Home > Latest News > EXCLUSIVE: Harvey Norman Facing Legal Challenge To Management Employment Contracts, Claims Of Toxic Work Culture

EXCLUSIVE: Harvey Norman Facing Legal Challenge To Management Employment Contracts, Claims Of Toxic Work Culture

Harvey Norman is facing a serious legal challenge as to how they employ proprietors to run their stores, with the issue potentially having implications to their franchise model in Australia.

The issue is set to be played out in a New Zealand Court, according to a former proprietor and former Australian franchisee who is one of several proprietors behind a move to challenge their current business model.

The issue unfolded after a former proprietor, was sacked, after 16 years with the company back in November 2023 and another committed suicide.

In whats seen as a test case, the proprietor taking legal action claims that he was unjustifiably dismissed after raising concerns with senior management about the workplace “culture” at the global retail Company.

He claims that he was given just minutes, to vacate the Harvey Norman store, and was prevented from communicating with his management team, after he complained to a Harvey Norman NZ Country manager about what is now being described as a “toxic work environment’.

Proprietors also claim that that senior Australian management, were also deaf to their complaints about both employment conditions and what they describe as a toxic culture between HN management and proprietors.

The proprietor taking legal action claims that the actions of Harvey Norman management caused significant hurt and humiliation and that he now requires emotional counselling “for the stress that the incident created in his life”.

This is not the first time that a senior proprietor has had problems with the culture at Harvey Norman stores, or the actions of senior management with several HN insiders telling ChannelNews that the cCompany basically control every aspect of a Company that actual employs the proprietors, who are now fighting back in an effort to get legal clarification, as to who is actually running the business that employs them.

Suicide

A former Harvey Norman proprietor Quinten Carpenter, who had previously been asked to move stores, and had himself experienced ongoing issues with senior management, committed suicide after disclosing to colleagues he felt “regret, despair, and was at a loss as to how to proceed with the Harvey Norman management team, the incident happened in 2021.

Weeks later Matthew Semple a New Zealand Proprietor who was the former Franchisee Director at Auburn, NSW—one of the company’s largest stores in Australia, met with Graeme Duck, the Harvey Norman General Manager of furniture operations in New Zealand.

He recommended that Harvey Norman would benefit from an inclusive review of its culture, policies, and practices following the suicide of Quinten Carpenter.

Duck’s response was that he had already reviewed Harvey Normans workplace culture as well as his own actions and was completely satisfied with both.

He said it would be “business as usual”.

Semple and other Proprietors, including the one terminated in November 2023, escalated their concerns about the leadership of Graeme Duck to Mr John Slack-Smith, Chief Operating Officer and a Director of Harvey Norman.

CN has been told these Proprietors expressed their concerns with bullying, intimidation, toxic culture, and unsafe work practices. It’s claimed that at the time, Slack-Smith gave assurances in respect of their safety, and the security of their roles, and undertook to address the concerns raised.

Mathew Semple resigned from Harvey Norman a few months later, believing that no improvements had been made and having lost confidence and respect for Duck’s leadership of the New Zealand Furniture Division and that of senior management in Australia.

Since then, it is alleged that other Proprietors who raised concerns have faced negative career repercussions. Some have reportedly been threatened with store relocations that were incompatible with their family situations, effectively forcing them to resign.

Now the big retailer is facing a personal grievance claim by the former Proprietor who is also challenging the legality of the proprietor business model that Harvey Norman demand proprietors accept.

Proprietor Contracts

We understand that in New Zealand Harvey Norman operates what’s called a ‘Proprietor model’ to manage its stores. Under this model, each department in each Harvey Norman store independently contracts with separate companies (each a ‘Consultant’), with a nominated individual from each Consultant providing consulting services on behalf of the company (a ‘Proprietor’).

These Proprietors are supposed to provide management, marketing, research, and advisory services to the relevant department on behalf of the Consultant, while also complying with Harvey Norman’s standards in relation to staff, visual merchandising, financial controls, and brand management.

Harvey Norman contends that the employment contracts signed by Proprietors with their respective Consulting companies absolve Harvey Norman of any statutory employer/employee obligations to the Proprietors managing their stores.

According to senior Harvey Norman management they have the right to remove Proprietors from their stores immediately that they are not happy with them and that includes complaining about the Companies workplace culture.

Preparations are being made to file proceedings with the New Zealand Employment Relations Authority to determine the real nature of the relationship between the parties. The claimant considers that he was an employee of Harvey Norman and Harvey Norman did not have a justifiable reason for terminating his employment and that they failed to follow a fair procedure in terminating his employment.

Lawyers have expressed their view that Proprietors are not genuinely in business on their own account, and that it is clear the Proprietor arrangement was for the benefit of Harvey Norman and not individual Proprietors.

As a result, the claim is for unjustified dismissal pursuant to section 103(1)(a) of the Employment Relations Act for breach of good faith; holiday pay; loss of earnings, hurt and humiliation, KiwiSaver contributions, and breach of the Health and Safety at Work Act 2015 and/or breach of contract in respect of its failure to provide a safe workplace.

Previous Legal Action 

Back in 2002 there was a case of Curlew v Harvey Norman Stores, in the New Zealand Supreme Court which Harvey Norman won.

The original case in the Employment Court, was before Judge Graeme Colgan who found Harvey Norman’s relationship with Dean Curlew was not that of employee, but contractor, and rejected his claim of unjustified dismissal.

At the time the New Zealand Attorney General Margaret Wilson criticised the Appeal Court decision for not following the “good faith” requirements of the Employment Relations Act.

Legal advice given to proprietors is that since the previous Harvey Norman court case, employment law has changed with previous issues clarified making it clearer in the determination of an employee status.

In today’s work environment it is necessary to look at all the surrounding circumstances to determine the real nature of the relationship and how it operates in practice claim layers.

They claim that today, previous decisions of the court are not binding and that in an employment court case today the courts will look beyond the labelling of the relationship by any party and consider the real nature of it.

The courts have said the real nature of the relationship will be determined by considering all relevant matters including:

a) whether the employee was working on his or her own account or for someone else.
b) the degree of control the contracted party is subjected to; and
c) the extent to which a person is integrated into the business”.

Lawyers, acting for the complainant claim that despite the label Harvey Norman attached to its relationship with the Proprietor, he was at all times an employee of the company.

The claim is that Harvey Norman dismissed him “without any warning or justification and failed to follow a fair procedure”.

We understand that attempts to mediate with Harvey Norman have so far failed to resolve the dispute.

As a result, past and present Harvey Norman Proprietors, as well as suppliers and business partners are set to face being subpoenaed to give evidence including an accounting firm and bank appointed to administer the Consulting companies that the proprietors were employed by.

This could result in a representative action (similar to a class action) being taken straight to the High Court claims insiders.

John Slack-Smith Chief Operating Officer & Executive Director at Harvey Norman said “Given the legal proceeding that has been commenced by a prior contractor to Harvey Norman Stores NZ Pty Ltd, I am unable to provide any comment at this time”.

 



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