ERA clarifies employer obligations during organisational changes
The Employment Relations Authority (ERA) recently dealt with a personal grievance claim from a worker who argued he was unjustifiably disadvantaged and constructively dismissed during a company restructure.
The worker claimed his employer failed to properly engage with him during the restructure process, didn't arrange proper redeployment options, and failed to undertake proper consultation.
He also alleged the company changed his job description without consultation and didn't provide proper support for his wellbeing.
After the worker went on sick leave and resigned from his position, the ERA had to determine whether the employer's actions met the statutory standard of what a fair and reasonable employer could have done in all the circumstances.
The worker was employed as an operations coordinator for a promotional logistics company operating in both Australia and New Zealand in March 2022.
He didn't have a specific role description but provided general operational support across the company's dealings with clients. Initially, the working relationship with the director was positive.
In January 2023, the company lost a service contract with one of its largest clients, resulting in significant reductions in revenue and workload. Despite attempts to secure a replacement contract, the company was unsuccessful.
On 15 February 2023, the director sent a letter to all employees about the company's intention to restructure. The letter mentioned potential redundancies and sought staff feedback. The worker provided feedback on 19 February, asking clarification questions and offering views on how to avoid redundancies.
On 7 March 2023, the company confirmed its decision to restructure and identified the worker's operations coordinator role for disestablishment. Due to stress related to this proposed outcome, the worker went on sick leave the next day, followed by pre-arranged annual leave.
Restructure communication created disadvantage claim
The worker claimed he was further affected when his annual leave wasn't paid on time and his work email access was cut off on 17 March 2023. Although the parties attended mediation on 5 April, they couldn't resolve their differences.
On 12 April, the company contacted the worker saying it was considering a change to its proposed outcome, meaning his role might not be disestablished.
The worker requested to remain on paid special leave due to uncertainty about his future, but the company declined this request and required him to return to work.
On 9 May, the worker met with the director to discuss changes to the redundancy proposal. The company proposed that the worker keep his role but with an updated job description. Two days later, the worker resigned.
The ERA determined that the company's restructure proposal didn't provide enough information for staff to understand the impact on the organisation and their own work areas. "The redundancy proposal letter consisted of a one and half page letter with no supplementary information or documentation," the Authority noted.
"The letter did not provide sufficient detail to explain its conclusion around staff numbers or its projected workload," the Authority stated. "There was no tangible information about which aspects of [the employer's] operation was affected and how it was affected."
The ERA found that the flaws in the restructure process caused the worker to seek clarity throughout the process, ultimately leading him to take sick leave. This was an adverse effect on his employment, resulting in an unjustified disadvantage.
However, the Authority rejected the worker's constructive dismissal claim. The ERA noted that the initial proposal to disestablish his role was clearly just a proposal, not a decision, and the company was entitled to change its proposed outcome when other staff left before the restructure process ended.
The Authority observed that the worker continued to engage with the company from the time he went on sick leave until the 9 May meeting, showing he was considering continued employment.
"Based on all these factors, it is difficult to assess whether [the employer] could have foreseen [the worker] resigning from his role after the 9 May meeting," the Authority stated. "By attending the 9 May meeting, [the worker] had clearly considered continued work for [the employer]."
As compensation for the unjustified disadvantage, the Authority ordered the company to pay the worker $7,000 for hurt and humiliation.
This took into account that he suffered distress that led to significant sick leave, which was "exacerbated by [the company] cutting of his access to emails and failing to pay his annual leave when it was due to be paid."
The worker claimed he should have been paid out for his one-month notice period, plus holiday pay that would have accrued during this time. His employment agreement contained a clause stating: "In the event that the employee leaves without notice or during the notice period without written consent of the employer, the employer reserves the right to deduct a day's salary for each day not worked during that notice period."
However, the ERA found: "There was no evidence to show [the worker] asked [the employer] to pay out his notice. There was also no evidence to show [the employer] had consented to [the worker] leaving within the notice period." Based on this, the Authority determined he wasn't entitled to payment for the notice period or related holiday pay.
The ERA also highlighted that the Employment Relations Act 2000 requires employers to provide access to relevant information about proposed decisions with adverse effects on employees and provide an opportunity for employees to comment before any decision is made.
