Getting Restructures Right

There have been numerous news articles recently about restructures, loss of jobs, and the impending gloom of 2023. If you are thinking about restructuring, you need to ensure the process is carried out correctly.

The law requires the employer to have a genuine business reason before implementing a restructure. A genuine business reason can be cost savings, increasing efficiency/performance, gaining a strategic advantage in the market or to achieve some other commercial objective. It does not include wanting to end an employee’s employment for poor performance or conduct, because a restructure is not a fault-based process.

If you have a genuine business reason to conduct a restructure, then the starting point is to put together a business case. Employees need to be provided with sufficient information to be able to provide feedback, suggest alternatives and/or challenge the basis of the business case. Therefore, the business case needs to specify the purpose of the restructure, provide relevant information, and clearly state the objectives the business expects to achieve if it decides to proceed with any outlined proposals.

Process

Once the business case is ready, you will need to follow a fair process to ensure that employees are genuinely consulted before making any final decisions. Simply put, if a decision to make an employee redundant is challenged by them, the courts firstly look at whether the reason was genuine and then, whether the employer followed a fair process.

The first step of the process is to present the business case to all impacted employees. Employees must be given reasonable time to review the information provided, ask questions and seek advice before being required to provide feedback and/or being consulted. We generally recommend providing five working days, but if the business case is complex and contains a lot of information, then it may be reasonable to provide more time to consider the information. Employees are entitled to bring a legal representative or support person to a consultation meeting or any further meeting you hold with the employee as part of the process.

During the consultation phase, you must consider and discuss with the employee whether there are any redeployment opportunities for them within the business, or if there are alternatives to redundancy, such as reducing hours or taking a period of leave.

Confirming an Outcome

After consulting the employee(s), you must genuinely consider any feedback and alternatives they provide. Remember that the purpose of going through a consultation process is to ensure that you have considered all reasonable options and alternatives to the restructure before making a final decision, especially if the restructure results in employees being made redundant.

It can be difficult for employees to have their employment end via redundancy. We always recommend that the process is carried out with empathy, and where you can, provide additional support to the employees impacted by the restructure such as counselling services or job search support.

The above is a very high level and general overview of what a restructure process can entail. There are many considerations an employer will need to have before undertaking a restructure such as whether a selection process is required, whether an employee is on a long term medical absence, or whether any impacted employees are on parental leave, which will trigger special protections.

The above does not constitute as legal advice. For comprehensive and detailed advice on your specific situation, please contact:

Melissa Johnston (Partner) on (09) 306 6729 (mjohnston@mcveaghfleming.co.nz)

Hiruni Wijewardhana (Solicitor) on (09) 262 4940 (hwijewardhana@mcveaghfleming.co.nz)

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Written by Melissa Johnston, Hiruni Wijewardhana and Gus Hardie Boys