Restructures, Redeployment, and Redundancies
Current market conditions and sentiment in 2023 has meant restructures, or workplace changes are becoming more frequent as New Zealand businesses look to reduce costs and/or increase efficiency. A restructure resulting in staff redundancies may be a step an employer needs to take to retain the viability of their business. While employers can make changes to their organisation as they see fit, they must still uphold their obligations as a fair and reasonable employer under the Employment Relations Act 2000 (the Act) and ensure they comply with their employment agreements and policies.
An employer has various responsibilities when undertaking a restructure or change process. These include:
Genuine Business Reason/Rationale
The employer must have a genuine business reason for the restructure and for deciding particular roles are surplus to the business’s needs. In 2023, the predominant rationale for businesses is financial necessity and costs saving. Other common reasons include to reorganise and streamline company systems/structures, or in the case of a sale or transfer of the business. A restructure must not be a front for dismissing an employee when the real issue is poor performance or misconduct.
Information
An employer must provide all potentially affected employees in a restructure with access to relevant information about the decision. This information must be sufficiently precise for the employee to state a view or provide feedback during the consultation period. Information can be withheld on the basis of commercial sensitivity, provided potentially affected employees have sufficient information to provide meaningful feedback. Information provided to an employee during a restructure must be done so in a manner which is active, constructive, responsive and communicative.
Fair and reasonable consultation process
An employer is required to consult with all employees whose roles are potentially affected by the restructure proposal. Employees are ‘potentially affected’ where their role is proposed to be disestablished or where the restructure may result in a change to their duties, responsibilities and/or reporting lines. Consultation does not require the parties to reach an agreement or consensus regarding the proposal, but it requires something more than mere prior notification to the employee.
During the consultation phase it is important to make clear to staff the restructure or workplace change is only a proposal. Careful language and wording should be used in any documentation to reflect that, but it should not be ‘semantic’.[1] The employer must keep an open mind throughout the process. A common problem employers face is when their proposal documentation or in-person communications with staff indicate or suggest a decision has already been made or they have predetermined the outcome.
Affected employees must be given a reasonable opportunity to consider the proposal and express their views and feedback to the Employer (in writing or in person if they wish). The employer, or its delegated decision maker(s) must genuinely consider the employees’ feedback or comments (if any) before a decision is made. Where an employer is unsure whether they are meeting their good faith obligations during the consultation process, they can always go back to the hallmark legal test: what could a fair and reasonable employer do in all the circumstances.[2]
Selection process where roles are contestable
When multiple roles are proposed to be disestablished and new roles are created which more than one of the affected employees would be suitable for, the employer must follow a fair and reasonable contestable process in selecting who will be redeployed into the new roles. The criteria for selection, how it will be applied, and the weighting of each criterion should be discussed with employees, and they should be given an opportunity to provide feedback (including on their individual scores).
The case of Apiata v Telecom New Zealand Ltd[3] found the subjective assessment of an employer’s attributes against an agreed criteria ‘behind closed doors’ without any opportunity to comment will not be fair and reasonable.
New Zealand Steel Limited v Haddad
The recent case of New Zealand Steel Limited v Haddad[4] re-emphasised the importance of employers considering redeployment options before dismissing an employee for redundancy.
The Employment Court found NZ Steel failed in its good faith obligations to Mr Haddad when it failed to consider redeployment options in what the Court agreed was a predetermined process to disestablish Mr Haddad’s position. In particular, the Court criticised the company’s failure to be active and constructive in maintaining the employment relationship, and their failure to engage with Mr Haddad in relation to alternative roles by not being responsive and communicative. It also found Mr Haddad was prejudiced by NZ Steel predetermining another employee’s appointment to a manager position, which Mr Haddad was also ostensibly qualified for. The fact there were two other roles to apply for did not detract from this breach.
It was found the Act[5] provides the basis for a merits review of a redeployment decision, noting it should not be ‘over-applied’.[6] The Court was careful to point out there is not an absolute duty on the employer to offer redeployment in all circumstances. The Court can however, after considering the reasons for a refusal or failure to redeploy an employee in a restructure, conclude those reasons were not substantively justified or the process the employer followed to reach them was not fair and reasonable. Ultimately, this case reiterates the need for employers to:
- Carry out a robust consultation process;
- Actively and constructively consider redeployment; and
- Be responsive and communicative throughout the process.
If an employer can demonstrate the above and has good reasons for not redeploying an employee, it will be difficult for that employee to claim that the decision is unjustified.
Assistance
If you are currently contemplating or undergoing a restructuring process in your workplace or business, do not hesitate to contact Dyhrberg Drayton Employment Law for general advice, guidance or assistance. Advice in the planning stages can ensure issues such as selection processes and redeployment are planned for in advance in a way which minimises risk.
Annah Casey-Solly, Associate and Will McMaster, Lawyer
[1] New Zealand Steel Limited v Haddad [2023] EmpC 57 at [36].
[2] Employment Relations Act 2000, s 103A(2).
[3] Apiata v Telecom New Zealand Ltd, [1998] 2 ERNZ 130 at [137].
[4] New Zealand Steel Limited v Haddad, above n 1.
[5] Employment Relations Act, s 4 (1A)(b).
[6] New Zealand Steel Limited v Haddad, above n 1, at [72].
