Redundancy and restructures are commonplace in today’s business environment. Unfortunately, the casualties of poorly constructed and planned transitions are far greater than just employees losing employment. The damage (if not managed effectively) often extends to the broader organisation, culture, employee motivation, productivity and ultimately customers.
In the discussion below we raise some of the common principles worthy of consideration. Whilst these points cannot guarantee a “risk free” redundancy they can assist in mitigating potential litigation.
Redundancies are genuine and objectively defensible:
We mean where an employer has labour in excess of the requirements of the business; where the employer no longer wishes to have a particular job performed; or where the employer wishes to amalgamate jobs”.
In other words, a genuine redundancy will arise if:
- The employer decides that it no longer wishes the job an employee has been performing to be done by anyone;
- The decision is not due to the ordinary and customary turnover of labour;
- It leads to the termination of the employee’s employment; and
- The termination is not due to any personal act or default of the employee.
What is critical is whether the holder of the former position has, after the reorganisation, any duties left to discharge. If there are no remaining duties for that person to perform, his or her position becomes redundant.
Redundancies pass the test of Procedural Fairness:
As in all terminations (dismissals etc) or employment contract changes, an employer needs to be both substantively and procedurally “fair”, i.e. you need to provide an opportunity that explains the reasons for the restructure, allow the employee to have a witness (if they choose to), and to respond and contribute to alternatives.
The Commission holds that “there is a responsibility for the employer to notify the employee if a termination is to occur”. With regard to the procedural fairness aspects of redundancy, the Commission also believes in the principle of “a fair go all round” which has to be applied to both the employee and the employer.
Redundancies offer Consultation:
It is a requirement of fairness that as soon as possible as an “in principle” decision has been made to restructure, the employer must consult with its’ employees and, in some cases, to any unions which they belong.
- Enables discussion regarding alternatives which may lessen the number (or impact) of terminations; and
- Gives employees time to deal with the emotional, family and domestic stresses of a potential termination.
When selection issues arise:
The fact that an employee occupies the position, which is being made redundant, does not necessarily mean that it is fair to select that employee in all cases. Also, a problem in offering voluntary redundancies is that they may be accepted by the employees who will be the most valuable in meeting the employer’s operational requirements.
The weight and priority of each selection criterion should be determined in advance and documented. This should reflect the goals of the restructure and operational requirements of the business. There is nothing wrong with taking into account subjective factors (such as an employer’s assessment of the employee’s attitude to work), but it will assist an employer if the main criteria can be objectively assessed (such as qualifications, training and experience). A practical difficulty may arise if the employer is later required to prove that these criteria were applied. It is important to note that this criteria must not discriminate on unlawful grounds or indirectly including; age, sex, pregnancy, race, marital status, disability and union membership.
Severance pay is crucial for redundancy to be considered fair:
There are provisions for severance payments and notice periods under the National Employment Standards based upon number of years’ service. Employers are required to comply with these requirements as a minimum. If employment contracts or HR policies offer a greater amount than the National Employment Standards, then these periods of notice and severance entitlements should be applied.
Outplacement Services and Career Transition Support:
Outplacement services (which are designed to assist retrenched employees through the process and in finding alternative employment), have been favourably viewed by the Commission as a sign of the companies willingness to do everything possible in supporting its’ employees.
If you have any questions, or would like more information on this or any other HR issue, please contact us.