Restructures Involving Restructures and Redundancy

In relation to restructures involving redundancy, there has been a long-held perception that as employers are entitled to manage and organise their businesses and to determine which positions will be selected for redundancy.

It has been generally accepted that as long as there are genuine employer reasons, and redundancy has been implemented in a procedurally fair manner (involving consultation with the employee), the Employment Courts will not interfere with management’s commercial decisions to restructure and make redundancies as they see fit, even if those decisions are poor ones.

This is no longer the case!

The Employment Court now places focus on employer decision making process

Recent decisions in the Employment Court make it clear that rather than the Court being chiefly focused on the consultation process, they are now also placing greater scrutiny on the justification for the employer’s commercial decision to restructure and whether it made a decision to terminate the employment relationship on substantively justified grounds.

Redundancy can be challenged by an employee through the personal grievance process outlined in the Employment Relations Act 2000, as can any other type of employee dismissal.

This process requires an employer to justify the redundancy, and that the manner in which it was executed was considered to be fair and reasonable in the eyes of the court.

Using redundancy to mask any other reason for terminating an employee’s employment (e.g. poor performance, personality based reasons or any other non financial reason) will not be tolerated by the Courts.

A personal grievance means a claim that an employee has against the employee’s employer or former employer that he or she was:

  • Unjustifiably dismissed; or
  • Disadvantaged by some unjustifiable action.

If an employee is terminated for redundancy reasons and is found to have been unjustifiably dismissed for want of substantive justification, the remedies available to the employee include reinstatement to the former position or a position no less advantageous to the employee, reimbursement of a sum equal to the whole or any part of wages lost by the employee as a result of the grievance, and payment of compensation to the employee for either humiliation, loss of dignity and injury to the feelings of the employee, and/or compensation for loss of any benefit which the employee might reasonably have been expected to obtain if the grievance had not arisen.

Even if an employee is reinstated, an award for lost wages may be ordered for the period between the dismissal and reinstatement, and an award for compensation for hurt feelings may be made.

Restructures and redundancy is becoming more complex

Recent employment cases signal that restructures and redundancy is becoming more complex and remains an important topic in employment.

There are many reasons when embarking on any process that may result in an employee or employees being made redundant, whether it is an internal restructure or a sale of a portion of a business, it is more important than ever for employers to seek professional advice and guidance early.

Undertaking this process with an experienced HR professional is a huge advantage and relief for an employer, and CHQ can assist by setting out all the factors that should be taken into consideration, mapping out a process and assisting you with the implementation of these.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.