Redundancy - The Gentle Dismissal?

In my years as an Employment Advocate, I have often heard employers say that terminating an employee through redundancy seemed kinder. In fact, just this week I represented two employees in mediation and negotiated settlements for them when it became clear their ex-employers had used Redundancy as a cover story to end the employment relationship.

If you talk to affected employees they will say the process of losing their job was far from gentle. Also, for the employer applying the logic that redundancy dismissal is a straightforward kind of doesn’t add up when that approach can go so badly wrong.

Employees have a sixth sense if redundancy is used as a reason to remove them when really there is something else going on. Typically, kiwis avoid confrontation and many times I have been called by an employee made redundant who suspects redundancy is a cover story.

Like the time a retail company avoided giving my client feedback during his 90-day trial, let the 90 days elapse, and then without warning in a catch-up meeting told my client his role was redundant, and that it was his last day. In the mediation, we attended when I had written a personal grievance for this client the company revealed they had been thinking he was not a good fit for some time. The Director said it seemed kinder to dismiss through redundancy so that my client could say he had been made redundant rather than that he was dismissed for some other reason.

Businesses put resources into recruitment and it may have been more productive for the above company to give my client constructive feedback during his 90-day trial. There was something the company liked about my client when they employed him. It seemed a waste of recruitment energy not to work on the employment relationship. As my client said at the Mediation he could not fix what he did not know was a problem. If this company had communicated issues to my client early on they may have turned the situation into a ‘win-win’, rather than the ‘lose-lose’ that occurred when my client lost his job, and the company ended up paying to settle his personal grievance because his role wasn’t really Redundant.

Legitimately Redundant positions are no longer required (are superfluous) to the needs of the business. It is not the person who has become redundant; it is the role. Employers can action a redundancy when they show that doing so makes the business more efficient, and after following a fair process of consultation with people affected.

Section 4(1A)(c) of the Employment Relations Act sets out the Good Faith requirements of consultation, which involves the employer giving the employee ‘access to information, relevant to the continuation of the employee’s employment, about the decision; and an opportunity to comment on the information to their employer before the decision is made.’ Redundancy decisions can be made only as a last resort when all other possibilities including redeployment are considered.

The above requirements generally involve allowing appropriate time for consultation. Although during the Covid-19 pandemic, a number of redundancy consultations had to be fast-paced due to economic reality, employers who did not allow employees sufficient time to provide feedback, or did not genuinely consider alternatives to Redundancy such as offering employees ‘substantially similar’ alternative positions were penalized in the New Zealand Employment Relations Authority (ERA) and Employment Court.

Employers considering making a position redundant are encouraged to do so for genuine business reasons and to follow a fair process. Employers may think using Redundancy as a reason for dismissal sounds kinder than any other reason, but is the redundancy reasoning is not genuine it can cost. In situations where employees are found to be Unjustifiably Disadvantaged or Unjustifiably Dismissed through Redundancy the ERA and Employment Court can order employers to pay their ex-employees Lost Wages for up to 13 weeks if the employee does not find new work in that time, between $8,000.00 - $15,000.00 in Hurt and Humiliation Compensation, and a contribution to the employee’s legal costs. That is a lot of money to pay for using Redundancy inappropriately.

If you are an employee facing redundancy, or an employer wanting to start a Redundancy consultation, please get in touch to discuss your rights in the situation. We are here to help navigate this challenging subject.