Authority examines employer's workforce reduction justification
The Employment Relations Authority (ERA) recently dealt with a case examining proper redundancy processes under New Zealand employment law.
A young worker challenged the termination of his employment after his employer, a building construction company, cited economic difficulties.
The worker questioned whether proper procedures were followed in ending his employment. His concerns were heightened when he discovered a job advertisement for a similar position shortly after receiving his termination notice.
The case highlighted specific requirements under New Zealand's Employment Relations Act 2000 regarding redundancy processes and good faith obligations.
At age 17, the worker started part-time with a Whangārei-based building construction company trading as Virgo Homes.
In January 2023, he transitioned to full-time employment as an apprentice carpenter. His written employment agreement specified a 40-hour work week at $22 per hour, which later increased to $24 per hour.
The worker's responsibilities grew to include opening worksites and transporting tools and colleagues. The employer provided him with a fuel card after he purchased a work vehicle for his duties.
According to evidence presented to the ERA, the worker received positive feedback about his performance throughout his employment.
His contract included a two-week notice period for termination, with the option for payment in lieu of notice, but contained no redundancy provisions.
On January 16, 2024, the worker received an email termination notice stating: "As you know, [a named] contract has all but disappeared in terms of work, our group housing contracts are not making any money... this means [the company] is short of work and needs to make cuts to the team... your position is no longer viable."
The ERA heard evidence that the worker found a job advertisement the following day seeking "at least one more APPRENTICE AND we need at least one more QUALIFIED carpenter" for two-storey new builds.
The employer explained this by stating: "After getting involved with these outside projects I saw there was no money in them and wanted out. The main contractors pressured me into commitment and told me I have to find someone else for them."
When questioned about staff meetings regarding business conditions, evidence showed some meetings occurred at licensed venues, which the worker couldn't attend due to age restrictions.
The ERA emphasised that under Section 4 of the Employment Relations Act 2000, employers have specific obligations regarding redundancy processes.
The Authority stated: "The defects in the process followed were significant and resulted in [the worker] being treated unfairly. [The employer] is unable to show it discharged its obligations under s 103A and s 4 of the Act."
The Authority found: "[The worker] was not given any information about [the employer's] financial situation or the pressures it was under. [The employer's] explanation of why it advertised roles the day after giving notice to [the worker] is unclear."
The ERA also noted: "There is no evidence [the employer] considered any alternatives to termination which could have maintained the employment relationship through redeployment."
Based on the evidence, the ERA ordered compensation of $15,000 under Section 123(1)(c)(i) of the Employment Relations Act for humiliation, loss of dignity, and injury to feelings.
The Authority calculated lost wages at $1,020 per week based on the worker's final pay rate, awarding $13,260 for three months' lost wages under Section 123(1)(b) of the Act.
Additionally, the ERA ordered the employer to pay $2,250 in costs and the $71.55 Authority application fee, with all payments to be made within 21 days of the determination.
