A recent Supreme Court decision,Service and Food Workers Union Nga Ringa Tota Inc v OCSLimited (OCS case), discussed redundancy entitlements for vulnerable employees under section 69N of the Employment Relations Act 2000 (Act).

Background

The OCS case concerned a group of cleaners who worked at Massey University sites. Those cleaners came within Part 6A, as "vulnerable employees". When OCS won a tender for the Massey University's cleaning contract, the cleaners elected to transfer their employment to OCS. Soon after the transfer, OCS informed the employees that their work would cease and they would be made redundant unless they were prepared to accept different and less beneficial terms and conditions of employment.

Section 69N

Under section 69N, where a "vulnerable employee" transfers his or her employment and the new employer then proposes to make the employee redundant, the employee is generally entitled to bargain for "redundancy entitlements" from the new employer. An exception to this is where the employee's employment agreement expressly excludes such redundancy entitlements. In the OCS case, there was a clause in the employment agreement that expressly excluded redundancy payments being made for loss of employment due to downsizing of client contracts or loss of client contracts. On appeal, the Supreme Court overturned the Court of Appeal on the specific aspect of redundancy entitlements and upheld the Employment Court's ruling that the express exclusion of the right to monetary compensation does not exclude the right for employees to bargain for other non-monetary redundancy entitlements, such as retraining and outplacement services.

What does this mean for employers?

Where employers are currently hiring, or may in the future hire, staff who could be deemed "vulnerable employees", such as cleaners or those who perform food catering services, they need to consider carefully the nature of any compensation they are prepared to provide in the event of any of those employees being made redundant. If the employer wishes to ensure that they will not be liable for any redundancy entitlements on termination, then the employment agreement needs to expressly refer to "all redundancy entitlements".