Selection, consultation & redeployment: The legalities of redundancies

With the workplace landscape rapidly evolving, employers need to be wary of various legal responsibilities when making changes to their organisational structure. HRD spoke with Bell Gully partner and employment law specialist Elizabeth Coats on the legalities of redundancies and how employers can ensure their end-of-employment process lives up to their legal obligations.

Selecting employees for redundancy

“There is no ‘one size fits all’ approach to determining selection criteria for redundancy,” Coats told HRD, adding that redundancy typically arises when a business is downsizing its operations.

To be legally defensible, Coats said the criteria used to select an employee for redundancy needs to be “relevant to the role and as objectively measurable as possible”. Where employers use subjective criteria to inform their redundancy decisions, they expose themselves to greater legal risk.

“Some employers will tailor the criteria based on the position description for the relevant role, while others will select certain key criteria that are a particular focus,” Coats explained.

Above all, employers should be transparent about the criteria they use to select employees for redundancy and provide employees with an opportunity to give feedback throughout the redundancy process.

Consultation obligations prior to redundancy

An employer’s consultation obligations surrounding redundancy typically differ from case to case.

“Every consultation process will be different, depending on the reasons for the change and how the impact might be across the business, as well as any specific employment agreement or policy requirements,” Coats told HRD.

However, while the specific consultation process may differ, an employer’s core obligations always centre around the statutory duty of good faith, which is an employer’s duty to refrain from acting in a manner that will or is likely to damage trust and confidence in the employment relationship. These obligations include providing relevant information about a proposal of redundancy; providing employees with an opportunity to give feedback; and taking that feedback into account when making redundancy decisions. Further, employers should consult the relevant employment agreement to understand their obligations surrounding the notice period for an employee’s redundancy.

“If the employment agreement is silent on the relevant notice period, ‘reasonable’ notice must be given (which will depend on the particular circumstances),” Coats advised.

Redeployment opportunities for a redundant employee

Before making an employee redundant, an employer must seek out any potential opportunities for redeployment to another appropriate role.

“An employer is legally obliged to consider if there are any redeployment opportunities within its business for any employee whose position is disestablished in any restructuring process,” Coats told HRD. “In some cases, the employer may be required to offer a redeployment opportunity to an impacted employee (without considering any other internal or external candidates),” Coats explained.

Coats is a featured speaker at the Employment Law Masterclass held in Auckland on 9 March 2022 – buy your tickets here.