Restructuring is a legitimate business decision and employers are entitled to make it. The Employment Relations Authority does not second-guess commercial judgement. It examines whether the process was genuine, and that is where employers lose.
The two requirements
A redundancy dismissal must be substantively justified — a genuine business reason, with the position genuinely surplus — and procedurally fair.
The test is what a fair and reasonable employer could have done in the circumstances. Both limbs must be satisfied; a genuine business reason implemented badly still produces liability.
The failure that recurs: predetermination
The most common finding against employers is that the decision was made before consultation began, and the process was presentation rather than consultation.
Indicators that give this away: a proposal document that reads as a decision, a replacement already lined up, an announcement drafted before feedback closes, or a consultation period so short that genuine consideration was impossible.
Consultation means proposing, genuinely inviting feedback, actually considering it with an open mind, and being willing to change the proposal. Employers who cannot point to anything that changed as a result of feedback have a difficulty.
A process that holds up
- Prepare a proposal setting out the business reasons, the proposed structure, which positions are affected, and the proposed selection criteria. Frame it as a proposal throughout.
- Provide the relevant information the employer is relying on. Employees are entitled to information relevant to the continuation of their employment, subject to limited exceptions.
- Meet with affected employees, individually, with the right to bring a representative or support person and adequate notice to prepare.
- Allow a genuine period for feedback — days rather than hours, proportionate to the complexity.
- Consider the feedback and respond to it substantively, in writing, including where you disagree.
- Confirm the decision, with reasons.
- Consider redeployment genuinely before terminating, including into vacancies elsewhere in the business.
- Give contractual notice and pay all entitlements including accrued leave.
Selection criteria
Where a group of similar roles reduces, selection must be by criteria that are objective, applied consistently, and communicated in advance.
Criteria that cause problems: anything that is really a proxy for age, disability, family responsibilities, union involvement or a prior grievance. Recent performance ratings applied where no proper performance management existed are also vulnerable.
Score against the criteria, document the scoring, and be able to explain each score.
Redeployment
Genuine consideration of redeployment is part of the obligation, not a courtesy. That includes vacancies the employee might not have thought of, and roles at a lower level if the employee would consider them.
Where a new structure contains a role substantially similar to the old one, appointing someone else to it while making the incumbent redundant is a difficult position to defend.
Redundancy compensation
There is no statutory entitlement to redundancy compensation in New Zealand. Entitlement arises from the employment agreement or an applicable collective.
Check the agreement carefully. Many contain redundancy provisions that employers have forgotten about, and failing to pay a contractual entitlement is a straightforward breach.
Restructuring and business sales
Where a business or part of it is sold or contracted out, employee protection provisions may apply, particularly for specified categories of vulnerable workers such as cleaning and food catering services. These give rights to transfer to the new employer on existing terms.
Employment agreements must also contain a clause about what happens on restructuring, and its content matters.
Doing it decently
Beyond compliance: tell people in person and privately, not in a group email. Allow them to leave with dignity and to say goodbye. Offer practical support — references, outplacement, time for interviews.
The people who remain watch how departing colleagues were treated, and it shapes their view of the employer more than any communication about the restructure.
Employment New Zealand publishes restructuring and redundancy guidance free at employment.govt.nz.
General information only, not legal advice. Take advice before commencing a restructure.
