A recent compliance hearing at the Employment Relations Authority (ERA) serves as a reminder to business owners that redundancies must be
both justifiable and
procedurally fair. Longevity Construction Ltd was ordered to pay its ex-employee $230,000.00 following a previous ERA determination which found the termination of their employee both substantively unjustified and procedurally unsound.
An organisation has the right to run its operation efficiently and profitably, and is allowed to make operational changes when this is not the case. However, they have to be transparent and prove the need to change, and follow fair process when doing so. Longevity Construction failed to do so on both counts.
At a time when a business is struggling financially to survive and remain viable is arguably the most critical time to get the change management part correct. It seems a lot of business owners don't accept this and fail to plan accordingly.
Leaving redundancies until it's too late for a company to survive financially, is legally unacceptable. Serving employees with 'fait accompli' terminations will never be okay under the laws of natural justice even if the company is non-viable and financially struggling.
Fair process with change management in a restructure scenario demands employees are transparently given the facts of the issue and genuinely offered a forum to provide feedback and input before any decisions are made. Bringing affected staff along this decision-making process is not optional and shouldn't be shortcut.
It is sometimes forgotten that only once that the process is complete does notice of termination of employment occur. Notice periods still have to be worked or paid in lieu. So, for an employee with a 4 week notice period, if the change management process takes 2 to 3 weeks from go to whoa, that's potentially 7 weeks a company needs to budget for per employee to effect a procedurally correct redundancy termination.
So if a business is facing a restructure, take it seriously and plan well for it, including the time it takes. It has long been demonstrated that the ERA and courts have no tolerance for lack of process, and if it is found that a redundancy is disingenuous, the remedies may include lost wages as demonstrated with Longevity Construction to the tune of $166,153.85.
We highly recommend consulting our 'Change Management' guide. It contains all our recommended letter templates including the important initial change proposal document. It's free to our members in the
document library of the Employers Toolbox, non-members can purchase it here:
www.employers.co.nz/change-management-product.aspx. Our team is also available to consult on your particular circumstances.