Employees don’t generally self-select for redundancy, but in an environment where businesses are having to slash and burn, offering voluntary redundancy is becoming more common.
Large employers including KiwiRail, MSD, Oranga Tamariki, NZ Police, MBIE and Stats have all offered parts of their workforce the opportunity to put their hands up. Most recently KiwiRail has given its employees two weeks to apply for redundancy in a bid to “right size its business”. Any employee can express interest, but KiwiRail has reserved the sole discretion to decline applications in cases where it considers it has a business need for the role/employee.
This raises the question as to what rights employees have in this context, and what criteria an employer may be required to apply in determining who stays and who goes.
The starting point is that employees do not have a legal right to be made redundant unless their employment agreement provides for this. In the absence of a contractual obligation to offer voluntary redundancy, whether to offer this option is totally up to the employer.
Many large employers do have contractual obligations to offer the option of voluntary redundancy where they need to reduce staff numbers. However, in most instances, these types of clauses would preserve the employer’s ability to refuse applications from employees in positions that they regard as business critical.
It becomes more sensitive where employers seek to make these decisions based on performance and conduct factors. That said, why would an employer pay its star performers to leave, whilst retaining less high performing employees?
The same considerations apply in any situation where an employer has to make selection decisions in a restructuring context, whether employees volunteer for redundancy or not.
Generally, the Courts have allowed employers a fairly wide berth in establishing the criteria for selection provided this is done in good faith and does not take into account irrelevant criteria. The employer must be able to explain how each criterion is relevant to the role and is fair and reasonable.
The Courts have also said that an employer is entitled to assess their employees’ skills and attributes when selecting for redundancy. In one case the Court said that “an employee’s skill levels, aptitude, and performance are relevant criteria for an employer requiring an efficient workforce”. Other relevant factors may include training and experience, job knowledge, safety awareness, work requirements, communication skills and proficiency.
However, using subjective criteria such as the employer’s perception of an employee’s attitude, loyalty and commitment to the business can create legal risk. In one case the employer’s reliance on “loyalty and a positive attitude” towards the company, and the “ability to handle change”, were challenged by an affected employee.
The Court found that overall, the criteria were justifiable, and said “Every selection process will almost inevitably involve subjective assessment of the candidates by the members of the selection panel. In most cases, the impression made by the candidates, their ability to interact with others and the way they react to challenges will be entirely valid considerations.”
In relation to the two selection criteria that the employee raised particular issues with, the Court found that they were only two of a number of criteria, but may have been unjustifiable if relied on wholly or largely.
Employers should consult on the criteria and selection process that they intend to apply. They must also be able to justify their decision making and how they have made the assessments that they have, for example, by way of a scoring matrix.
These rules may not apply in a voluntary redundancy context where employees are self-selecting for redundancy, although it would be expected that an employer acting in good faith would be transparent and reasonable in its decision making.
When NZ Police recently conducted a staff survey of non-constabulary employees to get their views on voluntary redundancy, 46% said they would consider applying for it and 54% said they would not. Unsurprisingly the key factor for employees in making this decision was their entitlement to compensation. Nonetheless in a constrained employment market, leaving a job without something to go to, even with a pot of cash, is a big call.
Originally published in The Post
