ERA looks at whether employer was fair and reasonable with dismissal
The Employment Relations Authority (ERA) recently dealt with a case involving a worker who claimed unjustified dismissal and disadvantage against his former employer, a hotel restaurant.
The case centred around a restaurant manager who was made redundant, but believed the redundancy wasn't genuine.
The worker, employed as a restaurant manager and sommelier at a boutique hotel, was notified that his employer proposed changes to his role. Initially offered a lower-paid position, the worker was soon after informed that his role was being made redundant due to financial reasons.
This turn of events led the worker to file a claim with the ERA, asserting that his dismissal was unjustified and that the redundancy process was unfair.
The worker had been promoted to restaurant manager and sommelier after a year of employment, working 40 hours per week at $45 per hour. His duties included managing the restaurant staff roster. The restaurant served both in-house guests and external customers.
Prior to the redundancy, the worker had participated in two video conference calls described as 'brainstorming' sessions about improving the business's financial profitability.
These sessions were facilitated by a third party and involved senior staff members. Importantly, the worker stated that there was no discussion about his role being affected during these sessions.
The worker had been away from work on Accident Compensation (ACC) due to a non-work related injury. During this time, he claimed to have participated in some remote work activities without pay, though this aspect of his claim was not pursued further in the ERA proceedings.
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Employer’s lack of consultation?
One of the key issues in this case was the apparent lack of consultation with the worker about the changes to his role. The ERA noted:
"I have nothing from the employer to show me that it consulted in any meaningful way with [the worker] about his role being one that was potentially affected by concerns about the financial viability of continuing its business."
This observation underscores the importance of proper consultation in redundancy situations. The ERA said that employers are required to provide relevant information and an opportunity for employees to comment before making decisions that could adversely affect their employment.
The ERA also found it concerning that the worker was initially offered a lower-paid position, which was then seemingly disregarded in subsequent communications leading to his termination. This inconsistency raised questions about the genuineness of the redundancy process.
A ‘confusing’ series of events
The sequence of events leading to the worker's dismissal was complex. First, he received an email offering him an alternate role in the restaurant with fewer hours and lower pay. This email was signed by a manager and copied to the company director.
The worker then had an informal conversation with the manager who had signed the offer, indicating that he would take the alternative job if necessary.
However, he formally responded to the employer by email, stating that he was seeking advice about the proposed job change.
Before the worker could respond further, he received an email from the company director stating that the restaurant would be closing to external guests and that they were considering how this would affect the worker's contract.
Shortly after, another email from the director confirmed that the worker's role was being made redundant due to financial reasons, giving him four weeks' notice of termination.
Genuine redundancy or not?
The ERA further noted that another crucial aspect of the case was the question of whether the redundancy was genuine. The worker's suspicions were aroused when he saw an advertisement for a similar role shortly after his dismissal.
The ERA considered this evidence, stating: "It is not then a stretch to accept that [the worker] would have questioned whether there was a genuine reason for disestablishing his restaurant manager role."
This highlights the importance for employers to ensure that redundancies are based on genuine business reasons and that their actions following a redundancy are consistent with those reasons.
The ERA's decision
After considering the evidence, the ERA concluded that the employer had not acted as a fair and reasonable employer could have done. The decision emphasised two key points:
"I find it likely that [the employer] breached its duty of good faith to [the worker] under s 4(1A) (c) of the Act before making a decision that impacted adversely on the continuity of his employment."
"The combination of the above satisfies me that the decision to make [the worker's] role redundant was not likely the result of the employer acting as a fair and reasonable employer could have done."
These findings underscore the importance of following proper procedures and acting in good faith when undertaking restructures or redundancies.
As a result of these findings, the ERA ordered the employer to pay $12,000 in compensation to the worker. This amount was described as "moderate" by the ERA, taking into account the worker's claims of stress and humiliation, as well as the fact that he had plans to start his own business.
The ERA also ordered the employer to pay $2,250 as a contribution to the worker's costs, along with the $71.55 filing fee for the Authority.