Former Christchurch mayoral candidate Gordon Freeman, seen here in 1998, has been banned from hiring staff for three years over employment breaches.

A Christchurch business owner has been banned from hiring staff for three years in the first use of powers introduced in 2016 to crack down on employment breaches.

The Employment Court, in a judgment released March 26, issued the banning order to former Watershed Bar and Restaurant owner Gordon Freeman over failures to provide staff holiday pay.

Freeman, a former Christchurch mayoral candidate, owned the business through his company, Victoria 88. The company included in its employment agreements a forfeiture clause previously deemed a "penalty provision".

CARYS MONTEATH/STUFF Freeman, through his company Victoria 88, owned and operated the Watershed Bar and Restaurant from August 2015 until August 2017.

It stipulated that, should employees fail to give six weeks' notice, "then equivalent wages shall be forfeited and deducted from any final pay including holiday pay".

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The Labour Inspectorate, which applied for the ban, said Freeman "intentionally and persistently breached employment law" by maintaining the "illegal clause" after another of his companies was stung over its use in 2015.

"Mr Freeman cynically abused the trust placed in employers, and disregarded the basic rules put in place to ensure everyone in the workplace is getting a fair deal," inspectorate national manager Stu Lumsden said.

"This ban should serve as a clear warning to any other employers who aren't taking their obligation seriously."

Freeman and Victoria 88 were each ordered to pay $10,000 in penalties – although the judgment acknowledged Freeman would cover both, as Victoria 88's "liabilities exceeded assets by a significant margin".

Of Freeman's personal $10,000 penalty, the court ordered $7845 be paid to 23 affected staff. The former Watershed owner operated the business from August 2015 to August last year.

"It's just real simple from my point of view. The employer follows the employment contract, but the employees don't have to, and that's the end result," he said, before directing questions to his lawyer, Tim McGinn.

McGinn said Freeman had reached a settlement with the Labour Inspectorate agreeing to a ban and the penalties "because of health and cost reasons".

"This case was making him unwell," McGinn said, adding the potential liabilities were far greater than those issued, up to a maximum of $300,000 if the case had proceeded.

A copy of the memorandum filed with the court showed both parties agreed to compromise their claims due to "litigation risk" over whether Freeman could rely on the forfeiture clause.

Freeman had sold the business and had "already retired from being an employer" when he was made aware of the proceedings, McGinn said.

"The inference from a banning order might be that he has been a terrible employer. But we don't think that's borne out by his employment history."

The employment lawyer said Watershed staff were paid their wages, and the case came down to "what rights . . . an employer [has] when an employee doesn't honour their contractual notice obligations".

Depending on the circumstances, McGinn said a clause like the one Freeman used should be allowable if both parties agreed an employer would suffer if an employee left without giving the required notice.

"They are allowed to agree in advance what the damage is, and they may well agree that forfeiting an amount of final pay, including holiday pay, is a fair compromise."

However, both the Employment Relations Authority (ERA) and the Employment Court – in decisions against another company controlled by Freeman, G.L. Freeman Holdings – have found it an unenforceable "penalty provision".

G.L. Freeman Holdings has an extensive history with the ERA.

In 2015, the ERA ordered the company, which owned the Redwood Hotel and Sequoia 88 restaurant, to pay more than $22,000 for underpaying staff.

The determination arose after staff found out they had been regularly rostered on annual leave one day a week without their consent. Their entitlements were reinstated, but not paid out when they resigned.

The banning order, which was also imposed on Victoria 88, meant Freeman was banned from hiring, being involved in hiring employees, or being an officer to employees.

Anyone who breached a banning order, was liable on conviction in the district court or High Court of a fine up to $200,000, a term of imprisonment of up to three years, or both.