Is a wave of redundancies and restructurings coming?
The Press recently reported that the construction industry in Christchurch is expecting serious pain in the coming year. Nationally, major housing developers are also facing the need to significantly reduce staff numbers. With little to no forward work in the pipeline, redundancies are on the rise and a “massive spike” in layoffs and liquidations is expected.
International trends are similar, particularly in the technology sector. CNBC reports that Google, Meta, Amazon and other large tech companies laid off more than 104,000 employees in 2022, with fresh rounds of cuts expected to continue.
Is a restructuring or redundancy process something you might need to consider in the near future? Here are the basics you need to ensure you are conducting a robust, fair process under our employment law framework.
The redundancy process
Redundancy, as with any other type of dismissal, can be challenged by an employee through the personal grievance process. If a personal grievance is raised, an employer will need to demonstrate that the reasons for the restructure were based on genuine commercial grounds, and that the process of implementation was what a fair and reasonable employer could have done in all the circumstances.
An employer must have genuine, substantive business reasons for the restructure, and able to explain the reasons for the restructuring in clear, practical terms to affected employees (and to the Employment Relations Authority or Employment Court if the decision is challenged).
Following a fair and reasonable process is as equally important as having genuine, substantive business reasons for the restructure. Even if the restructuring is substantively justified, procedural defects alone can make a dismissal unfair.
During consultation, the focus should be on genuine consultation, the provision of precise information and maintaining an open mind.
Restructures can be difficult to get right and should be tailored to the individual circumstances. We recommend seeking specific advice if you are undertaking a restructuring process.
- The first step should always be to consult the relevant employment agreements or policies to see whether there is a restructuring procedure which you are obliged to follow.
- Keep in mind that you are proposing to make the position redundant, not the person. Remember this when drafting the proposal documentation and holding consultation meetings.
- Consultation meetings should be in person as far as possible, although since Covid-19 and particularly for remote workers, online meetings have become more common-place.
- Give your employees sufficient time to consider the proposal and to give feedback. Genuinely consider all points raised by your employees and respond to their feedback.
- A fair and reasonable process must be used in deciding on a selection criteria. This could include employment length, performance, skills, experience and so on. Consult with employees on this and later on their preliminary score in the selection exercise.
- You must consider redeployment for each redundant employee and consult with employees on redeployment opportunities.
- If your employees are vulnerable employees under the Employment Relations Act 2000 further considerations are required.
- Consider the up-front cost of redundancies, which include their notice period and accrued annual leave balances. Some employees may also be entitled to redundancy compensation, so make sure you check the employment agreements carefully.
There will always be risks associated with redundancies where alternatives are not first explored and exhausted where available. Even in such economically turbulent times, redundancies which are challenged will be carefully scrutinised and the justification for those redundancies reviewed.
Special thanks to Solicitor Hamish Rossie for preparing this article. For more information, or for specialist advice on any employment issues, please contact a member of our Employment Law team.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.