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Restructuring and Redundancies 101 – Key Considerations

Home Insights Restructuring and Redundancies 101 – Key Considerations

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Contributed by: Niranjanaa Ram

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Published on: October 02, 2023


"Job-Cuts", "Lay-Offs" and "Restructures" are all common words that have recently featured in global media reports. It is no different in New Zealand, with a number of companies making cost-saving measures including shrinking their pool of employees. Restructures and redundancies can be difficult and sometimes messy processes and are not easy for anyone involved. Even more so, New Zealand has robust employment legislation that includes multiple safeguards that should be considered before a lawful decision is made to disestablish a role.
Whether you are an international company looking to cut your global workforce, or a local company navigating the effect of an economic downturn, we set out a few handy pointers below to consider when restructuring your company or changing your workforce.

Key Considerations

In New Zealand, a position of employment is considered a valuable asset. The right for a person to be in employment and support themselves and their dependents is viewed as a substantial right requiring protection. Any decision that is taken by an employer that would affect an employee's position would need to be justifiable and fair – both in terms of the reasons for the change in the employee's position as well as the process taken. A failure to do so could leave an employer open to remedies. That includes reinstatement, which tends to be more prevalent when jobs are harder to come by.
If there was a less than concrete reason for the change, or an improper process was followed, a disgruntled employee can raise a personal grievance for unjustified dismissal or unjustified disadvantage. If this is brought before the Employment Relations Authority (or the Employment Court on a challenge), it would need to be shown that the employer's actions, and how they acted, were what a fair and reasonable employer could have done in all the circumstances at the time the redundancy occurred. It is vital, therefore, to make your decision to make the role redundant transparent and fair.
You should keep the following key considerations in mind throughout any restructure or redundancy process:

  • Genuine business reason: There needs to be a genuine business reason for the restructure of the business and possible redundancy of a role. The employer should be able to articulate and justify the basis for their proposal for change.

  • Focus on the role, not the employee: The reason to make a person redundant is that their role has become redundant to the company due to the restructure. A restructure should not be used to terminate the employment of a specific individual if the reasons are performance based, or misconduct based. If there are any performance issues, or misconduct issues, the employer should follow a performance improvement process or a disciplinary process. Following the wrong process may result in the termination of employment being considered an unjustified dismissal.

  • Make the process fair: Not only should the reason for disestablishing the role be sound, but the process in coming to that decision should be fair and should not show any signs of pre-determination. This is done by engaging in a genuine consultation process with the employee. A genuine consultation process would include the following features:

    • providing a proposal to the employee containing all relevant information for the basis of the restructure, and that a possible outcome would result in their role being disestablished;

    • allowing the employee sufficient time and opportunity to provide feedback to the proposal; and

    • considering the employee's feedback and providing responses to their feedback. The employer may also consider changing your proposal and taking on the employee's feedback.

  • Redundancy does not mean termination: If the employer is disestablishing a role, it does not automatically mean that the employee's employment is terminated. The employer should consider if there are any redeployment opportunities for the employee in other roles across the organisation and offer the roles to the employee (if they are roles the employee could do). If there are no viable roles, if the employee rejects the role, or if the role is offered to another employee, then you may need to consider terminating the employee's employment. 

The "Parental Leave" Trap

There are higher safeguards and a higher standard to be met if the employee is on parental leave. The starting position under the Parental Leave and Employment Protection Act 1987 is that an employer cannot terminate the employment of an employee on parental leave.
To avoid falling into the "parental leave" trap, you should keep in mind the following:

  • No prospect: Termination is possible if you can show a redundancy situation of such a nature that there is no prospect of appointing the employee to a vacant role which is substantially similar to the employee's position. Not only does an employer need to meet the standard of genuine business reasons and a fair process, it also needs to consider all other roles in the organisation and the possible redeployment of the employee.

  • Redeployment: The employer must offer other vacant roles to the employee if they are capable of performing the role, even if they are not the best person for the job. This may require the employer to provide support and training required for the new role. The ball is in the employee's court to reject the role offered. There is less leeway for the employer in a parental leave scenario compared to a general redundancy situation.

  • Be considerate: The employee is on parental leave. Allow them more flexibility and time in attending meetings and providing feedback. Do not be too stringent or strict in the deadlines for the consultation.

One-Size does not fit all

Restructuring and redundancies come in all shapes and sizes and are a highly individualised process. What may work for one might not work for another. If you would like specialised advice or guidance on your impending restructure, feel free to approach any member of our team.

This article is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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