Last month, the Employment Court found that an employee's termination for redundancy was unjustified because the employer did not offer redeployment (Wang v Hamilton Multicultural Services Trust).

The decision is important to employers who are contemplating a restructure. The Court held that having disestablished Wang's position, it was not sufficient for the Trust to invite (and encourage) him to apply for a new vacancy. This was the case even though Wang declined the invitation. By the Trust's admission, Wang was well able to perform the duties of the new role. Therefore, he should have been offered the new position, rather than being required to apply for it.

Important implications for employers

In situations of restructuring, as part of a consultation exercise, employers will be prudent to consider offering a provisionally redundant employee any vacancy that is suited to their qualifications and experience, unless there is objective justification not to do so. Any requisite "up-skilling" or training should be taken into account for this purpose.

Where it is unclear whether an employee has the right skills set for a vacancy or will be capable of performing a new role, it may be appropriate to invite the employee to apply for the role along with other candidates.

Employers should be mindful that documents produced for the purposes of assessing an employee for redeployment where the continuation of their employment is in question may well be caught by the obligation to provide "relevant" information under section 4 of the Employment Relations Act 2000 (ERA). This was the issue explored by the full Employment Court in May this year in The Vice Chancellor of Massey University v Wrigley and Kelly.

Wang's recalcitrance caused restructuring

At the time of the restructure, Wang was employed by the Trust as finance administrator. Prior to that, his permanent duties had been subject to a number of changes, and in addition he had performed higher management functions in a relieving capacity.

Various disagreements between Wang and the Trust director to whom he reported regarding his duties and associated discrimination complaints by him against the Trust rendered communications between the parties dysfunctional. Attempts by the Trust director to agree with Wang the duties he would perform for the financial administration of the Trust and his job description were unsuccessful. In short, Wang was negative and suspicious towards the Trust.

The Court found that this impasse between the parties precipitated a management restructure, which (after consultation) resulted in the disestablishment of Wang's position. As part of the restructure, a new "finance manager" role was created. The new role involved significantly more responsibility for training, supervision and decision making than the finance administrator role, and a 50% salary increase to recognise the increased responsibilities and duties.

The Trust advertised the new position externally, and at the same time actively encouraged Wang to apply for it. Wang's experience and qualifications meant that he could fulfil the new role, albeit with some up-skilling. However, he decided not to apply for it so as not to jeopardise a personal grievance claim that his redundancy was not genuine and therefore substantively unjustified. Other roles were also considered without success. The Trust terminated Wang's employment by reason of redundancy.

Trust should have offered redeployment role to Wang

The Court held that in cases of redundancy, it was required to review an employer's selection process and its outcome as part of the justification test in section 103A of the ERA.

Section 103A provides that the question of whether a dismissal was justified must be determined on an objective basis by considering whether the employer's actions, and how the employer acted, were what a fair and reasonable employer would have done in all the circumstances at the time of the dismissal. The full Employment Court determined last year that in applying the section 103A justification test, it was necessary to review all of the employer's actions up to and including the decision to dismiss (Air New Zealand v V).

In the above case, the Court considered that the Trust was obliged to look for alternatives to making Wang redundant. Given that he would be able to perform the new finance manager position with some up-skilling, the Trust should have offered him the position rather than simply inviting him to apply for it. The critical step for the Trust was its decision not to appoint Wang as the new finance manager. The Court found that the Trust had hoped Wang would apply for the new role, and inferred from that finding that he would have been successful for the new role provided that no one more suitable applied.

Importantly, the Court of Appeal had held previously (in the context of the Employment Contracts Act 1991) that in a situation of genuine redundancy, a failure to offer the employee a different position could not constitute unjustified dismissal, provided that there was no contractual provision to that effect (New Zealand Fasteners Stainless Steel Ltd v Thwaites). Put simply, in the absence of a specific contractual right, a redundant employee had no entitlement to be redeployed to a different position.

However, the Employment Court, following an earlier decision this year (Jinkinson v Oceana Gold (NZ) Ltd), considered that the enactment of the ERA and subsequent amendments had substantially altered the law in this area since the year 2000 when Thwaites was decided.

The Court concluded that the Trust's failure to offer redeployment was not the way a fair and reasonable employer, judged objectively, would have acted in all the circumstances at the time of the dismissal.

Reinstatement inappropriate

The Court declined to reinstate Wang on two counts. Firstly, the allegations of racial and ethnic discrimination undermined the Trust's culture as a multicultural service centre, and this would inhibit Wang's future employment with the centre. Secondly, there had been a subsequent restructure transforming the three main management roles to part-time positions on a job share basis. As a result, it would not be appropriate to reinstate Wang on a full-time basis.

As to monetary remedies, the Court held that Wang's decision not to apply for the new role was not a breach of his obligation to mitigate his losses. However, his "unreasonable intransigence" over discussions concerning his duties amounted to contributory conduct. The Court reduced the amounts to be awarded to Wang by 50% to 6 months' salary and $5,000 compensation for hurt and humiliation.

"Would" to "could" make any difference?

The ERA Amendment Bill proposes to change the justification test under section 103A to what a fair and reasonable employer "could" rather than "would" have done in all the circumstances.

It is possible that had the revised test applied in the above case, the Court may have reached a different conclusion.