Understanding 'Last on, First off' in New Zealand Redundancy Law
In New Zealand employment law, a 'redundancy' occurs when an employee's position is no longer required by the employer due to legitimate business reasons, such as restructuring, technological changes, or economic downturns. The concept of 'last on, first off' refers to a selection method where employees with the shortest tenure (meaning they were the 'last on' to be employed) are selected for redundancy before those with longer tenure ('first off').
Is 'Last on, First off' a Legal Rule in New Zealand?
No, the Employment Relations Act 2000 (ERA) does not explicitly mandate or prohibit a 'last on, first off' (LIFO) approach for selecting employees for redundancy [Source: Employment Relations Act 2000]. Instead, New Zealand law focuses on the overarching principles of good faith and justification in all employment relationship matters, including redundancy processes.
The Principle of Good Faith
Employers in New Zealand are legally required to act in good faith throughout the redundancy process [Source: Employment Relations Act 2000, s 4]. Good faith is a fundamental obligation requiring employers and employees to be active and constructive in establishing and maintaining productive employment relationships [Source: Employment Relations Act 2000, s 4].
In the context of redundancy, acting in good faith typically involves:
- Providing Information: Employers must provide affected employees with access to relevant information about the proposed changes, the business reasons for the redundancy, and the potential impact on their roles [Source: Employment Relations Act 2000, s 4].
- Opportunity to Comment: Employees must be given a genuine opportunity to comment on the proposals before any final decisions are made [Source: Employment Relations Act 2000, s 4].
- Genuine Consideration: Employers must genuinely consider any feedback provided by employees and explore alternatives to redundancy where appropriate [Source: Employment Relations Act 2000, s 4].
The Test of Justification
Any dismissal, including a dismissal for redundancy, must be justified [Source: Employment Relations Act 2000, s 103A]. The legal test for justification requires the employer's actions to be 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 means that even if an employer uses a selection criterion like 'last on, first off', the overall redundancy process, including the selection of affected employees, must be fair and reasonable. Sole reliance on a LIFO criterion without a thorough and good faith consultation process could lead to a finding of unjustified dismissal [Source: Employment Relations Act 2000, s 103A].
Using 'Last on, First off' as a Selection Criterion
While not mandated, an employer may choose to use 'last on, first off' as one of their selection criteria for redundancy. If used, it must be:
- Applied Fairly and Consistently: The criterion should be applied uniformly to all employees in the affected pool [Source: Employment Relations Act 2000, s 103A].
- Part of a Broader Process: It should form part of a genuine consultation process where employees have the opportunity to comment on the proposed criteria and how they will be applied [Source: Employment Relations Act 2000, s 4].
- Not Discriminatory: Employers must also be mindful of their obligations under the Human Rights Act 1993, which prohibits discrimination on grounds such as age, sex, and family status [Source: Human Rights Act 1993, s 21]. A selection criterion that disproportionately affects a protected group, even if not intentionally discriminatory, could raise concerns under this Act [Source: Human Rights Act 1993, s 21]. For example, a LIFO policy could potentially disadvantage younger employees or those who have taken parental leave, as they might have shorter continuous service.
In summary, while 'last on, first off' is a commonly understood concept, it is not a legal requirement in New Zealand for redundancy. The law prioritises a genuine, good faith process and the overall justification of the dismissal, requiring employers to consult with employees and consider all relevant circumstances.
When to Seek Independent Legal Advice
Individuals seeking to understand their specific rights and obligations regarding redundancy should consider obtaining independent legal advice. The Ministry of Business, Innovation & Employment (MBIE) provides information on employment standards, and the Employment Relations Authority (ERA) hears and determines employment disputes. Free legal assistance may also be available through Community Law Centres.