Redundancy - no longer the silver bullet

Over the past couple of years it has become much more difficult for employers to make workers redundant.

Redundancy in the past

Before 1990, an employer had to prove that a redundancy dismissal was "unavoidable" and necessary, not just desirable or convenient.

In 1990, in a court case known as 'Hale', the President of the Court of Appeal said "A worker does not have the right to continued employment if the business can be run more efficiently without him." All five Judges in the Court said that so long as the employer's decision to dismiss for redundancy was based on genuine business reasons (not, for example, because the employer didn't like the worker) then the decision could not be challenged by the worker or the court.

For the next 20 years, employers have regarded redundancy as an easier means of exiting a worker than, say, dismissal for poor performance. Employers have "massaged" the company's requirements to conclude that the unwanted worker's position was "surplus to requirements". In the absence of evidence of ulterior motive (for example warnings or threats of dismissal for poor performance) it has been extremely difficult for the worker to establish that the redundancy was not genuine.

Redundancy now

In 2000, the Employment Relations Act introduced a definition for unjustified dismissal which required the court to consider "all of the circumstances" not just business efficiency.  The Act also defined and strengthened the commitment to the duty of good faith that employers and workers have always owed to each other.

In 2011, the Employment Court held, in a case known as "Wrigley & Kelly", that Massey University should have provided its lecturers (Wrigley and Kelly) with a raft of information about why they were selected for redundancy. The required information included evaluations by their peers and other information previously regarded as inaccessible by workers. The Court held that without access to that information the lecturers were compromised in their ability to challenge and change the employer's decision to make them redundant. 

Since 2011, the Employment Court has scrutinised redundancy dismissals in a progressively rigorous fashion. In a case known as "Totara Hills" the Chief Judge considered the redundancy of a farm worker from Totara Hills farm. The farm owner claimed that he made his worker redundant to reduce the wages bill by 10%. The worker said the real reason for his dismissal was unproven performance concerns. The Court carried out a careful analysis of the figures and concluded that, at most, the cost saving would have been only 6%. The redundancy was therefore held to be unjustified.

In May 2013, in a case called Brake & Grace Team Accounting, the Employment Court again conducted a careful analysis of the employer's calculations which it said were the reason it was forced to make Ms Brake redundant. The Court found that the figures were inaccurate and that, therefore, the employer's actions "were not what a fair and reasonable employer would have done in all the circumstances at the time the dismissal occurred." For this reason the redundancy was held to be unjustified.

Implications of these changes

These cases demonstrate a trend towards imposing increasingly more onerous obligations on employers to justify the redundancy of a worker. Workers no longer have to just accept the employer's bold assertion that the redundancy is for "genuine business reasons". We can expect many more workers to challenge redundancy proposals and decisions from now on.

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