Redundancy

Good faith

The overall obligation of good faith now imposed under the Employment Relations Act and applying to redundancy can be summarised as an obligation to:

1. Not mislead.
2. Provide relevant information unless good reason to withhold.
3. Be candid, reasonable, honest and forthright.

Procedural requirements

1.  To follow any process contained in the employment agreement, which should generally include the following (regard a union as an Employee, where relevant): 

      a.  Tell affected Employee(s) you need to meet to discuss possible restructure well in advance of having to make the decision (do not leave to last minute). 
  b.  At the meeting tell the affected Employee(s) that the(ir) position(s) is(are) being re-considered or restructured. 
  c.  Give some details as to why necessary and possible result (ie what new structure might be). 
  d.  If a number of Employees affected, advise of selection criteria. 
  e.  Consult.  Give the Employee(s) an opportunity to provide input (ie what options the Employer might pursue in relation to restructuring/removing the position) and time to think about it before any meeting (also an opportunity to take advice). 
  f.  Give timeframe as to when restructuring is to take effect. 
  g.  Employee input needs to be taken into account and matters raised by the Employee need to be considered and possibly investigated. 
  h.  The Employer can then reach a reasonable decision as to what they want to do. 
  i.  Set up individual meetings with the Employees who are likely to lose job or be affected other ways.  Invite them to bring a representative or support person. 
  j.  Advise them of decision.  If losing role, give requisite notice as contained in the employment agreement and explain extras (discussed at 6 below) and/or compensation (discussed at 5 below). 
  k.  If some reduced role available, give details and allow time to make the decision (a minimum of three days). 
  l.  If they do not accept, go through j above. 

 2.  Consultation

    a.  Timing is important and it will be considered a breach of the obligation to consult if that is carried out after the decision is made to make a position redundant.  So consult prior to making the final decision. 
  b.  Consultation is a two-way process and includes not only giving the Employer’s position but hearing the Employee’s. 
  c.  Doesn’t require agreement – you aren’t obliged to accept the Employee’s view or proposals. 

 3.  Selection criteria

    a.  Criteria must be relevant to the new business structure and based on proper motives. 
  b.  If it involves abilities and past performance you will need to be prepared to consult with Employees over that. This is another reason to ensure Employees are disciplined for non-performance and/or misconduct when that arises. It gives the perfect opportunity to differentiate Employees who are otherwise competing for the same position. 
  c.  Should be transparent and not include hidden considerations. 

 4.  Compensation

    a. Even if the employment agreement doesn’t specifically provide for compensation, it can be (and has been) implied by the Authority or Court, 
  b. If you don’t want to pay redundancy the contract should specifically provide that none is payable, 
  c. You will need to provide notice of the termination coming into effect and pay any annual leave or alternate holidays owing prior to departure. 

5.  Redeployment should be considered.  Employers have been successfully sued where an Employee’s proposal to job share wasn’t properly considered – in the particular case another Employee was prepared to share. 

 6.   Extras for redundant Employees

    a.  Offer to assist with CV preparation are common and indicative of goodwill. 
  b.  A reference or at least a record of employment should be offered. 
  c.  Offers of coaching or counselling might be considered in some circumstances, depending on the seniority of position and length of service. 
  d.  Time off for interviews, paid or unpaid depending on the circumstances. 
  e.  An offer to pay out notice period in lieu of it being worked should be discussed with your lawyer first. 
  f.  Any restraint of trade provisions in the employment agreement should be addressed.  Discuss with your lawyer first. 

 7. Your decision may be tested.  Although the Employment Authority will very rarely look at the reasons for making a position redundant it is very important to have good reasons that can be justified.  Therefore if another person is taking over the role, why?  How does that improve the business?  Why is that person getting the new role and not the one being made redundant?  You need a good answer for these questions. 

Last Updated ( Tuesday, 08 November 2011 )
 
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