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Communtity Law Manual | Starting & leaving a job | Redundancy: When the business doesn’t need your role anymore

Leaving or losing your job

Redundancy: When the business doesn’t need your role anymore

What is a “redundancy”?

A redundancy is when your employer discontinues your position for business reasons. In this case your employment is terminated not because of anything you’ve done or not done as an employee, but because your particular job is no longer needed.

The decision to make you redundant must be one that a fair and reasonable employer could make in that situation, and your employer must also follow a fair process in coming to this decision. If your employer doesn’t meet those standards, you can bring a personal grievance claim against them for unjustified dismissal (see the chapter “Resolving employment problems”).

When will a redundancy decision be “fair and reasonable”?

Employment Relations Act 2000, s 103A

Your employer must have had genuine business reasons for making you redundant. It can’t be because they were unhappy with your performance or for some other reason to do with you personally.

However, even if your employer was motivated by genuine business reasons, the decision must also have been one that a fair and reasonable employer could have made. If you raise a personal grievance the Employment Relations Authority won’t simply accept whatever decision your employer made, nor will the Authority substitute its own assessment of whether redundancy was an appropriate business decision. Instead, the Authority will apply the objective test of what a “fair and reasonable employer” could have done.

What is a “fair and reasonable” decision-making process?

Employment Relations Act 2000, ss 4(1A), 103A

If you challenge a redundancy on the grounds of how your employer went about making the decision, the Employment Relations Authority will assess whether the process was one that a fair and reasonable employer could have followed.

First, you must have been given a reasonable amount of notice that your job could be affected by redundancies.

Your employer must also have consulted with you before making a final decision. Specifically they must:

  • have given you the relevant information about the proposal (including, for example, the selection criteria to be used if the proposal is for some employees to be made redundant and some not)
  • have given you a chance to properly consider this information
  • have given you a chance to have input into the decision-making process by making proposals, and
  • have genuinely considered any proposals you do put forward.

Your employer can’t just consult with you as a formality after they’ve already made a final decision. The consultation process must be genuine, and your employer must keep an open mind about alternatives. The duty of good faith also requires your employer to be responsive and communicative in these situations.

However, the requirement to consult doesn’t mean the employer has to negotiate with you with the aim of coming to an agreement: the final decision will still be the employer’s. They also don’t have to consult with you about whether a redundancy would be an appropriate business decision.

If there’s a vacant position into which your employer can move (“redeploy”) you, your employer must do this, so long as you’re able to do the work, or will be able to do it after receiving any necessary training.

The Employment Relations Authority may also look at other issues, such as whether the employer provided you with counselling, with career and financial advice, and with retraining.

The Authority will also look at whether your employment agreement sets out a particular process to be followed for redundancies. The Authority will generally hold your employer to that process, unless the process isn’t fair and reasonable – for example, if the agreement specifies an unreasonably short notice period for redundancies.

Does my employer have to pay me compensation if I’m made redundant?

In general, you have no right to compensation for being made redundant unless your employer has agreed to this with you and/or your union, or unless you’re covered by the special protections for vulnerable employees (see “Migrants and other vulnerable workers” in this chapter). An agreement for redundancy compensation can be part of your employment agreement or it can be reached later as a separate agreement.

COVID-19 and redundancies
Your employment rights continued to apply

Standard employment law on redundancies has continued unchanged during the COVID-19 crisis. Employers have still been legally required to consult with you first, as part of their duty as an employer to always act fairly and reasonably.

The consultation process usually takes around two weeks – however, during COVID-19 a shorter consultation process may in some cases have been “reasonable”.

Even if they follow a fair and reasonable consultation process, the redundancy may also be unreasonable if your employer was eligible for the COVID-19 Wage Subsidy but didn’t apply and simply made you redundant instead.

If your employer didn’t consult with you properly, or the proposed restructuring wasn’t justified, you may still be able to challenge any changes to your employment conditions through a personal grievance, depending on how much time has passed. Your local Community Law Centre or your union will be able to advise you.

If I lose my job during the pandemic, is there any financial relief available to me?

If you lose your job (including self-employment) from 1 March 2020 to 30 October 2020 due to COVID-19, you may qualify for the COVID-19 Income Relief Payment. You can find out more information here on the Work and Income website: workandincome.govt.nz/covid-19/income-relief-payment/

Getting paid under the COVID-19 Wage Subsidy

The COVID-19 Wage Subsidy is a payment made by the government to an employer to go towards their employees’ wages, so they can keep their staff during the pandemic. The scheme first ran from March to 10 June 2020, but was extended to 1 September 2020. For more information, go to www.communitylaw.org.nz – see “Coronavirus and the law”.

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