offering a suitable lesser role that Ms Kennett had the skills and experience to perform. It was not enough for Polygon to decide, without asking, that she probably would not be interested.

The Authority found no substantive justification for the redundancy because Polygon dismissed Ms Kennett while the sale remained uncertain and did not comply with its redeployment obligations.

Procedural failures: sale consultation, information and notice

The Authority found serious procedural defects as well. Polygon informed Ms Kennett about the proposed restructure only after it had signed the sale and purchase agreement. The decision to sell was already made, subject only to conditions to be met by the purchaser and franchisor. Polygon had no ability to reverse its decision if those conditions were satisfied.

Under the good-faith obligation in section 4(1A)(c) of the Employment Relations Act 2000, an employer proposing a decision that may adversely affect continuation of employment must provide relevant information and an opportunity to comment before deciding. Polygon did not establish that a confidentiality exception justified withholding consultation about the sale before signing the agreement.

Ms Kennett also asked for information to make informed feedback on the restructure. Polygon treated all of it as confidential. The Authority found that at least some of the information was relevant and of limited commercial sensitivity, including whether Polygon would retain its other Subway stores and the employment-related clauses of the sale agreement.

Finally, Polygon dismissed Ms Kennett without the four weeks' written notice required by the employment agreement. There was no serious-misconduct basis for avoiding notice. Polygon also did not provide the purchaser with Ms Kennett's employment agreement, did not demonstrate that it properly explained the restructure's impact on her, and did not put her concerns or ideas to the purchaser before the consultation meeting took place.

Constructive dismissal also established

The Authority separately considered the December 2024 resignation. It held that Ms Kennett had effectively been required to resign after her leave request was declined and resignation was presented as the only option, reinforced by promises of ongoing work when she returned.

Although Mr Greene did not expressly say she would be dismissed if she refused to resign, the Authority found that the situation was sufficiently coercive. The requirement to resign was a breach of duty that directly caused Ms Kennett's resignation, and it was reasonably foreseeable that it would do so. This amounted to constructive dismissal.

Unpaid work: the employer must pay for work it receives

Ms Kennett also claimed small wage arrears based on worked time. Polygon argued that certain additional time should not be paid because Ms Kennett had not recorded it on a variance sheet, had not obtained approval, had worked through an unpaid break, or had taken longer than Polygon considered reasonable for approved tasks.

The Authority rejected the premise that Polygon could retain the benefit of work without paying for it. Where Ms Kennett worked through an unpaid break, the employer accepted that she had worked. Where she performed small additional periods of necessary work or had an administrative record-keeping oversight, Polygon received the benefit. And where she worked 1.5 hours on approved inventory, paperwork and timesheets, Polygon could not simply decide after the event that only part of the actual time should be paid.

The Authority found that 9.25 hours had been underpaid and awarded $237.98 gross, plus 8% holiday pay and 3% KiwiSaver contributions.

Remedies: compensation, lost wages, notice, entitlements, penalty and interest

Ms Kennett obtained new permanent employment from 5 April 2025. The Authority accepted she had taken reasonable steps to mitigate her losses. It held that, with a proper process, her Assistant Manager role could likely have been disestablished when the business sale settled, but that she might have had an opportunity to work in a redeployed Sandwich Artist role while seeking other employment.

The Authority therefore assessed lost wages on a loss-of-chance basis at six weeks rather than the full three months. It awarded $5,848.20 gross. It did not deduct Work and Income benefits, observing that any repayment issue was a matter between Ms Kennett and the relevant agency.

For humiliation, loss of dignity and injury to feelings, the Authority awarded $19,000. It accepted evidence of depression, anxiety, panic attacks, emotional distress, stigma, financial dependence and strain on relationships. No contribution reduction was made.

The Authority also awarded four weeks' notice pay of $3,898.80 gross plus 3% KiwiSaver contributions, statutory entitlements of $2,657.85 gross plus 3% KiwiSaver contributions, and interest of $448.22.

Penalty for deliberate minimisation of Holidays Act liabilities

Polygon's treatment of Ms Kennett's 2023 holiday period as two separate employments resulted in underpayment of statutory entitlements. The Authority assessed this as a single course of conduct for penalty purposes.

The Authority found Polygon had intentionally elected the arrangement knowing that treating the two periods as discrete could minimise statutory entitlements. It also found that the resignation-and-recommencement structure had no meaningful operational purpose beyond minimising liabilities under the Holidays Act. A $2,000 penalty was ordered, half payable to Ms Kennett and half to the Crown.

Why this case matters

Kennett v Polygon GY Developments Limited is a significant Holidays Act and redundancy decision. It makes clear that formal labels such as “resignation” do not answer the real-nature question. When an employer requires a worker to resign, assures them of re-employment, pays out leave and brings them back shortly afterwards, the Authority may treat the employment as continuous and require the employer to meet the entitlements that the arrangement was designed to avoid.

The decision also demonstrates the risks of treating a pending business sale as an immediate redundancy justification. A sale may ultimately be genuine and lead to a real loss of roles. But the process must still be undertaken when the relevant decisions are actually being made, and the employer must consider redeployment throughout its wider business, provide relevant information, consult in good faith, and comply with contractual notice obligations.

Practical takeaways

• Look beyond the word “resignation”: determine who initiated the ending and whether the employee had a real choice.
• Do not use termination and rehire to reset leave balances: section 85 may preserve continuous service where re-employment occurs within a month.
• Holiday leave problems are not solved by requiring resignation: consider annual leave in advance, leave without pay, temporary cover or another lawful arrangement.
• A pending sale does not automatically establish redundancy: the employer must still establish that the role will genuinely cease when dismissal occurs.
• Consider redeployment broadly: a lesser-paid or lower-status role may need to be offered where it is available and within the employee's capability.
• Provide relevant restructure information: confidentiality does not justify withholding all information; explain and justify any redactions or limitations.
• Follow contractual notice requirements: immediate dismissal is not available simply because a business transaction is underway.
• Pay for work actually performed: an employer that receives the benefit of necessary work cannot withhold wages based on internal approval or recording disputes alone.
• Minimum-standards breaches can attract penalties: deliberately structuring employment to minimise statutory entitlements can result in both arrears and a penalty.

Read the full ERA determination (embedded)

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