Firms struggle with redundancy process

Employers must explore alternatives for affected staff.

OPINION: There has been widespread outrage following the announcement by Cadbury that its landmark Dunedin factory will be closing next year.

Its intention is to shift production to Australia with the likely result being that over 350 jobs will disappear in the near future.

The furore over Cadbury’s decision is unsurprising given the factory’s association with Dunedin, and the significant impact it will have on the community.

Job losses also appear likely at The Warehouse Group’s head office, which is streamlining its operations. Group chief executive Nick Grayston has confirmed that about 130 positions will go.

Redundancy situations are particularly difficult for employees who are left facing the loss of employment through no fault of their own.

Cadbury has publicly acknowledged that had it not been for the outstanding performance of the staff, the factory may well have closed some time ago.

The law has long recognised that employers have the right to restructure their businesses for genuine commercial reasons.

In recent years, that right has been qualified by a series of cases that have made clear that the reasons must be ‘‘fair and reasonable’’.

The courts have also shown a willingness to investigate the reasoning underpinning a decision to restructure.

While most employers understand that they need to demonstrate good business reasons for restructuring proposals, and that they need to consult with affected staff, employers who have prepared sound restructuring proposals often struggle when it comes to the second part of the process.

This involves exploring alternatives to termination with affected employees.

The key point here is that a decision to disestablish a position does not mean the employee in that role will automatically become redundant.

Where a decision to disestablish a role has been made, the employer is obliged to turn its mind to whether there are other employment opportunities within the organisation that might allow the employee to avoid redundancy.

This includes identification of vacant positions that the employee is suitable for or could perform with reasonable training.

This sounds simple enough, but difficulty often arises when there are multiple employees whose roles have been disestablished and who may be suitable for a vacant position.

In this scenario, the employer needs to afford all of these employees a fair and equal opportunity to be considered for the role. Often employers will resort to a contestable selection process.

Employers can seek external candidates only after fairly concluding no one already on the staff can be deployed. In the case of the Cadbury factory workers, their redeployment options may be limited given that the work is going to Australia.

Even if there are options to continue to work at one of the sites across the Tasman, presumably very few would be willing or able to make such a move.

Nonetheless, Cadbury does need to fully explore alternatives to redundancy before it can justifiably notify staff that this will be the outcome.

Should The Warehouse Group progress with making changes to its head office, then redeployment options are likely to be a lot more viable given the office would be staying put.

Often streamlining involves responsibilities being combined which naturally results in new roles being created. These roles will no doubt be hotly contested which makes it especially important that the employer’s processes are fair and robust.

Restructurings are an unfortunate reality of the modern world. Employers may find themselves having to make decisions that will not go down well with their employees and may impact on their livelihood.

However, it is crucial both from a legal and good faith perspective that employers engage in genuine consultation with staff and consider alternatives to dismissal.

If I may add a personal observation – employers should also remember the human impact of these processes.

While restructuring should be based on business needs, affected employees often feel, wrongly or rightly, that it is personal. Recognising this and taking the time to explain the rationale and genuinely considering the employee’s views, will at least ameliorate some of the hurt.

Susan Hornsby-geluk is partner at Dundas Street Employment Lawyers, www.dundasstreet.co.nz