What is redundancy?

Redundancy is not defined in the Employment Relations Act 2000 (“ERA”) but the commonly accepted definition today is that from the Labour Relations Act 1987. Section 184(5) of the Act defined redundancy as:
… a situation where…[a] worker’s employment is terminated by the employer, the termination being attributable, wholly or mainly, to the fact that the position filled by that worker is, or will become, superfluous to the needs of the employer…
The emphasis in the definition, and in the case law since redundancy has been a feature of New Zealand’s employment law jurisprudence, is on the position rather than the worker who occupies the position.
The common law accepts the right of the employer to determine the structure of the business and, therefore, to make positions redundant subject to any redundancies being genuine and carried out in a fair and reasonable manner (G N Hale and Son Ltd v Wellington Caretakers etc IUOW) [1]. The ERA has overlaid this management prerogative with a statutory obligation to act in good faith, including specifically in relation to consultation over changes to the business (section 4(4)(c)), any proposal to contract out or sell or transfer all or part of the business (section 4(4)(d)) and making employees redundant (section 4(4)(e)).
Acting in good faith means, amongst other things, where the employer is proposing to make a decision that could mean an employee’s employment is terminated, giving relevant employees access to information about the decision and an opportunity to comment on that information before a decision is made (section 4(1A)(c)).
The following situations may justify termination on the grounds of redundancy (subject to any termination having been carried out in a procedurally fair manner): * reducing employee numbers for efficiency or cost cutting reasons, including on or following the appointment of a receiver to a business, or because the work can be done by other means, e.g. contracting out * materially changing the job description applying to a position (changing duties and responsibilities), and * relocating a business or position in a business more than a reasonable distance from its original place.
RESTRUCTURING
Restructuring is a process that often results in redundancy. For that reason it is also covered by the good faith obligations of the ERA whether or not redundancy is the final outcome.
TECHNICAL REDUNDANCY
A technical redundancy situation arises where an employee’s employment with a particular employer is terminated as a result of the sale or transfer of the business to another owner, but the employee is offered the same position with the new owner on the same terms and conditions of employment, including recognition of service with the previous employer. In this situation there is a new legal employer and the employee cannot be compelled to transfer it. However, in most employment agreements providing for redundancy compensation, a technical redundancy situation is typically grounds to avoid payment of redundancy compensation. In these circumstances, if the employee elects not to transfer their employment to the new owner there is no entitlement to redundancy compensation.
Where ownership of the legal entity is transferred, as with a sale of shares rather than the business asset, there is not any form of redundancy.
Substantially similar positions
Most redundancy agreements provide for transfer into a substantially similar position as an exclusion to entitlement to redundancy compensation in circumstances in which redundancy compensation might otherwise be payable.

NZ HERALD
7000 Qantas cabin crew staff offered redundancy
Qantas hopes 350 - or five per cent - of its cabin crew will take up voluntary redundancy, as the airline tries to cut costs in the face of rising jet fuel prices.
All of the 7000 carrier's cabin crew were contacted on Thursday and asked to give expressions of interest in the redundancy program.
The last time Qantas made such a call was in 2008, when 150 cabin crew took up its offer.
"We expect that around 350 voluntary redundancies may be offered to staff, that's around five per cent of our 7000 cabin crew," a Qantas spokesman told AAP today.
However, the numbers are not expected to be finalised until July when the expressions of interest process is completed.
Cabin crew have been assured that there would be no forced redundancies.
Qantas said the move was a reaction to the "considerable challenges" it now faces in the aviation market.
"Qantas still faces considerable challenges, including high jet fuel costs in our international business, and this voluntary redundancy is part of a number of measures that we are implementing to address these challenges," Qantas said in a statement today.
Chief executive Alan Joyce says Qantas is facing its most serious challenge since the peak of the global financial crisis.
"We need to act decisively to respond to rising fuel costs and natural disasters, just like we did during the global financial crisis, to ensure the ongoing sustainability of our business," he told ABC online.
Qantas wants to reduce its planned capacity growth on domestic flights from 14 to eight per cent, and on international routes from ten to seven per cent.
Qantas will also suspend up to four Jetstar services from Australia to Japan, as well as Qantas flights between Perth and Tokyo, and put a smaller capacity aircraft on the Sydney-Tokyo route.
The airline is also cutting three daily New Zealand domestic flights to Christchurch and one Melbourne to Christchurch flight, the ABC reports.
The announcement came on the same day the airline announced its international unit carried 509,000 passengers in April 2011, up 7.4 per cent from April 2010.
Qantas last month announced it will lift the price of its European flights after the EU, under its emissions trading scheme, said it would force the airline to pay a tax on 15 per cent of its carbon emissions from its nearest port of departure.
Meanwhile, a recent US study placed Qantas fourth in the world for revenue raised by ancillary charges for items such as baggage.
Qantas earned about $1.5 billion in 2010 as a result of the charges, consultancy firm IdeaWorks found, placing it fourth below US airlines Delta, American and United.
The move towards voluntary redundancy for cabin crew is the latest in a series of industrial issues for the airline.
The Australian and International Pilots Association (AIPA) is currently considering industrial action over wages and conditions following a canvas of its 1700 members.
If the pilot's strike goes ahead, it will be the first of its kind in 45 years.
The airline's management have also recently been in negotiations with union groups over wage and working conditions.
In mid May, 1600 engineers scrapped plans for nationwide strikes.
Members of the Australian Licensed Aircraft Engineers Association (ALAEA) planned strikes at airports around the country as part of the ongoing row over pay and conditions.
On Thursday on the Australian Stock Exchange, Qantas closed down two cents at $2.09 a share, down 0.95 per cent.
- AAP

Fifty per cent of Enztec staff get the boot
Funding difficulties for its United States parent has forced Christchurch medical device manufacturer Enztec to lay off nearly half its staff at its Sockburn site.
In April last year, Enztec had about 44 staff and said it was on a growth path. It had invested close to $1 million in new equipment and was looking to hire three more staff.
Enztec general manager Stephen O'Neill said the layoffs were due to Enztec's parent holding company and sole shareholder, United States-based Orthopaedic Synergy Inc (OSI), experiencing "funding difficulties".
"It is very, very sad," O'Neill said.
"There's been a backing off from growth and funding difficulties in our parent company in the US and that's led to us having to do a restructuring process and cutbacks here."
He did not want to comment on why or how OSI had experienced funding difficulties.
The layoffs had been taking place during three weeks and the process was nearly complete.
About 22 positions were being made redundant, some of which were already vacant, O'Neill said.
Staff across all parts of the company, which designs and manufactures instruments used in orthopaedic surgery, were being let go.
O'Neill said staff had known of the funding issues for some time but the official restructuring process had only started three weeks ago.
Orthopaedic Synergy Inc, based in Raynham, Massachusetts, is the parent holding company for three companies. They are Massachusetts-based OMNIlife Science Inc, a medical device design, manufacture and distribution company, French orthopaedic surgery software and technology company PraximInc, based in La Tronche, and Enztec.
"The aim is Enztec consolidates and grows stronger again, and that's dependant on the group that we're part of.
"The whole group is in the process of looking at its costs and becoming more financially viable."
Asked whether there were plans for further layoffs, O'Neill said there were no plans at this stage for further redundancies.
O'Neill did not want to comment on what redundancy packages staff would receive.
Redundancies would start to take effect from the end of this week.
"We're very very sad too, given the success and the growth we've had in what is a great little business, that we have to go through this sort of thing."
Enztec had been successful, but had been increasingly reliant on its parent company during the last 12 months.
"So when the group has funding difficulties and backs off on its growth it affects us quite quickly."
The companies in the group were complementary and intertwined, he said.
Now for Enztec it was business as usual but with reduced capacity.
There was still a lot of opportunity in the orthopaedics market, O'Neill said.

Redundancy Andrew ClemowRecently I was called into a meeting with my employer. I was told that they could no longer afford my position and that my job was redundant effective immediately. I was told to clear my desk and leave within 1 hour. Nothing was given to me in writing. I want to challenge the decision and the way it was handled but I am not sure what my rights are. I am very distressed and worried as I have significant financial commitments and do not think I will have much chance of getting another job at my age in the current economy. What can I do?You were treated badly. You have a personal grievance against your employer for unjustified dismissal, presuming that the events you relate above took place within the last 90 days. You could seek compensation for emotional distress from the way that the redundancy was carried out, as well as for lost wages.Having a legitimate reason for the redundancy (which your employer appears to have, presuming that their comment about no longer being able to afford your position is true) is only half of the story.Your employer also has to follow a fair process. That process is set out in case law. An essential component of fairness is the element of consultation. You were not consulted with at all. You were simply told about a decision that had already been reached without your input. Fair consultation involves putting the possibility of the redundancy to you and giving you an opportunity to state your views, provide other ideas and give feedback. That step was skipped by your employer. That omission is fatal in any redundancy.In addition, your employer failed to give you any notice of the redundancy. You have not stated whether you have a written employment agreement and what it says about redundancy. Most employment agreements these days make no provision for actual redundancy compensation. Older employment agreements often used to provide a redundancy compensation formula (commonly six weeks pay for the first year of service and one week’s pay for each completed year of service thereafter). However, just because your employment agreement may say that no redundancy compensation is payable, that does not mean that your employer is absolved from paying anything. In your case, the obligation to pay arises from the failure to carry the redundancy out fairly and to provide reasonable notice.What notice you were entitled to is governed by your employment agreement. However, if your employment agreement only provides for two weeks notice in event of redundancy it would probably be deemed by the Employment Relations Authority (ERA) to be unreasonable. If your employment agreement was silent on notice for redundancy (or if you did not have an employment agreement) a reasonable period of notice is implied. Generally a fair notice period is at least 4 weeks. Because your employer did not give you any notice, they must now pay you out the notice period.It is extremely important that you formally raise your grievance within 90 days of your dismissal. You should not rely on a mere verbal statement to your ex-employer that you are unhappy about matters. You should prepare a formal written letter which clearly states that you are pursuing a personal grievance for unjustified dismissal because the way that the redundancy was carried out was unfair. You should state in the letter what action you wish your employer to take to satisfy your grievance. (In this regard it would be wise for you to take legal advice as to what you may realistically be entitled to). You should also state that you are willing to go to mediation.Mediation is virtually inevitable in employment disputes. If you try to go straight to the ERA, they will order you to first go to mediation. Mediations are run by the Department of Labour. There is no cost for applying for or attending mediation (save for the cost of a representative – if you elect to have one). The purpose of the mediation is for an independent person (a mediator employed by the Department of Labour) to facilitate discussions to see if an agreement can be reached between you and your ex-employer to settle your grievance. Usually, settlement involves payment of money by the employer, however, this is not always the case. Other elements such as an apology or a good reference can be more important than a monetary payment.If the matter does not settle at mediation, you are left with the options of either abandoning your grievance or filing a statement of problem in the ERA and seeing the matter through to a hearing. This can be a rather stressful experience. Although the ERA is described as a “low level, informal” forum for dispute resolution, it does require you to be able to prove your case (with witnesses) and address the relevant law. It would be wise to engage a reputable employment lawyer or advocate if you are considering action in the ERA.There is no right to compensation just for losing your job. Many redundancies are for legitimate reasons and are implemented in a procedurally fair way. Such redundancies cannot be successfully challenged. However, in your case the procedure was lacking and that caused you considerable distress. You are entitled to redress for the employer’s failure in that regard and you should pursue your rights. But do so in a realistic manner, with a view to achieving a settlement with a minimum of expense and stress.There is one other important matter. Don’t focus on your redundancy. Focus instead on the opportunity that your redundancy presents. We understand that it is not easy, but there will almost certainly be another job out there for you somewhere. You just have to find it. Talk to friends, find a reputable recruitment consultant, respond to job advertisements (from the papers or the internet). Remain positive – it will make a difference | |