Lessons from recent redundancy cases

A rash of redundancy cases this year has provided guidance for employers in managing the various restructuring situations which can arise.  Below are a few snapshots from some recent cases.

Redundancy is a misfortune, not a privilege

In Taranaki DHB v Grammans the District Health Board sought a declaration from the Employment Relations Authority – that it was entitled to require a nurse to work according to a new job description that had been developed after consultation with staff and the union.  This case concerned the Hawera Hospital, which had combined the staffing of the emergency department and in-patients ward into one structure.  The nurse asserted that she had a right to work in the emergency department only, or in the alternative, said that her role was disestablished.

The Authority disagreed, saying that “redundancy is a misfortune, not a privilege” and holding that the DHB had complied with its obligations of good faith, including consulting extensively with the nurse.  The Authority noted that “no less than a dozen letters” were exchanged and two meetings occurred.  The Authority also held that the nursing duties in the generic position description were substantially similar to the duties required of a nurse in the emergency department, and that this nurse had the requisite skills and qualifications to perform the role.

Selecting employees for redundancy

In Gilbert v Transfield Services (New Zealand) Limited the Employment Court held that an employee was unjustifiably dismissed in a redundancy situation and ordered his reinstatement 3½ years later, plus full lost remuneration in the meantime.  There are a number of lessons apparent in the Court’s decision:

  • The company did not properly assess whether the position filled by the employee was actually superfluous, but incorrectly lumped him in with a group of other ‘field staff’.
  • The company did not consider the employee’s skills and attributes, as required by the collective agreement, when making decisions to select staff for redundancy.  Instead, it focussed far more on “attributes” than on actual skills.
  • The company ignored the employee’s performance assessment history, which the Employment Court said “beggars belief” as it was an obvious and relevant tool.
  • The results of psychometric testing were an “irrelevant criteria” in selecting employees for redundancy, as those tests are designed for new employees not for those facing redundancy.
  • It was unfair to use psychometric testing when the base material (the questions and answers) were not able to be accessed and considered by either the employer or the employee.

The Court also referred to the use of an “FAQ” document that contained misleading information, noting that this was not literally frequent questions posed by employees but ones posed rhetorically by the employer with answers intended to convey its plans in a positive light.

As the employer in this case was unwilling to offer any redundancy compensation, the Court noted that a critical examination of its compliance with legal obligations was an important safeguard.

A requirement to look for alternative roles

Following a line of similar case findings recently (which have confirmed that an employer has an obligation to proactively consider an employee for available roles ahead of confirming any redundancy), the Authority held in Ford v John Holland New Zealand Ltd that the company had breached its own policy by failing to investigate whether there might be positions for a redundant employee in a completely different area of the company.  While the employee’s direct manager may not have been in a position to investigate this, the Authority held that either he or ‘HR’ should have referred the matter to someone who was.

Is the new role really any different?

An employee will only be validly redundant if their role actually ceases to exist.  In Kreider v Vodafone New Zealand Ltd, the Authority held that the General Counsel role with Vodafone was the same as the ‘new’ Legal Director role created in a restructuring.  After carefully considering the job descriptions of the two roles, the Authority held that there were not sufficient differences between the two roles apparent.

In another recent case, the Ministry of Foreign Affairs Trade justified the redundancy of a long-serving finance employee because it genuinely believed that more complex financial advice and assistance was required than her role provided.

A decision not to redeploy an older employee isn’t necessarily age discrimination.

In Anderson v Fullers Group Ltd an employee described by the Authority as “a man of mature years”, challenged the company’s decision not to redeploy him to an entirely different role.  The Authority found that there were a number of reasons why the employee was not suitable for the alternative role.  These included the fact that it was fixed term, the hourly rate was significantly lower, the role would involve cash handling skills in an on-board environment with relatively short voyage times, and the employee would be working with staff who were a generation younger.  While the employee’s age was a consideration, the Authority found that the dominant reasons for not redeploying the employee were because the role was short term and poorly paid.  As such, there was no age discrimination.

A note about timing

In Moore v Carter Holt Harvey Ltd an employee was made redundant only 8 days after the restructuring was first proposed.  The Authority noted that the process leading to that redundancy was very rapid, which could raise doubt about whether it was as thorough as it could be. However, it held that there was no evidence in the case that suggested the potential pace of the process resulted in any unfairness.

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  1. Lewis Thompson 26 July 2013 at 2:09 am

    Thank you Karen. It’s posts like these that are always helpful and it’s great that you are taking the time to inform us of cases that impact us in employment law


  2. Hi Karen,
    Thanks. I agree that it is really important for employers to know the process to follow and to follow it carefully every time. So many employers come unstuck trying to take shortcuts when a proper application of a fair process would have resulted in their decision being upheld (even if challenged).
    Kind regards
    Alan Knowsley


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