Restructuring and Changes to Employment Roles

About the Author:

Paul Wilton (editor)

CA with degrees in commerce, accounting and information technology. Paul worked overseas in the “Big 4” accounting firms and served as a director at Audit New Zealand before setting up his own consultancy. Author of A-Z of New Zealand Business Law, Paul has over 30 years of experience as a business owner and consultant. He joined FBA in 2004 and is totally committed to providing excellence in quality and value to our subscribers. 

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Keywords: Workplace change, Redundancy, Good faith, Fair Process, Poor Performance, Personal Grievance, Unjustified or Unfair Dismissal, Unjustifiable Disadvantage

The terms and conditions of an employee's job are set out in the written employment agreement and there must be one for every job.  An employer cannot vary these without the employee's consent.  This includes changing hours or pay, as these must be documented in the agreement.

The Employment Relations Act 2003 (The Act) requires an employer when bargaining to change employment conditions to do at least the following [S63A (2)]:

• provide to the employee a copy of the intended agreement under discussion; and

• advise the employee that he or she is entitled to seek independent advice about the intended agreement; and

• give the employee a reasonable opportunity to seek that advice; and

• consider any issues that the employee raises and respond to them.

An employer also cannot require an employee to do a different job, or make an employee redundant without acting in good faith and following a fair process.

An employer can, however, make changes to an employee's duties.  Any worker can expect there to be changes in the job, especially when there is a clause in the agreement to the effect that the employee must follow reasonable and lawful instructions given by the employer in managing the business.

The point at which the change in duties becomes a different job has been considered by the courts.  They try to establish "if there was sufficient difference to break the essential continuity of the employment".   In some cases, a change of 20% has been used to draw the line and determine if a new role has been created. Clearly, these tests may rest upon personal judgment.  If there is a new role, the old one is replaced, creating a redundancy situation. 

A redundancy occurs when a person’s employment is terminated because the position filled by that person has become superfluous to the employer’s needs.  The focus is on the position, not the employee.  A term that is often used is the disestablishment of the position.

Redundancy may not be used to mask another reason for terminating employment such as poor performance.  An employee who has been made redundant may have a personal grievance based on unjustifiable dismissal, if the redundancy was not genuine or if the termination process was not procedurally fair.  In brief, an employer must show that:

• there was a genuine commercial reason for the position being superfluous;

• the process was carried out in a procedurally fair manner; and

• all contractual compensation entitlements have been paid.  (Note - if there is no redundancy compensation entitlement in the employment agreement, then the employer has no obligation to pay redundancy compensation).

Is it Genuine?

Employers are entitled to manage and structure their businesses as they see fit.  This includes making employees redundant or making substantial changes to conditions in an employment agreement, provided there are genuine reasons.   

Genuine reasons include, for example:

• Closures, changes in product lines, technology or methods of operation;

• Changes to save money or to become more efficient; or

• Restructuring

The Act defines restructuring as:

• Contracting out, contracting in, subsequent contracting or

• Selling or transferring an employer's business (or part of it) to another person.

Outsourcing therefore may create a genuine reason for a position becoming superfluous to an employer’s needs.

Restructuring may also refer to changing the structure or roles in the business.

Procedurally Fair

The Act requires employers to deal with their employees and unions representing those employees, in good faith. This duty of good faith would apply to a situation where an employer is proposing to contract out work that would otherwise be done by the employee. 

In the first instance, an employer should look to the employment agreement to understand what obligations, if any have been established by the agreement.  These must be followed.

Unless otherwise required by the employment agreement, the following procedure should be followed to avoid a successful claim of unjustified dismissal. 

At first glance, this may seem onerous but it may only come down to a couple of letters and a few meetings with a few days in between each to allow time to consider feedback and options:

• Before a redundancy decision is made, advise your employees that there is a restructuring proposal. Spell out the process that you plan to follow, providing a reasonable timeline.  Tell the employees as much as possible, as soon as possible about the situation but do not jump to conclusions or decisions about the outcome (such as redundancy) until you have been through the fair consultation process.  For example, indicate that there is a proposal that may lead to certain positions in an identified area being disestablished.

• Meet with the employees to discuss the proposal and how it might affect their employment, allowing them to have representation at the meeting.

• Give them an opportunity and sufficient time to consider and comment on the proposal.

• Consider all feedback, options and alternatives.

• Deliver your decision.  If it includes redundancy, explain the criteria you will use to select who will be made redundant (e.g. length of service, competencies…).  This can help to avoid unjustifiable disadvantage.

• Give the employees notice if you decide to make them redundant.  Follow the requirement of the employment agreement or give 'reasonable notice'. Pay redundancy compensation if your employment agreement provides for any.

• Give the employees an opportunity to discuss the impact of the decision.

• Give the employees the opportunity to work out their notice period or negotiate an alternative in good faith.

• Offer assistance to the employees to reduce the impact. This could include counselling or time off for job interviews, for example.

• Resolve all outstanding issues.

• Allow them to leave with dignity.

The above process is not specifically defined in Law.  However, it is likely to be deemed fair and failure to follow a fair process could lead to unjustified dismissal, making you liable for compensation. To get compensation the employee would need to raise a personal grievance with you within 90 days of the redundancy.

MBIE has provided a suggested task list and timeline as follows:

Step	Task	Suggested Timeframe
1	Document restructure proposal	Complete before announcing restructure
2	Invite people to a meeting to hear about the proposed restructure	Allow a few working days between sending the invitation to the meeting and holding the meeting
3	Hold a meeting to discuss the restructure	Allow enough time during the meeting to discuss the proposal and to answer questions
4	Gather feedback about the proposal	At least one week
5	Consider feedback and make a decision. If you still think your original proposal is best, go to Step 6. If you want to change your proposal, go back to Step 1.	A few days after the feedback deadline
6	Confirm the structure in writing to all employees. For those roles affected (made redundant or change in responsibilities) you’ll need to provide personalised written notification. If any roles are being made redundant, go to Step 6 of the Redundancy task list.	As soon as you make your decision

FBA Editor

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