A recent case affects what employers must consider when undertaking a restructure and redundancy process. While the restructuring and redundancy were genuine and followed the proper process, the Employment Court found fault on the employer’s part in the case because they did not offer the employee the new position that was created in the restructure. Instead they merely encouraged him to apply for it.

In coming to this finding the Court applied the test of justification and asked what a reasonable employer would have done in the circumstances. They held that where an employee has the skills to carry out the new position, or requires only a small amount of up-skilling which would pose no problem, a reasonable employer would offer the employee redeployment to the new position, instead of terminating their employment and making them redundant. 

Where the employee perhaps doesn’t have all the necessary skills and up-skilling presents more of a difficulty, and where it is unclear whether they have the right skills or will be capable of performing the new role, a reasonable employer would invite them to apply for the new position.
This means employers who are restructuring their business should offer employees who will otherwise be made redundant a new position, unless there is an obvious reason not to do so, for example because there is no new position in their skill area being created in the restructure.
In the recent case, it was clear the employee could do the new job with minimal up-skilling, which presented no problems.

Due to their failure to offer him the position the employer was ordered to pay the employee six months’ salary, the employee’s Kiwisaver contribution for that period, and $5000 in compensation. These remedies would have been even higher had there not been contributing behaviour on the part of the employee in the case.

It should be noted that the test for justification is changing from what a reasonable employer would do, to what a reasonable employer could do, in the circumstances. It may well be that a reasonable employer in the circumstances could offer redeployment to a new position or encourage the employee to apply for the new position. It will be unclear what the position will be under the “could” test, until a similar case comes before the Court. Until then, employers undertaking the restructuring process should continue to tread carefully.