By Vaughan Granier
Welcome to the first in our series of articles guiding employers on how to compliantly proceed with a restructure and a redundancy
The devasting economic impact of coronavirus has caused many businesses to face the increasingly common prospect of restructuring their business to remain viable in the future. Often, as part of this process, employee redundancies are viewed as necessary in order to cut costs and survive.
But both restructuring, and redundancy by reason of restructuring, are tricky processes, and it’s unwise to go down these paths without the right knowledge or expert guidance to make sure you don’t stray into non-compliance.
In this seven-part series, I’ll cover the essential steps you should take to correctly restructure your business. And if (not when) a genuine redundancy occurs, I’ll show you how to resolve the matter in good faith and mitigate your risk of an unfair dismissal claim.
But before we dive into the ins and outs of the process, we need to look at three essential concepts:
- The definition of restructuring;
- The definition of redundancy; and
- The importance of good faith in these processes.
What is restructuring?
Employers have a right to restructure, and this is important to recognise. Making changes that enable your organisation to be the most efficient it can be is a normal and accepted part of business.
Restructuring is where a business changes its structure or processes as a result of changes in its business environment. Sometimes the reason for those changes can be obvious, like the impact of COVID-19, but not always. Changes can, for example, occur through:
- The introduction of new technology (a machine can now do all or part of the employee’s job);
- A change in business processes (e.g. as a result of health and safety requirements);
- The business slowing down or losing profit and needing to adjust its expenses or operations to meet this financial situation; and
- The business closing altogether or relocating overseas.
If, as a result of any of these examples, your business needs to modify or adapt the way it functions, then the law in New Zealand requires you to follow a specific restructuring process. And this process has very strict requirements around involving your employees in dealing with how these changes affect the workplace. We’ll discuss these requirements throughout the articles in this series.
What is redundancy?
Even though ‘restructuring’ and ‘redundancy’ are words often heard together, they are very separate things. A ‘redundancy’ happens, possibly after a restructure, when every option to try and reduce the impact on a position has failed. Even after you’ve determined that there’s no option but to disestablish an employee’s position, you may be able to redeploy that employee into another role. Only when redeployment is not an option will the employee in the now disestablished position be declared redundant and be terminated by reason of that redundancy.
What is good faith?
It’s always possible that a restructure could lead to redundancy. This is why we need to examine the core principle that underpins New Zealand’s employment laws relating to any situation where an employee could possibly lose their job: The principle of good faith.
Restructuring is just one of many scenarios included in the application of this principle. Good-faith behaviours sit at the heart of any process that could lead to the termination of an employee.
Good faith means positively doing some things, such as:
- Actively and constructively building and maintaining relationships;
- Proactively providing relevant, accurate, and sufficient information;
- Allowing employees to comment; and
- Being responsive and communicative.
And it means, in the same breath, not doing some other things, for example:
- Using the restructuring process to illegitimately get around the important work of managing performance;
- Rushing a process, or providing partial information; and
- Predetermining an outcome beforehand, regardless of employee input.
I go into all the details of good faith and it’s critical importance in an employment relationship in this article on the duty of good faith in employment law. It’s worth a quick detour to read the blog if you need a refresher.
Now, before I move to the next part in this series, let’s briefly address the elephant in the room: yes, restructuring processes sometimes get misused by employers.
Sometimes, an employer may unlawfully choose termination by redundancy to escape having to deal with difficult issues, or workers, as part of a performance management process.
Here are two clear examples of misuse of redundancy due to restructuring:
- When an employee is terminated because their job has been ‘restructured’, but, when they leave, someone else is employed to the same position or work.
- If you call it a ‘restructuring’ but no other positions are affected at all, it can indicate that this was a directed and personal process and not an objective business restructuring.
These misuses are not in good faith, and if found out, would be regarded as unlawful! If you’re ever in any doubt, you can always return to these articles for guidance.
Now that you’ve had an overview of some of the important concepts around restructuring and redundancies, the second article in this series will outline the reasons that make a redundancy genuine under the law, and how to identify these before you start a workforce restructure.
HR Assured is an end-to-end outsourced HR solution for SMEs combining unlimited expert workplace relations advice, award-winning HR Cloud Software, auditing and employment practice insurance. Our clients reduce the time they spend on HR by up to 70%! That’s more time for them to run their business and get on with the things that matter. Contact the HR Assured team to learn more.
Vaughan Granier is the National Workplace Relations Manager for HR Assured NZ. He has over 24 years’ experience in international human resources, health and safety, and workplace relations management. With over 10 years working in New Zealand and Australian companies, he provides in-depth support to leadership teams across all areas of HR, Health and Safety, and employee management.
Other articles in the series:
- The employer’s guide to restructure & redundancy – Part 2: genuine reason
- The employer’s guide to restructure & redundancy – Part 3: consultation
- The employer’s guide to restructure & redundancy – part 4: redeployment
- The employer’s guide to restructure & redundancy – part 5: the final decision
- The employer’s guide to restructure & redundancy – part 6: managing redundancy
- The employer’s guide to restructure & redundancy – part 7: communicating with employees