Does COVID-19 change the way you restructure your business?

Wednesday, October 14, 2020

COVID-19 has wreaked havoc on many businesses, some of which must now contemplate cost cutting measures in order to keep their business afloat. So, what do employers need to think about if they propose a restructure? Has COVID-19 changed the rules?

The short answer is no. COVID-19 in itself is not an excuse for an employer to carry out a restructure, short of the minimum requirements. The situation many employers currently find themselves in is unprecedented and difficult. However, COVID-19 has not changed any of the normal legal obligations.

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 be able to explain the reasons for the restructuring in clear, practical terms, both to affected employees and to the Employment Relations Authority or Employment Court.

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.

Top tips

  • 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.
  • While consultation meetings should be in person as far as possible, during the COVID-19 lockdowns consultation meetings held via video-conferencing technology may have been acceptable.
  • Give your employees sufficient time to consider the proposal and, after the consultation meetings, to give feedback. Genuinely consider all points raised by your employees and respond to their feedback in detail and in writing.
  • 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. Clearly communicate the proposed criteria, and ensure you give your employees an opportunity to comment on it and later to comment on their preliminary placing in the selection exercise.
  • You must consider redeployment for each redundant employee. For some businesses (particularly smaller ones or those with highly specialised roles) it will be obvious from the outset that there are no redeployment options readily available. Employers can be up front about this, but you must allow your employees to give their feedback on this and whether they are able to identify any redeployment options.
  • If your employees are vulnerable employees under the Employment Relations Act 2000 further considerations are required. Please get in touch with us for advice on this point.
  • Consider the up-front cost of redundancies, which include the notice period in the employees’ employment agreements and their accrued annual leave balances.

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.

For more information, or for specialist advice on any employment issues, please contact a member of our employment 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.



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