December 2024
This year is proving to be an especially difficult period for employers and employees throughout New Zealand. Many businesses are reporting a disappointing year with declines in revenue and operating profits. Some of this performance is due to the macro environment, such as inflation, employment, spending, and monetary and fiscal policy. This is shaping the job market and has created stresses and strains for both employees and employers as they navigate the issues of higher costs, cost-cutting, scaling-back and job cuts. Added to that mix is the upheaval of the ‘tech wave’ with the rise of AI and the prediction that it will be a contributing factor to more layoffs.
There is no doubt employers are reviewing their costs, how jobs are organised, what skills they need, and whether the work can be outsourced. Unfortunately, this often leads to some employees losing their jobs as employers figure out how many people they still need or what they can afford.
A key part of considering any proposal for change is to ensure compliance with relevant employment agreements and obligations of good faith in implementing a proposal for change. In the context of a restructuring, good faith requires employers to consult with the affected employee (and their union representatives) and to provide the employee and the union with information related to the restructuring. The courts have repeatedly stated that where an employer makes an employee redundant without first consulting with the employee and the union, the employer’s actions will be seen as unjustified on the grounds of procedural unfairness.
In recent months there have been several high-profile decisions of the Employment Court and Employment Relations Authority finding that companies and public service organisations have breached their obligations under employment agreements to consult with employees about the proposed changes. In the case involving TVNZ the Court issued compliance orders to require the state broadcaster to meet its consultation obligations under the collective agreement.
In another decision, the PSA union won an important case in the Employment Relations Authority against the Ministry of Education about the application of collective agreements – in the context of spending cuts and redundancies. The importance of the PSA case is the Authority accepted the union’s argument that the Ministry was required to adopt a case-by-case approach to the outcomes for individuals. This means that employers need to resort to a variety of options before considering layoffs. For example, retraining, offering more unpaid time off, early retirement, severance, and assisting people into other work.
In returning to the basics, it is helpful to remember that there are two essential phases to consultation.
The first phase is in relation to the ‘proposal’ (i.e. before a final decision is made). The purpose of consultation is to provide the affected employee(s) with the opportunity to understand and provide feedback on the proposal and, if they wish, to try to influence the decision. This involves providing employees with information necessary for them to be able to provide meaningful comment on the proposal, including the selection criteria. The employer is obliged to consider any feedback from employees with an open mind before coming to a decision.
The second phase is the implementation of the decision. Once a decision has been made, issues relating to retraining, offering leave without pay, early retirement, redundancy compensation, and assisting the employee(s) into other work need to be addressed with the affected employee(s).
This is a tricky area of the law to get right. If you are considering making changes in your workplace it is important that you first consult with your lawyer.