All questions

Discontinuing employment

i Dismissal

Employment is not 'at will' and cannot be terminated unilaterally by an employer without cause. The employment laws require a lawful reason to terminate an employee's employment and any termination must be legally justified.

The test of justification is whether the employer's actions, and how it acted, were what a fair and reasonable employer could have done under all the circumstances at the time the dismissal or action occurred. This includes having a substantive reason for the dismissal and following a fair process in reaching the decision to dismiss. A fair process will ordinarily involve raising concerns with an employee, allowing the employee to respond and investigating the matter before reaching any decision in relation to it.

The employer must provide the employee with the notice in their employment agreement in all cases except where the termination is the result of serious misconduct. Payment in lieu of notice and working alternative duties during the notice period are permissible where these are contemplated in the employment agreement. There is no legal requirement for the length of a notice period other than that it must be reasonable. Common practice is four weeks' notice, with the exception of more senior staff, for whom it can be up to six months' notice. In the case of serious misconduct, termination without notice is permitted.

There is no requirement to notify any government agency, works council or trade union of the dismissal. There is no requirement for a social plan.

Employees can seek the remedy of reinstatement to their role in the event that they bring proceedings before the Employment Relations Authority in relation to the dismissal. There is no obligation to offer alternative employment except in a redundancy situation (see subsection ii), and there is no obligation to pay the employee severance or other dismissal indemnities.

The parties are able to enter into a settlement agreement in relation to the dismissal if they wish to agree to a waiver of claims against the other party. This agreement can be certified by a mediator from the Ministry of Business, Innovation and Employment. Where a mediator certifies a settlement agreement, the agreement is not able to be brought before the Employment Relations Authority except for enforcement purposes.

ii Redundancies

A redundancy is treated in a similar way to any other termination of employment. Therefore, the employer is required to justify the decision to terminate the contract of the employee on the grounds of redundancy both substantively and by following a fair process. The employer is therefore required to demonstrate a commercial rationale (genuine business case) for the redundancy in order for it to be justified. While redundancy is not defined in New Zealand legislation, it is commonly accepted to mean a situation where the role is or will become surplus to the needs of the employer.

A fair process in a redundancy situation will require an employer to propose the restructuring of its operations first and to seek feedback through consultation with employees. Once that feedback has been heard and considered, the decision can be reached to disestablish roles. If an employee's role is disestablished, the employer is required to consider redeployment opportunities for the employee into other roles within the business (including any roles established as part of the restructuring process).

If an employee is made redundant, there is no statutory obligation to pay redundancy compensation. However, if redundancy compensation is payable under the employment agreement, the employer will be obliged to pay it.

There is no requirement to notify any government agency, works council or trade union of the redundancy. There is no requirement for a social plan.