Redundancies and Restructuring - “Best efforts”, “Best endeavours”, and the employer

COVID-19 will undoubtedly have had a significant impact on businesses in the Queenstown and Wanaka region. As a consequence, issues may arise in regard to potential restructures and/or redundancies.

In making any decisions an employer must remember that in all dealings, employers and employees must deal with each other in good faith.  

Ultimately, the employer must be able to establish that its actions were "what a fair and reasonable employer could have done in all the circumstances".

Before any restructure or redundancy process commences, the employer should always address the employment agreement and any applicable policies and procedures.

The Employment Team at Todd & Walker Law have made a list of things to consider, below:

• Has the employer considered all alternatives to redundancy? Reduced hours, reduced wages, redeployment, period of leave without pay, access to wage subsidies, reduced days of work, a closedown period.
• Has the employer consulted with the employee? The good faith duty requires the employer to give an employee an opportunity to comment on the information before the decision is made. Employees do not have to agree with the employer’s proposal for restructuring or redundancy, provided there has been proper consultation.
• Has the employee been given the chance to obtain legal advice? An employee ought to be offered/ recommended the time to obtain legal advice before any decision is finalised.
• Has the employer permitted the employee to provide feedback? Has the employer considered the employee’s feedback? Consultation meetings may not be possible, and therefore we recommend employees be contacted via videoconference, telephone, or in writing.
• Is there a sound rationale for the redundancy? Has the employer made “best efforts” to retain the employee? There is no clear guidance from MBIE about the definition of “best efforts” but we parallel this phrase with "what a fair and reasonable employer could have done in all the circumstances".
• Has the employer got evidence to support the reason for any redundancy? A significant downturn in sales/revenue, a loss of customers/suppliers, and/or a shift in market requirements, could amount to a genuine reason for restructuring or redundancies. Evidence can be in the form of accounting advice, attempts to obtain rent relief, bank advice, loan information.

Notwithstanding the impact of COVID19 and its impact on the local community, any breach of employment law is still liable for personal grievances and/ or penalties.

Now is the time to review your individual workplace and/ or employment situation and if you have any questions about redundancies, restructures, the wage subsidy  and how they relate to your workplace or friends and family, please do not hesitate to contact one of our dedicated Employment team members.