UPDATE Nov 25: 2degrees says it has reached an out-of-court settlement with founder Simon "Tex" Edwards after mediation talks last week.
The confidential settlement will see Mr Edwards leave the company, where he has been on gardening leave.
Mr Edwards' investment vehicle, KLR, will keep its share in 2degrees (most recently listed as 1%).
Mr Edwards had two actions against the company he founded. One was a pending Employment Court over 2degrees' (failed) bid to make him redundant.
The second was a dispute of his shareholding, which has been watered down by half with new rights issues.
Mr Edwards filed in the High Court that he was not offered new shares on the same terms as minority iwi shareholder the Hautaki Trust, which was given an extended deadline and access to a company loan.
Mr Edwards was on the front foot going into the mediation talks.
In separate Employment Relations Authority hearings, he had won reinstatement to his role; the reversal of a 2007 pay cut from $350,000 to $200,000; $800,000 in backpay; plus the right to move the case to the higher-powered Employment Court, where it was expected to be a much-watched, precedent-setting case.
2degrees had argued the evolution of the company made Mr Edwards' position as "strategist" redundant. Mr Edwards' lawyer argued the company was motivated by its personal opinion of his client.
Legal experts see the dispute as a potential test case for Section 103 of the Employment Relations Act, amended in April last year.
It could have set a precedent over the right (or not) of a business to dismiss employees as it sees fit during a restructure.
Tex gets pay restored to $350K, nearly $800K in backpay
Nov 4: Simon "Tex" Edwards has won another round in his multi-faceted legal war with the company he founded – which now spans separate Employment Relations Authority, Employment Court and High Court actions.
2degrees must restore Mr Edwards’ salary to $350,000, backed-dated to March 2007 with 5% interest, the ERA has ruled.
In March 2007, Mr Edwards salary was reduced to $200,000.
The arrears are payable up to the date of the decision (October 1 this year), meaning Mr Edwards is in line for more than $800,000 in back pay.
The ERA determination, released today, also says he is entitled to share options, denied to him since March 2007.
Details of the share plan are subject to a non-publication order.
But Mr Edwards’ lawyer, Kensington Swan partner Anthony Drake, told NBR ONLINE it was likely to be “significantly more” than the salary arrears. A seven-figure sum beckoned.
The ERA also said Mr Edwards was entitled to two months' notice (a crimp on the 36 months' notice required by his 2002 employement agreement).
2degrees was ordered to pay $4000 costs.
Mr Drake expected 2degrees to challenge the determination.
2degrees director of corporate affairs Mat Bolland refused to comment on that possibility, or any other element of the case.
The ERA decision released today on Mr Edwards' salary reduction, and share options, is separate to an ERA and Employment Court case centred on an attempt to make him redundant – although tensions from the salary and share displute appear to have sparked the breakdown in relations Mr Edwards claims contributed to an attempted dismissal.
Mr Drake said Mr Edwards – who founded the company now known as 2degrees in 2002 – objected to his salary reduction and revised employment terms in March 2007. However, he decided to "let it slide" for a period, not wanting to “kick up dust” as an employee.
However, matters came to a head earlier this year during negotiations over Mr Edwards' potential exit and what 2degrees said was an attempt to "game" the company by seeking to "wrap up" a dispute over his share holding (now the subject of a High Court action in which Mr Edwards is being represented by Carter & Partners' Brent O'Callahan) at the same time.
2degrees moved to made Mr Edwards redundant in February, sparking a behind-the-scenes tussle that culminated in his dismissal on May 15.
The spat that went public when Mr Edwards' filed a grievance with ERA, which was rejected in a decision released June 10.
But on July 13, the Employment Court over-ruled the ERA and reinstated his employment at 2degrees pending a full hearing (which on August 8, in another win for Mr Edwards, was now moved from the ERA to the higher-powered Employment Court. It is not expected to be heard until next year).
Mr Edwards is currently on gardening leave.
Mediation is scheduled for later this month, which had the potential to head off the Employment Court action, Mr Drake said.
If the Employment Court case over 2degrees' attempt to make Mr Edwards redundant goes ahead, it promises to be a protracted drama.
Legal experts see the dispute over the degree Mr Edwards' 2008 employment agreement over as a test case for Section 103 of the Employment Relations Act, amended in April last year.
It could set a precedent over the right, or not, of a business to dismiss employees as it sees fit during a restructure.
No love lost
The ERA determination reveals not just the duration of Mr Edwards dispute with 2degrees but its degree of animosity at time.
Mr Edwards submitted evidence, not disputed by 2degrees, that in or around 2008, then COO Sean Dexter made repeated efforts to persuade him to sign a new employment agreement incorporating his reduced salary (and eliminating a three-year notice period dating from a 2002 employment agreement).
“Tex, sign the f*cking document,” Mr Dexter said.
Mr Edwards did not sign the new contract. It was a unilateral salary reduction, Mr Drake told NBR today.
Edwards – personal, not business
In its July 13 determination reinstating Mr Edwards, the ERA noted 2degrees CEO Eric Hertz proposed making Mr Edwards' "strategist" position redundant in February this year.
The company had evolved to the point where "strategy development is a responsibility of all members of the SMT [senior management team]", Mr Hertz wrote in an email cited by the ERA.
Mr Edwards' lawyer argued that the decision to disestablish Mr Edwards' role was "predominantly motivated by an adverse view taken of Mr Edwards' personally" rather than considering whether the position of strategist was needed by the business.
He also argued that Mr Hertz and 2degrees chairman Stewart Sherriff – both appointed by Trilogy, the US company that over time has become 2degrees' largest investor – were not impartial.