Rocket Lab has established itself as an iconic New Zealand company, leading the way in aeronautical innovation and space exploration. It is hard not to be impressed by the imagination and entrepreneurial endeavour demonstrated by the company and its CEO Peter Beck. This is not a small enterprise, Rocket Lab now has around 80 employees based in the US and 400 in New Zealand.
It is therefore disappointing that Rocket Lab has recently been blasted by the Employment Relations Authority for failing to comply with even the basic requirements of employment law. It seems, from reading the decision, that Rocket Lab considered that it was above the law, or at least could buy its way out of any legal obligations, in a manner that frankly smacks of arrogance.
It is worth traversing the facts of the case, because it really is a compelling example of exactly what an employer should not do.
Craig Owen was employed by Rocket Lab in January 2018 as a Vehicle Test Manager. At the time of his employment there was an acknowledgement that the company was stretched and had staff retention issues, but this was put down to the fast paced and rapidly growing business, and the time sensitive environment. Owen was thrown in at the deep end and received no induction, training or handover. He was expected to “get on with it”.
In February 2019, a year after he started, Owen was called to a meeting with Human Resources. He was not told the purpose of the meeting or given any information about it, and went by himself. At that meeting Owen was dismissed with immediate effect due to “ongoing performance concerns”. No further explanation or information was provided.
After he was told he was dismissed, Rocket Lab presented Owen with a Settlement Agreement, providing for a payment of $10 000 by way of “distress compensation” in exchange for him signing away his legal rights to challenge the dismissal or take any legal action against the company. Owen refused to sign the agreement and subsequently brought a personal grievance against Rocket Lab.
Authority member Rachel Larmer found that the dismissal was “extremely unfair” and that the company “failed to comply with even the most basic and widely understood principles of procedural fairness”. In particular, the company had never given Owen a performance review or told him what the expected performance criteria were, and it did not tell him that his job was in jeopardy or give him an opportunity to improve. At the meeting Owen was given no explanation of the reasons for his dismissal, or information to support this, and nor was he given any chance to provide an explanation.
The authority was also critical of the company’s actions in presenting Owen with a Settlement Agreement immediately after it had dismissed him. Larmer commented in this regard “instead Rocket Lab appeared to have deliberately calculated that it was better for it to “buy off” Mr Owen by offering him $10 000 for not enforcing his legal rights…”. She said that Rocket Lab was not a naïve operator unaware of its legal obligations, but rather this was a “cynical calculation” by the company and “indicated a particular callousous”.
The fact that the company arrived at the meeting with the Settlement Agreement pre prepared showed that the dismissal was pre-determined, as did the fact that Owen was locked out of company systems whilst he was in the meeting.
In relation to the company’s claims that it had lost trust and confidence in Owen and therefore he would have been dismissed even if a fair procedure had been followed, the authority found that Rocket Lab had done insufficient investigation to be able to establish this.
Owen was awarded significant remedies of 6 months lost wages ($65 000) plus $30 000 for humiliation and distress. The higher than usual compensation reflects the authority’s disapproval at the company’s approach, and also the profoundly adverse impact on Owen and his wife.
The authority also ordered Rocket Lab to pay a penalty of $3000. Penalties are only imposed in the most severe of cases, and in so making this order the authority said “It is important that a penalty be imposed to signal disapproval of Rocket Lab’s actions and to discourage it from engaging in such behaviour in future. It is also necessary to send a clear message to other employers that acting in this way, namely blatantly ignoring good faith and undermining an employment agreement is likely to attract a penalty.
It is unusual for the authority to be so overtly critical of an employer, and it’s message was clear – employers who demonstrate a brazen disregard for the law will be punished.
The compensation that Rocket Lab now has to pay is probably inconsequential for this celestial higher flyer, but what may stick is the damage to its employment brand.