Skip to main content

Disclaimer: Educational purposes only. Not legal advice. Consult a qualified NZ legal practitioner for your specific circumstances.

SimplifiedLaw.co.nz
employment

Redundancy law: When is a redundancy genuine?

Key Takeaway

A genuine redundancy occurs when an employer genuinely decides, on reasonable grounds, that an employee's position is no longer needed due to legitimate business reasons. Employers must act in good faith, consult with affected employees, and genuinely consider their feedback throughout the process. Employees have rights to fair treatment and may challenge unjustified redundancy dismissals.

Understanding Genuine Redundancy in New Zealand Employment Law

Redundancy is a form of dismissal where an employee's job is eliminated, not due to their performance, but because the employer's business no longer requires that specific position. For a redundancy to be lawful in New Zealand, it must be genuine. This means the employer must genuinely believe, on reasonable grounds, that the position will no longer be required for their business operations.

What Constitutes a Genuine Redundancy?

A redundancy is considered genuine if the employer has made a genuine business decision to eliminate a position, or alter its requirements, to the point where the employee's specific role is superfluous (no longer needed) to the business's operational requirements [Source: Case law interpreting Employment Relations Act 2000, s 103A]. This decision must be based on sound and justifiable business reasons, which may include:

  • Economic Downturn: A decline in demand for products or services requiring a reduction in staff numbers.
  • Restructuring: Changes in the business structure, management, or operations that eliminate certain roles or merge responsibilities.
  • Technological Advances: New technology making certain jobs obsolete.
  • Relocation: Moving the business to a new location where the existing position is no longer required.
  • Cessation of a Business Function: Discontinuing a particular part of the business or a specific project.

Crucially, a genuine redundancy is about the position no longer being required, rather than the person holding the position. If the employer's primary motivation is to dismiss a particular employee under the guise of redundancy, it would likely be considered an unjustified dismissal [Source: Employment Relations Act 2000, s 103A].

Employer's Obligations in a Redundancy Process

Employers have several key obligations when contemplating redundancy, primarily guided by the principle of good faith:

  • Good Faith Obligations: All parties to an employment relationship must deal with each other in good faith [Source: Employment Relations Act 2000, s 4]. This obligation requires employers to be active and constructive in establishing and maintaining a productive employment relationship. In the context of redundancy, it means employers must be responsive and communicative, and provide information relevant to the continuation of the employment relationship [Source: Employment Relations Act 2000, s 4(1A)].

  • Consultation: Employers must genuinely consult with affected employees before making a final decision about redundancy [Source: Employment Relations Act 2000, s 4]. Consultation involves:

    • Providing employees with all relevant information about the proposed changes and the reasons behind them.
    • Giving employees a genuine opportunity to provide feedback, ask questions, and suggest alternatives.
    • Genuinely considering the employees' feedback before making a final decision.
    • This process must occur while the decision is still proposed and before it is finalised.

  • Consideration of Alternatives: As part of the good faith consultation process, employers should genuinely consider alternatives to redundancy, such as redeployment opportunities, retraining, or reduced hours, where these are reasonable and practical [Source: Employment Relations Act 2000, s 4].

  • Fair Selection Process: If a redundancy involves choosing between multiple employees in similar roles, the employer must use fair and objective selection criteria. These criteria should be clearly communicated and applied consistently to all affected employees [Source: Case law interpreting Employment Relations Act 2000, s 103A].

  • Notice and Redundancy Pay: An employer's obligations regarding notice periods and redundancy pay are typically set out in the employee's individual employment agreement or collective employment agreement. In New Zealand, there is no statutory entitlement to redundancy pay; it is a contractual right [Source: Employment Relations Act 2000]. Employers must adhere to the terms specified in the employment agreement regarding notice periods and any redundancy compensation.

Employee Rights in a Redundancy Situation

Employees facing redundancy have several rights:

  • Right to Good Faith Treatment: Employees have the right to be treated in good faith throughout the redundancy process, including the right to be consulted and have their feedback genuinely considered [Source: Employment Relations Act 2000, s 4].
  • Right to Information: Employees are entitled to receive all information relevant to the proposed redundancy to enable them to make informed representations [Source: Employment Relations Act 2000, s 4(1A)(c)].
  • Right to Challenge Unjustified Dismissal: An employee who believes their redundancy was not genuine, or that the process followed by the employer was unfair or unreasonable, may raise a personal grievance for unjustified dismissal [Source: Employment Relations Act 2000, s 103A]. A personal grievance is a complaint raised by an employee against their employer regarding an employment matter, which can include claims of unjustifiable dismissal, disadvantage, or discrimination.

Key Legislation

The primary legislation governing redundancy and employment relations in New Zealand is the Employment Relations Act 2000.

When to Seek Independent Legal Advice

Individuals seeking to understand their specific rights and obligations regarding redundancy should consult with an employment law specialist or seek assistance from a community law centre. Employment New Zealand provides guidance, and employees can also contact their union if they are a member. Legal professionals can provide advice on specific circumstances and represent individuals in disputes with employers. Free advice is available through Community Law Centres.

Key Resources