Employment dispute in Christchurch where a business faced consequences for dismissing an employee before their start date, resulting in an $18.5K payout.
Published 22 August 2023 | 2 min read
Minimise the risk of legal challenges
The economic climate is challenging for many businesses in New Zealand. As a result, some businesses may be considering redundancies or restructuring in order to cut costs and streamline operations.
Making redundancies or restructuring is a difficult decision for any business. It can be even more difficult if you don't follow the correct process. If you don't, you could end up facing legal challenges from your employees.
There are a number of things you need to do to make sure that your redundancy or restructuring process is fair and legal. These include:
- Having a genuine reason for the redundancy or restructuring
- Consulting with your employees
- Considering redeployment opportunities
- Applying the selection criteria fairly
- Providing your employees with adequate notice
By following these steps, you can minimize the risk of legal challenges from your employees and ensure that your redundancy or restructuring process is carried out fairly and in good faith.
Handling redundancies and restructuring in a fair and legal way
To navigate the treacherous waters of redundancy and restructuring, companies must follow a well-defined path. The legal test, outlined in the Employment Relations Act 2000, underscores the necessity of a fair and reasonable process. Both substantive and procedural elements must be carefully considered.
Substantive Justification
The first pillar of a solid redundancy process is substantive justification. Employers must present a genuine reason for disestablishing a position. It's crucial to ensure the rationale is not merely a pretext for other motives. If the redundancy results from an economic downturn, supporting documents like revenue reports and financial statements are essential. Furthermore, explaining why a particular role is being disestablished fosters transparency and understanding.
Procedural Justification
The second pillar, procedural justification, delves into the process itself. Communication is key. Employers must provide all relevant information to affected employees and invite their feedback. This consultation must be conducted in good faith. Employees have the right to seek advice and representation. Adequate time should be provided for consideration and response. The selection criteria for redundancy must be communicated clearly and applied uniformly. Lastly, a commitment to redeployment opportunities within the company must be upheld.
Engaging in the process of redundancy and restructuring requires meticulous attention to detail. With the New Zealand economic climate facing uncertainty, companies must take the necessary steps to ensure their actions are both justifiable and legally sound. Following the statutory test and embracing the dual pillars of substantive and procedural justification will not only protect companies from legal actions but also foster a sense of fairness and transparency. In this delicate process, where every action is scrutinized, the path to success lies in doing redundancy and restructuring right.
Considering a restructure?
If you are considering redundancies or restructuring, it is important to seek advice from a human resources consultant, such as EQ Consultants or an employment lawyer. They can help you to ensure that you are following the correct process and minimising the risk of legal challenges.
Here are some additional tips for handling redundancies and restructuring in a fair and legal way:
- Be transparent with your employees about the reasons for the redundancy or restructuring.
- Provide your employees with as much notice as possible.
- Offer severance pay and other benefits to help your employees transition to new jobs.
- Provide outplacement services to help your employees find new jobs.
By following these tips, you can help to ensure that your redundancy or restructuring process is handled in a fair and respectful way.