By: Charlene Sell

If you are considering restructuring your business the process you follow can have a huge impact on how exiting staff feel about the way they were treated.  Disgruntled employees who feel they were mistreated during a redundancy process may be more inclined to raise a personal grievance.  The morale amongst remaining staff will also be affected if redundancies are not handled sensitively.
At the time you identify the possibility of redundancies you should consider obtaining legal advice from an employment lawyer.
An employer needs to have genuine commercial reasons for making employees' positions redundant.  An employer may decide to shut down an unprofitable part of the business, downsize a department, relocate the business or outsource work to independent contractors.  Redundancy should not be used as a camouflage for dismissing an underperforming or unsatisfactory employee.  Before putting a proposal to staff you need to clearly understand the reasons for considering making redundancies. 

You must ensure redundancy and restructuring provisions in the employees' employment agreements are followed exactly.  These provisions may set out how the consultation process is to be conducted.  You will need to consider these requirements when putting together your proposal.

A written proposal should be distributed to all employees whose positions may be made redundant if you go ahead with the proposal (the "affected employees").  The proposal should discuss the reasons for considering making positions redundant, what the effect would be if you went ahead with the proposal (e.g. five existing positions in a department would be reduced to three positions and therefore two employees' employment would end) and, if necessary, selection criteria you are proposing to use to decide which employees would keep their jobs if you went ahead with the proposal.  The proposal should also explain how the employees can provide feedback on the proposal.  If you are considering making a number of redundancies, you may wish to seek voluntary redundancies.

You should advise employees that they are entitled to get their own legal advice on the process and have an advisor or support person with them at any meetings.
It is important that you engage in a genuine consultation process with the affected employees.  You should listen to feedback and alternatives to redundancy suggested by the employees.

Affected employees are entitled to be provided with information relating to the proposal.  For example, if there are financial reasons for considering making employees' positions redundant it may be appropriate to provide affected employees with financial information or a cost/benefit analysis.  However, you do not have to disclose confidential information or information that cannot be disclosed in order to protect a person's privacy or the employer's commercial position.

If an affected employee would like more time to provide feedback and this request is reasonable, you should grant that request.
Once all affected employees who wish to provide feedback on the proposal have done so, you then need to decide whether to proceed.

If you decide to go ahead with the proposal you need to let the affected employees know whether they will keep their jobs.  Ideally you should advise those employees who will lose their jobs in person and at the same time provide them with a letter confirming that. 

You need to provide those employees who will lose their jobs with the period of notice specified in their employment agreement.  The employees may either work out the notice period or alternatively you may decide to pay the employees in lieu of working out the notice period.  In addition you will need to pay the employees any redundancy compensation referred to in their employment agreements and their accrued holiday pay.
You should also provide employees with a reference or certificate of service and you should consider allowing employees time off to attend interviews.
A former employee may raise a personal grievance for unjustified dismissal if you did not have genuine reasons for making their position redundant or the redundancy process was not carried out correctly.

The employee must raise the grievance with you within 90 days after the action alleged to amount to a personal grievance occurred or came to the employee's notice (whichever is the later).

If you reach a settlement agreement with the employee in relation to the personal grievance, the terms should be recorded in a record of settlement signed by the parties and a mediator from the Department of Labour.  Once the mediator has signed the record of settlement it will be binding on the parties. 

If you cannot reach a settlement with the employee the next step is usually mediation through the free mediation service offered by the Department of Labour.  If mediation is unsuccessful, the parties will attend an investigation meeting before an Employment Relations Authority member who will then make a binding determination.
To undertake a fair redundancy process you need to have genuine reasons for considering making employees' positions redundant, implement a fair consultation process giving employees an opportunity to provide feedback, pay employees who will lose their jobs redundancy compensation (if required under their employment agreement) and their accrued holiday pay, and provide those employees with the required period of notice and references or certificates of service.

If you would like to discuss how to implement a fair redundancy process in more detail, you can contact a member of our Employment Law team. 

Kent France, Partner
Amanda Douglas, Partner
Charlene Sell, Associate

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