The recent MediaWorks debacle highlights the obligations on employers when proposing to make employees redundant. It is understood that MediaWorks called employees to a mid-morning meeting to advise its intention to close Today FM, and gave them until the end of the day to provide feedback. Unsurprisingly, the 40 odd affected employees were shocked and questioned the genuineness of the “consultation” process.
MediaWorks says that financial pressure is the reason for taking this action, and presumably the very short consultation period, but it is difficult to see how the situation became so crushingly urgent that the company could justify avoiding its employment law obligations.
When an employer is contemplating restructuring or making changes to its business that might result in redundancies, the first and most basic principle is that it is required to consult with affected staff. This means preparing a “business case”, which is usually in writing, and which sets out what is being proposed and why. This should be presented to affected employees, ideally in a face to face meeting, and they should be allowed a reasonable opportunity to provide feedback.
What is “reasonable” depends on the circumstances. A matter of hours, as in the case of MediaWorks, would seldom, if ever, be regarded as sufficient. In most situations a period of at least a week could be expected, and longer where the restructuring proposal is complex and affects a number of people in different roles.
Employees should also be provided with all relevant supporting information and an opportunity to comment on it. Where an employer is claiming financial hardship, this would generally require it to provide an overview of the company’s financial position and what, if any, actions have been taken to cut costs or otherwise get the business back on its feet.
It is not uncommon for employers to refuse to provide this information, claiming that it is commercially sensitive. However the Courts have not been particularly sympathetic to employers hiding behind claims of confidentiality when employees’ jobs are on the line. The purpose of consultation is to enable employees to challenge the basis of the proposal and to suggest alternatives – this is not possible if they are not informed of what sits behind it.
Once an employer has received feedback from affected employees, they must genuinely consider it. Confirming the business case with no changes, and no explanation, hours after the consultation period ends, is unlikely to satisfy this requirement. Reasonable consideration should be given to any alternative suggestions and reasons should be provided for either accepting or rejecting other options that have been identified.
If a decision is made to proceed with the restructuring and jobs are disestablished, an employer is then required to consult with employees in relation to any alternatives to dismissal. This may include redeployment to another role, reducing hours, agreement around extended notice or leave periods, or retraining. Making an employee redundant should be a last resort and only after these options have been considered.
Employees whose positions are disestablished may also be entitled to preferential redeployment into new or vacant roles where they have the required skills and experience, or could acquire this with reasonable training. This is often a contentious area in restructuring situations, with employers preferring to advertise new roles in order to seek the strongest candidate. However in most instances (excluding where an Act of Parliament requires the appointment of the best person for the job), employees affected by restructuring get first rights.
Finally, if the process reaches the point where an employee is given notice of termination, there may be an obligation to pay redundancy compensation. Employees are often surprised to learn that if they do not have an employment agreement that expressly provides for redundancy compensation, there is no legal right to any such payment. The fact is that most small to medium businesses do not have redundancy compensation in their employment agreements, and employees can be left with no job and only their notice period.
The process described above generally takes several weeks if it is carried out properly and there is genuine engagement as to the alternatives to making employees redundant. Employers who seek to avoid these obligations are likely to end up with personal grievance claims which may result in awards of compensation for humiliation and distress, lost wages and reimbursement of costs.
In the MediaWorks scenario, there are up to 40 affected employees who may justifiably be disgruntled with the process that has been undertaken. Should they all pursue legal claims against MediaWorks, this could be very costly and may cause the company to reflect on whether the rush was worth it.
originally published on Stuff.co.nz 5 April 2023
