Redundancies in the Post COVID-19 Economy

The COVID-19 global pandemic has forced businesses to make unprecedented changes to adjust and survive.  The new business landscape emerging in the post COVID-19 economy signals that changes to staffing structures are likely to be common.

As employees rely on job retention more than ever, this is likely to result in a climate where there is an increase in personal grievance claims for unjustified dismissals.  If an employee who is made redundant raises an unjustified dismissal claim, the onus shifts to the employer to establish that its actions, and how it acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred.

Accordingly, it is important that businesses that decide to restructure for commercial reasons follow a procedurally fair and reasonable process.  These two elements: (a) a genuine business reason; and (b) a fair process are interlinked and must be satisfied to constitute a lawful redundancy process.

The Employment Relations Authority (ERA) recently considered an application for an interim injunction by a former senior manager employed by Kathmandu Ltd who was made redundant during the COVID-19 pandemic (Barry v Kathmandu Ltd [2020] NZERA 197).  While the application for interim injunction was unsuccessful, the ERA Member held that there was a serious question to be tried regarding a possible unjustified dismissal based on the process, particularly as it pertained to the adequacy of information provided, the opportunity for the employee to respond and whether Kathmandu Ltd consulted properly and sufficiently over redeployment.

What is fair and reasonable process in the COVID-19 economy?  Our non-exhaustive list is as follows: 

  • Consider any suitable alternative working arrangements with employees, such as a reduction in hours or pay following a good faith, process before considering redundancy.
  • Document your proposal in writing and present it to employees, setting out the reasons and the effect that it may have on their employment.  Ensure that you do not overlook employees who are working remotely, on sick leave, on holiday or on parental leave. 
  • Outline the process to affected employees and provide expectations on timeframes to provide certainty and reduce anxiety.  Be cognisant of your declaration made under the COVID-19 Wage Subsidy/Wage Subsidy Extension Scheme with respect to retaining employees for a specific period of time.
  • Provide affected employees access to relevant information from the outset of the proposal, including financial data.  The information must be accurate and sufficiently precise to allow the employees to provide meaningful feedback on the proposal.  
  • Consult with employees prior to a decision being made, allowing them a genuine opportunity to provide feedback on the proposal.
  • It is preferable to hold a meeting to obtain feedback from employees face-to-face, however, other methods such as Skype or Zoom are acceptable. 
  • Be responsive and communicate with employees throughout the process in accordance with your good faith obligations.  You should consider the relevance of requests and respond in a timely manner to any requests for further information by an employee or their representative.
  • Remind employees of their entitlement to seek independent legal advice and provide a reasonable period of time for them to do so.  Employees are entitled to have a support person or legal representative/employment advocate present at a meeting, so be mindful to accommodate these persons.
  • You should consider and respond to any requests for adjournments.
  • Genuinely consider the employee’s feedback and any opportunities for redeployment within the business for which they have the relevant skills and experience to perform the roles.  If you do not agree with the feedback provided you should explain this to the individual employee.
  • Set out your decision in writing.
  • Offer Employee Assistance Program counselling where available.  Employees are likely to be more susceptible to stress in this post COVID-19 economy.  
  • Comply with any contractual obligations under the employee’s employment agreement, including notice and redundancy compensation.
  • Provide any future assistance to the employee such as a written reference or certificate of service if redundancy is the final outcome of the process.

Saunders & Co Lawyers are available by phone and email to provide legal advice and guidance on a range of employment matters. For more information and specific legal advice on restructuring and redundancies please contact the Employment team.