In several recent cases, the Employment Court has indicated an employer potentially faces greater hurdles when justifying a dismissal for redundancy.
Earlier this year we updated you on the Employment Court decision in the Totara Hills Farm case, where the Court held that if a redundancy is challenged, the employer cannot simply say there was a genuine business reason, without the Court examing the merits of the claim.
The Court also emphasised that an employer's good faith obligations should encompass redeployment and it found the farm manager should have been offered the new, smaller position (on less pay) of Junior Shepherd (as opposed to simply being offered the opportunity to 'apply' for the role).
Selection process criticised
In the recent decision of Gilbert v Transfield Services (New Zealand) Ltd the Employment Court again found a redundancy unjustified, criticising the selection process used.
Transfield undertook a restructuring in light of its new contractual arrangements with Chorus. As part of the restructuring, Transfield used a selection process to determine which employees from a pool of field technicians should be made redundant (part of downsizing from 12 to 9).
The Court found Transfield should have considered the technical skills and past performance of the field technicians when undertaking the selection process; saying it "beggar's belief" they did not. Psychometric and personality testing should not have been used; the Court deemed them irrelevant criteria.
Transfield argued that the current performance assessments of the employees were of limited value to the selection process. The Court disagreed and found they were obvious and relevant tools to an employer when undertaking a selection process.
The case is also of note for the extent of the remedies awarded. Mr Gilbert had been made redundant in October 2009. The Court hearing was in late 2011 and the decision was released on 29 April 2013. Nevertheless the Chief Judge held that reinstatement was a practicable remedy. It held that due to the time that Mr Gilbert had been away from the job he would require some training and supervision. The Court also considered that there may be some personality issues that should be settled before he returned to employment with Transfield but these were not considered to be factors preventing reinstatement.
The Court awarded Mr Gilbert full lost earnings from his dismissal in 2009 and $15,000 compensation for hurt and humiliation.
Senior management role found not substantially different
The Kreider v Vodafone New Zealand Ltd case was heard in the Employment Relations Authority. It came in the wake of Vodafone's acquisition of Telstra Clear in 2012. Mr Kreider was employed in the position of General Counsel at Vodafone, however his position was disestablished and he was asked to apply for the newly created role of Legal Director. He was not successful in his application for the role and, as a consequence, was to be made redundant.
Mr Kreider sought a determination in the Authority that the position of Legal Director was not substantially different from his role as General Counsel. The Authority Member undertook a detailed comparison of the job descriptions of the two roles and agreed with Mr Kreider, finding that a reasonable employer could not conclude the differences were of a sufficient degree to justify a contestable selection process.
Having found the positions substantially similar, the Authority determined that Mr Kreider should be appointed to the new position of Legal Director without going through the selection process. The Authority made this determination despite the fact that Vodafone had other candidates for the role.
The cases highlight a potential increase in the legal exposure for an employer when making an employee redundant. The scope for the Authority and Court to examine an employer's decision (including selection and redeployment processes) has increased as has the level of remedies being awarded for an unjustified redundancy.
A further decision of the Court, in relation to a redundancy, has been appealed to the Court of Appeal. We will keep you informed on developments.