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The redundancy process - analysis and information are key

By Claire Mansell - 26 Mar 2014

Being a good employer sometimes means making difficult choices. Decisions aimed at improving profitability and efficiency can come at the cost of someone's job. Good communication and transparency from a company is important if you're to avoid employment disputes and litigation headaches. 

When an employee brings a personal grievance for unjustified dismissal an employer will be called upon to justify that dismissal. The employer's decision and actions will have to be shown to be "what a fair and reasonable employer could have done in all the circumstances at the time of the dismissal".

The recent case of Ledger v Delmaine Fine Foods Limited, is an example of redundancy process gone wrong. In this case the employee was told that there was no longer a job for her due to the "economic downturn" and financial pressures upon the company. The Employment Relations Authority criticised the employer for not providing detailed supporting financial information or projected costs savings to show the reasoning behind her redundancy. Reliance on "economic downturn" and rumours of mergers in the industry  lacked substance and therefore were no justification for the dismissal. The employer had to pay the employee approximately $36,000 plus costs.

A reading of that case suggests that this may well have been a good justifiable business decision on the part of the employer for reasons more specific than "economic downturn". However, there had been no objective analysis by the employer of the financial health of its business and how making Ms Ledger redundant would improve that situation - or at least not in a form that could be presented to the authority. 

A decision to make redundancies cannot be made in a vacuum. It must be supported by analysis and information. That analysis must then feed in to the consultation process.

Contact us for information in relation to redundancy and restructuring processes.


Claire Mansell


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