Redundancy During Covid-19

In the wake of the Covid-19 lockdown, many employers are assessing options available to them to save their business and are contemplating cutting staff.  This decision should not be taken lightly as the underlying requirements for proper termination of employment still apply.

The relevant legal test is whether an employer's actions, and how the employer acted, were what a fair and reasonable employer could have done under all the circumstances at the time of the dismissal or action occurred.  

With Covid-19 causing such rapid and sudden changes to businesses, the "under all circumstances" criteria will also have to reflect the rapid and sudden change in pace experienced in businesses. Depending on the industry or business employers may be supplying relevant information to employees sooner than usual and the consultation process between parties to discuss a possible redundancy may turn around in a shorter space of time.  

Justifying redundancy will always be on a case-by-case basis, even during these times, and should only be used as a method of last resort as there are a number of other matters during this time to consider.  We strongly urge employers and HR to consider obtaining legal advice specific to their needs during this time.  As a starting point, all matters will require consideration of the following factors:

(a) The government financial support package should be the first port of call for employers.  We have outlined the financial support packages available during this time in our separate article Financial Support for Employers During Covid-19.

(b) When considering any action on any individual employee, employers must consult the specific wording of each individual employment agreement or collective agreement. For example, an individual employment agreement may contain a 'force majeure' provision that may be triggered by an intervening event such as a Covid-19 outbreak. For further information on force majeure clauses please read our separate article Frustration, Force Majeure and Covid-19.  

(c) Employers must genuinely consider all other practical options before suggesting redundancy. This is because an employer is required to during the consultation process with an employee explain and justify why the employer has absolutely no other options available but to make the role redundant.  Those other options may include reduced work hours, redeployment within the business, the use of annual leave or leave without pay or any other arrangement specified in the employment agreement.

(d) Along with the typical risks of personal grievance claims against an employer on the grounds of unjustified dismissal, employers must be acutely aware of other non-compliance risks with other employment legislation and/or immigration legislation.  For example, there may be flow-on implications on migrant worker visas from decisions made by employers during the Covid-19 lockdown.  Many of these issues are specific to each employee.

(e) Above all, the obligation for parties in an employment to negotiate in good faith remains essential and employers during this time will need to consider all other proposals, provide employees with an opportunity to comment on the proposals, and make genuine efforts to accommodate the views of the employee before making a decision.  

For specific advice and guidance on your business, please contact our teams:

Albany Office: James Turner at jturner@mcveaghfleming.co.nz .  

City Office: John Burley at jburley@mcveaghfleming.co.nz or Craig Andrews at candrews@mcveaghfleming.co.nz

We are working remotely and can schedule a meeting with you via Zoom, WhatsApp or telephone.

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