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employment

The consultation process for redundancy

Key Takeaway

In New Zealand, employers undertaking redundancy must follow a consultation process guided by good faith obligations. This involves genuinely discussing proposed changes, providing relevant information, and considering employee feedback before making a final decision. Failure to conduct a fair process can lead to an unjustified dismissal claim.

The Redundancy Consultation Process in New Zealand

Redundancy occurs when an employee's job ceases to exist due to an employer's genuine business requirements, not related to the employee's performance or conduct. In New Zealand, employers are legally required to engage in a fair and reasonable consultation process with employees before making a redundancy decision.

The Duty of Good Faith

The entire employment relationship, including redundancy processes, is underpinned by a duty of good faith [Source: Employment Relations Act 2000, s 4(1)]. Acting in good faith means acting honestly, openly, and without deception, and being responsive and constructive [Source: Employment Relations Act 2000, s 4(1A)]. This duty is mutual, applying to both employers and employees, and extends throughout the employment relationship [Source: Employment Relations Act 2000, s 4(2)].

Genuine Redundancy Requirement

For a redundancy to be lawful, it must be a genuine redundancy, meaning the role is no longer required due to legitimate business reasons [Source: Employment Relations Act 2000, s 103A, which requires an employer's actions to be what a fair and reasonable employer could have done in all the circumstances]. It cannot be a disguised dismissal for performance issues or other reasons that would otherwise constitute an unjustified dismissal.

Key Elements of the Consultation Process

The good faith obligation dictates the nature and extent of the redundancy consultation process. A fair process generally includes:

  • Providing Information: The employer must provide affected employees with all relevant information about the proposed changes, including the reasons for the proposed redundancy, the proposed new structure, the roles at risk, and the proposed selection criteria (if applicable) [Source: Employment Relations Act 2000, s 4(1A)(c) requires employers to be 'active and constructive in establishing and maintaining a productive relationship in which the parties are, among other things, responsive and communicative']. This information should be provided in writing.
  • Opportunity for Feedback: Employees must be given a genuine opportunity to provide feedback on the proposed changes. This includes the right to ask questions, offer alternatives to redundancy, or suggest modifications to the proposed new structure [Source: Employment Relations Act 2000, s 4(1A)(c)].
  • Genuine Consideration: The employer is obliged to genuinely consider the feedback provided by employees. This means that the employer must not have made a final decision before the consultation process concludes. The consultation should be a meaningful exercise where employee input can genuinely influence the final outcome [Source: Employment Relations Act 2000, s 4(1A)(c)].
  • Adequate Time: Employees must be allowed a reasonable period to consider the information, seek advice (e.g., from a union or lawyer), and prepare their response [Source: Employment Relations Act 2000, s 4(1A)(c)]. What constitutes 'reasonable' time depends on the complexity of the proposal and the amount of information provided.
  • Support and Representation: Employees have the right to have a representative (e.g., a union delegate, a support person, or a lawyer) present during consultation meetings [Source: Employment Relations Act 2000, s 4(1A)(c), which refers to good faith obligations including being 'communicative' and 'responsive'].
  • Consideration of Alternatives: As part of the consultation, employers should genuinely explore alternatives to redundancy, such as redeployment opportunities, changes to job descriptions, or voluntary redundancies, where appropriate [Source: Employment Relations Act 2000, s 4(1A)(c)].

Unjustified Dismissal and Personal Grievances

If an employer fails to conduct a fair and reasonable redundancy process, or if the redundancy is not genuine, an affected employee may have grounds for a personal grievance [Source: Employment Relations Act 2000, s 103(1)(a)]. A personal grievance is a complaint an employee may raise against their employer for an alleged unjustified dismissal, unjustified disadvantage, or other specified actions [Source: Employment Relations Act 2000, s 103(1)].

When determining whether a dismissal or action (including redundancy) was justified, the Employment Relations Authority or Employment Court must objectively consider whether the employer's actions were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred [Source: Employment Relations Act 2000, s 103A]. This test applies to both the substantive decision to make a role redundant and the procedure followed to effect that redundancy.

When to Seek Independent Legal Advice

Individuals involved in a redundancy process, whether as an employer considering redundancies or an employee facing potential redundancy, should seek independent legal advice. Information on rights and obligations can be obtained from official government bodies such as Employment New Zealand, or free advice can be accessed through Community Law Centres.

Key Resources