EMPLOYMENT LAW
Redundancy or Re-‘done’-dancy?
By Jennifer Mills, partner, and Bridget Smith, senior associate, Minter Ellison Rudd Watts
There are two main questions we tend to get from clients in relation to redundancy at the moment.
The first relates to the current economic climate. With commentators predicting an improvement in the economic climate and business confidence increasing, have we seen the end of the redundancies, or at the very least, a decrease?
It is no secret that the economic climate, particularly in mid-late 2009, resulted in difficult financial circumstances for many companies. Sales were down, but there was no corresponding decrease in fixed costs, and therefore companies needed to find ways to decrease costs and to operate more efficiently. For a large number of companies, the need to operate more efficiently was achieved by decreasing the number of employees. That is, achieving the same or increased levels of output by reducing the number of employees and reallocating the work requirements across the remaining employees.
So, have we seen the end of redundancies now that the economic climate is improving? We have perhaps seen a decline in large-scale downsizings and redundancies, but it is highly unlikely that we have seen an end to all redundancies.
Commentators have recently been discussing the impact of the improvement in business confidence on the actions and decisions of business leaders and CEOs. The message is very much that, to a certain extent, many New Zealand business leaders had become somewhat complacent prior (and perhaps contributing) to the recession. A silver lining arising from the recession has been a need to think more laterally, more creatively, and to come up with more innovative outcomes. The concern is that without the looming spectre of the global economic crisis, it will be too easy to go back to easier, low-risk, decision making. The challenge for employers is to continue to review and assess the needs of the business and how it can meet those needs as efficiently as possible. This is likely to result in further redundancies as companies continue to focus on the ability to operate efficiently.
The other question is – is redundancy a ‘done deal’? From the employer’s perspective – how can a redundancy be challenged? From the employee’s perspective, if the employer has proposed your position for redundancy, is there any point in providing feedback – isn’t the decision already made?
Where an employer is proposing to make a decision that may impact an employee’s continued employment, there is an obligation to consult with potentially affected employees. This involves providing the potentially affected employees with information about what is being proposed and why, so that the employees can provide feedback in response to the proposal, including possible alternatives, during the consultation process.
An inherent part of this is that the obligation to consult arises before a final decision is made. In order to have genuine consultation, the feedback provided by the employee must have the ability to influence the outcome. That doesn’t necessarily mean that it will change the outcome – but it has to have the ability to do so, and at a time when a change could potentially be made.
That is not to say that the obligation to consult arises every time an employer thinks of an idea that might, potentially, one day, impact on employees’ ongoing employment. That would be unnecessarily unsettling for employees and would therefore be equally counterproductive. Instead, the law recognises that the employer needs to ‘get its ducks in a row’ in respect of what is being proposed, before consulting with employees, in order to have sufficient certainty for consultation. The key point is that there must be genuine consultation – even if the employer is necessarily a significant way through the development of its proposal – at a time before any final decision is made and at a time when the feedback could potentially influence the outcome.
The question then raised by employees is: but if my role has been proposed for redundancy, is there any point in providing feedback? The answer is yes. If an employee chooses not to provide feedback, but has been afforded an opportunity to do so, the employer has complied with its obligations and is entitled to proceed to make a final decision, even in the absence of feedback being provided.
For employers, the good news is that the Employment Relations Authority and Employment Court have accepted that employers know their companies better than the Authority or Court do. For that reason, the authorities have indicated a reluctance to interfere in genuine business decisions of a company. Instead, what they have indicated is that they will focus closely on the process that is followed.
This can be contrasted with the process followed by the Authority or Court in investigating a dismissal for serious misconduct. As with a dismissal for redundancy, both decisions to dismiss must comply with section 103A of the Employment Relations Act 2000. This requires the decision to dismiss to be substantively justified (a decision a fair and reasonable employer would have made in all the circumstances at the time) and carried out in a procedurally fair manner. The difference is that with a decision to dismiss for serious misconduct, the Authority or Court will put itself in the shoes of the employer and assess whether the employee’s conduct warranted their dismissal, as well as assessing the process followed by the employer in making the decision. In a redundancy situation, the focus of the Authority or Court will be on the process followed by the employer and will assume the employer’s business reasons are genuine, unless there is evidence to the contrary.
If there is evidence that a decision has already been made, or if a genuine alternative is advanced, the employer may, if challenged, need to justify why an employee’s feedback is not adopted or why an alternative cannot be implemented. That does not mean the employer must adopt alternative proposals, but the company must be able to explain why the alternatives were not reasonable or workable.
Redundancy isn’t a done deal – either in terms of the process, or the process continuing to occur in the future. The key aspect for both parties is participating in the process. Saying ‘No, I’m not going to, you’ve already made up your mind’, unless there is evidence to confirm that, won’t advance the situation. That approach is a redundant one.
Bridget Smith is also the author of the weekly Herald online blog – All in a Day’s Work:http://www.nzherald.co.nz/all-in-a-dayswork/news/headlines.cfm?c_id=1502908.
NZLawyer, 4 June 2010, Edition 3
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