Reduce Restructure Regrets: Get Employee Consultation Right

Much can be learned from cases brought in the Employment Relations Authority dealing with the restructures and redundancies that took place during the Covid-19 lockdowns in 2020 and 2021.  In many of these cases, the business owners had genuine reasons for carrying out their restructures.  Despite this, employees have successfully argued that they were unjustifiably dismissed and have received awards in the Employment Relations Authority.

The main issue in these cases is that the employers failed to properly consult the employees before making them redundant.  Despite having genuine business reasons, employers who have rushed the consultation process or failed to give adequate information to employees, have been found to have acted unfairly and unreasonably. 

How long should you allow for consultation?

In one case a consultation period of only four days was found to be inadequate (Kumar v Hospitality Services Limited [2022] NZERA 398; 18/08/2022).  Also in that case, the employer failed to disclose the selection criteria it used to select the employee for redundancy.  This meant the employee was not consulted on the selection criteria and the employer made its decision based on assumptions about the employee, which was found to be unreasonable and unfair. 

In another case, a consultation process of 10 days was considered very short (Steele v Kaylee Investments Limited [2022] NZERA 381; 11/08/2022).  While the Employment Relations Authority found that the employer had a valid reason for restructuring the business because of financial issues, it had failed to provide the employee with information about why their position had been selected over colleagues who worked in similar roles and failed to give information about the broader picture for the business and why it was facing financial difficulties.  The Authority also found that the employer had not acted fairly or reasonably when it refused to meet with the employee and give her an opportunity to provide her views and feedback.

Take time to get consultation right

These cases tell us that, even when a business has genuine reasons for making staff redundant, the employer’s obligation to fairly consult with employees remains just as important.  Even in extreme cases such as the Covid-19 lockdown, employers should avoid rushing the process by truncating the consultation period.  Providing all relevant information to enable an employee to give proper and meaningful feedback is vitally important.  Even when the writing is on the wall, the employer’s duty to consult fairly and reasonably is not diminished.

Every situation turns on its facts.  If you are contemplating restructuring in your business, we recommend that you seek legal advice from the outset.

Disclaimer

The above information is of a general nature only.  The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to their specific circumstances.