For some time now there has been some uncertainty as to what an employers obligation are when considering making an employee redundant.
The need for the employer to carry out the redundancy process in a procedurally fair way has been well settled for some time and this includes the need for consultation, consideration of alternatives, using a fair selection process and complying with any terms of any agreement.
What has been less certain of recent times is whether the employer’s decision itself to make the employee redundant is open to question where the redundancy is not a cloak for an alternative reason to dismiss the employee e.g. to exit an employee when there are performance issues.
There have been lower Court decisions which have indicated that the test is no longer just the need for a genuine basis for the redundancy but that in fact the Court will also review and enquire into the employers business decision to make a position redundant and whether this was fair and reasonable in the circumstances. This will include reference to any purported financial basis that justified the employer’s decision.
The Court of Appeal has now confirmed that this is the correct approach. The Court also reconfirmed that it is important that the employer provide the employee with adequate information in a timely manner which will enable the employee to assess the financial basis for the employer’s decision.
Employers must take careful note of this decision as many employers have approached the redundancy process in a much more casual way in the past and the Court of Appeal has made it clear that this approach will no longer satisfy the legal tests required to satisfy a genuine redundancy.
It is worthy of note that the employer’s failure in the case in question, although accepted by the Court to be not malicious or deliberate, was nevertheless a mistake and awarded 12 months loss of wages ($65,000) and importantly compensation for distress in the amount of $20,000. As can be seen, the costs of getting it wrong can be quite significant.
Farry and Co. are experienced in all aspects of employment law and can advise an employer in relation to any contemplated restructuring or redundancy process.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
pfarry@farry.co.nz
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.