How one worker fought back after BizDojo Auckland’s collapse left her out of pocket

BizDojo was founded on the premise of building and supporting a coworking community for startups. But with the collapse of its Auckland branch last year, former staff have accused the company of bullying, evasiveness and unpaid redundancy, forcing one employee to take BizDojo to court. This is the story of how one worker fought back and won.

When Emma Ashley found out her workplace was in voluntary administration, she didn’t find out from her bosses, but from a very confused client.

The client had put in a bond with for-hire startup and event space BizDojo Auckland for an event in the new year, but had noticed a peculiar listing on the company’s registerThey called up one of Ashley’s colleagues to ask what was going on. From there, it wasn’t long before the news quickly spread. This was back in early December – just two weeks before Christmas Day.

“Once the directors (Jonah Merchant, Lachlan Sloan, Nick Shewring) realised we all knew about it, they called a meeting,” recalls Ashley, BizDojo Auckland’s former community coordinator. “When we asked if our jobs were going to be in jeopardy, they said no, you have nothing to worry about. This isn’t as serious as you think. And every time we asked questions about whether they had a plan B, they were like: We’re not going to think about that. That’s not going to happen. You have nothing to worry about.”

Started in 2009, BizDojo has five locations (including Parnell, Takapuna and a recently opened Wellington branch), where entrepreneurs and fledgeling companies can hire desk space, office space and rooms for events. Other amenities include outdoor patios “to enjoy a spot of golf or morning yoga session” and freshly-made barista coffee. A casual pass to one of the company’s catered outposts can set you back $179 a month for five days, while a permanent pass can cost you $799 a month for a desk, wifi, 24/7 access, free mail delivery and access to “community networking tools, business profile opportunities and more”.

Bizdojo Auckland (bizdojo.com)

BizDojo has long been a high profile player in the start-up community and its co-founders Merchant and Shewring (the latter has announced he’ll leave the company in May) have regularly courted the media. But the news section on the self-named collaborative network’s website halts in August 2017 with a piece on a recruiter working out of BizDojo Auckland. The big news would later come in December: BizDojo Auckland had gone into liquidation. Its parent company – BizDojo Group Limited – had lost its contract as one of two operators running Auckland Tourism, Events & Economic Development’s (ATEED) startup hub, GridAKL. It owed ATEED $341,000 in unpaid rent and its workers were told that their roles had been terminated.

“I was completely shocked. I had no idea we were in that kind of position because the whole time we were told to hold on and that we were going to help the company grow,” recalls one former employee who wishes to remain anonymous. “I’d never been made redundant before or been part of a company heading towards liquidation. All the questions we’d ask in our meetings to the directors would never have answers that would help us understand what the company was going through and what would happen to the staff. I had to look on Google to get a better understanding of the liquidation process.”

Three days later on December 22, BizDojo director Lachlan Sloan pulled each employee aside for one-on-one meetings at the company’s Parnell branch. They were each shown their final payslip consisting of their last week of pay, their holiday pay, and one month’s redundancy pay.

But the employment contract – which has been sighted by The Spinoff – stipulates the employee is entitled to three months of redundancy pay, not one. They were also presented with a waiver which relinquished their rights to contest their payout. They were told if they didn’t sign the waiver, they wouldn’t be able to guarantee when, how much, or if they would receive any sum of money.

“I wasn’t sure why I wasn’t getting the [remaining] two months. I felt like if they could pay me out one month, why couldn’t they pay me out three?” recalls the former BizDojo employee. “I wasn’t given the option to take [the documents] home and have somebody else look over it to make sure it was all legit. I had to sign it right then and there, or the directors couldn’t confirm when we would get our final pay. It was coming up to Christmas and I didn’t want the chance of not being paid over the holidays, so I felt pressured into signing it.”

Another former employee (who The Spinoff has agreed not to name) shares this sentiment. “They didn’t put the pen in my hand and make me sign it, but it was like, ‘If you don’t sign this, we can’t guarantee when we’ll be able to pay you and how much if we could’. That was the pressure that I felt.”

BizDojo directors (L-R): Jonah Merchant, Nick Shewring and Lachlan Sloan (Bizdojo.com)

BizDojo director Jonah Merchant says that financially, the business was in a difficult position at the end of last year. He says capital it had expected to come through in early 2017 hadn’t as its acquisition by international coworking company IWG took time.

“We had challenges with capital coming in at the right time… That acquisition process was quite lengthy [and] we had a limited amount of money coming in from that. We had to negotiate a compromise with a number of parties,” he says. “It wasn’t an issue of not wanting to honour our obligation, but it was one where we were in a pretty serious situation and if we couldn’t conclude that process before Christmas, we might not have survived.”

When asked why despite its employees having contracts with BizDojo Group Limited (which was not in liquidation) not BizDojo Auckland (which was in liquidation) that it was still unable to pay the remaining two months redundancy, Merchant says the liquidation “had nothing to do with it” and the issue was with the entire group’s financial situation. He also confirms that employees were asked to sign the waiver on the day, arguing that the group had “very little time to act once it became clear BizDojo couldn’t include GridAKL in the final acquisition”.

But while BizDojo was unable to pay its employees what they were owed according to their contracts, it has, however, been expanding its operations. After finally having its acquisition by IWG confirmed in February, BizDojo opened the doors to its brand new branch in Wellington last month with another on the way in Auckland’s Ponsonby. Merchant puts this down to having grown too rapidly too quickly, and the challenges it’s had with capital coming in at the right time. “We were expecting capital to come into the business at the start of 2017. Unfortunately, changes in financial markets at the time meant that [didn’t happen].”

By the end of the day on December 22, all BizDojo Auckland employees had signed the waiver bar one. Unlike her co-workers, Ashley was away on annual leave in Wellington which meant the documents were sent to her via email instead. “I had some time to think about it [and decide I wasn’t going to sign the waiver]. But the situation [my colleagues were in] was way worse because they were having drinks and stuff at the Parnell branch with the rest of the crew where I think they were kind of strong-armed into signing,” she says.

“I emailed some colleagues afterwards asking what they thought about the whole situation and they said they didn’t really know what to do. They didn’t want to have to think about this over Christmas with their families, worrying about paying bills, rent etc. They couldn’t have that risk. Which is why they all signed. They were told that this was the best offer that they would get.”

In hindsight, both anonymous employees The Spinoff spoke to say they “100% wish” they hadn’t signed the waiver.

“I could see they were in a really awkward situation and the mental toll that it must have had on them would’ve been massive,” says one former employee. “I genuinely believed them and I didn’t think anything bad of it until later.”

BizDojo Auckland (supplied)

For Ashley, her situation took a whole new turn. On December 28 – almost a week since being sent the waiver which she refused to sign – BizDojo made the surprise move of paying her anyway (it was still missing two months redundancy). She emailed the directors to find out what was going on, pointing out that she hadn’t agreed to their terms. BizDojo replied saying the payment was a mistake – she had to pay the money back.

By then, Ashley had hired a lawyer to explore her legal options. Her lawyer told her that even if she only received part of her redundancy pay, she wasn’t required to pay it back. Merchant says he can’t comment on why Ashley was asked to pay the money back but adds that BizDojo’s response was based on legal advice.

Since deciding to challenge BizDojo over its payment terms, Ashley claims she’s also been the subject of bullying and peer pressure from one of its directors (Ashley requested the director not be named). “After my lawyer issued the first letter, one of them actually called me. He yelled at me and it was a very abusive phone call. He was pretty much belittling me and saying I was being stupid. I was in tears from it because it was just so out of the blue and so disrespectful. My lawyers immediately emailed him afterwards and said he needed to cease contact with me going forward.”

“I understand it can be very stressful owning a company, but you should never act that way. It completely disregards all of your team and it’s just looking out for your own interests. That was the real disappointment – it’s not really the money. It’s the fact that this is the way they’ve conducted themselves which is unacceptable. Especially given the values they have as a company and the way they project themselves in the media.”

On March 1 at the High Court in Auckland, Ashley put in an application to put BizDojo Group Limited (renamed BDG Group) into liquidation. This followed several unsuccessful attempts by her legal team to settle with BizDojo, including issuing the group a formal statutory demand on January 18, which received no response. It was due to be heard in court today but then, on the eleventh hour, BizDojo agreed to pay Ashley’s remaining redundancy in full. An out of court settlement was drawn up (the terms of which are confidential) and the proceeding against BizDojo was discontinued.

Merchant says the situation has been unfortunate with Ashley, stating that it’s been “reluctantly settled” on the basis of legal advice. “All our staff bar one accepted the agreement, knowing the background of the financial situation, where we were at with the acquisition, and what was happening with ATEED. Unfortunately, one didn’t sign. She wanted a better deal for herself than the other staff and our creditors. From our perspective, we were pretty disappointed with that [as] it would’ve affected a much bigger set of people than just this one staff member.”

Prior to publishing, one former staff member contacted The Spinoff to voice their support for BizDojo. They dispute the claim that employees were not sufficiently informed and that they were lucky to have a job to go to in the new year (employees were offered six-month contracts courtesy of ATEED to tide them over the redundancy period). The staff member in question was employed as a contractor, however, so their contract did not entitle them to any holiday pay or redundancy pay.

“I just think there’s a total and utter naivety from those working in the trenches that don’t know what’s going on behind the scenes and how much the guys have sacrificed,” says the former contractor. “If they hadn’t done what they’d done, the whole company would’ve probably gone under.”

Five Boroughs (Facebook)

This isn’t the first time this year disputes over pay have surfaced. In January, it was reported that Wellington diner Five Boroughs went into voluntary liquidation with the owners telling Business Desk that it was the “quickest and cleanest” way to switch to a more profitable business model. However, the diner quickly landed itself in hot water when it was revealed that employees had been left out of pocket, with $32,400 worth of holiday pay still owed to staff. The issue was later resolved thanks to union involvement.

“In reality, this happens to many people in the workforce,” Ashley says looking back on the whole experience. “It was extremely expensive to hire a lawyer, something that clearly acts as a disincentive for people to pursue these types of situations any further. I was lucky to have the money to put towards a lawyer.”

“In the end, I’m glad that we achieved a settlement but it definitely wasn’t easy. The entire process and the uncertainty that came with it was stressful and emotionally draining… There was a clear power imbalance between myself and the three directors. Power imbalances are also a reality in the workplace and can result in bullying and harassment, both of which I’ve endured.”

“My advice for anyone going through this situation would be to know your worth (don’t be afraid to go against the grain), surround yourself with supportive people, get legal advice (either by hiring a lawyer or going to Community Law which is free), and don’t just accept the first offer to settle. Consider how much time, money, and energy has gone into the process and make sure the settlement reflects that.”

Worried about your employment?

If you think your employer might be in financial trouble, Chris Scarrott from employment law firm Cullen has five key tips all employees should know about. Keep in mind these are general terms and all specific cases should seek further legal advice.

  1. If you’re aware the business is about to be liquidated, look for another job. Don’t resign until you have one, but start looking. That said, some liquidations will result in a reorganisation of the business rather than liquidation. Whether the business is redeemable and sold as a going concern may inform your decision as to whether you should resign. Sometimes it is better to abandon the ship before it sinks if you can.
  2. Ask for your wage and time, holidays and leave records, as well as a copy of your employment agreement. Employers are required to keep all of these records, and having copies will make it easier when claiming any unpaid wages or leave entitlements from the liquidators. The liquidators will also get a copy of any wage records, so ask them if you don’t get the records prior to their appointment.
  3. Talk to the liquidators. Unpaid wages for a period of four months prior to the liquidation can be claimed, as can any holiday pay owing at the time of termination and any redundancy compensation. Employees can claim as a preferential debt up to the value of $22,160. Employee claims are high on the list of preferential creditors, falling just behind liquidator costs, creditor court costs and secured creditors.
  4. Strongly consider resigning if your pay stops prior to the termination of your employment.
  5. If you’re going to raise a personal grievance, do it before the business goes into liquidation, if you can

The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.

Check out how Kiwibank can help your business take the next step.


The Spinoff’s business section is enabled by our friends at Kiwibank. Kiwibank backs small to medium businesses, social enterprises and Kiwis who innovate to make good things happen.

Check out how Kiwibank can help your business take the next step.

Related:


The Spinoff is made possible by the generous support of the following organisations.
Please help us by supporting them.