Restructuring - genuine proposals must be considered

06 October 2017

by Rebecca McLeod, Senior Associate

Restructuring is one area where employers really do need good advice as the following precautionary tale demonstrates.

W had been at Opus for 35 years, working in the HR department. During 2014 she was advised that Opus was beginning a consultation process, with the view of restructuring the HR services in NZ. At the time W was the HR coordinator, which involved handling leave applications, monthly reporting requirements and inducting any new employees. There were four members of the team, with one member - Ms D - being away on parental leave at the time of the consultation.

Initial meeting

W attended an initial meeting where the restructure was discussed and she was informed that it may involve the disestablishment of her position, reducing the team to three.

W submitted feedback on the proposal. The employer met with W to discuss her feedback and she was informed that her role was to be disestablished. W was provided with the position description for the newly created HR advisor position, which she applied for, as did Ms D who was still away on parental leave.

W makes ‘without prejudice’ offer

When W received notice that her position was to be disestablished, she advised her representative to send a without prejudice offer to Opus. This was to accept voluntary redundancy and included a proposal that W take over Ms D’s position until she returned from parental leave.

W received no response to that offer, but was told to continue with the process of applying for the new role. W was interviewed on 13 October, but Ms D was the successful candidate for the newly created HR advisor role.

‘Too busy’ to consider proposal

During the meeting to provide W the outcome of the interview process, W asked about her without prejudice proposal to cover Ms D’s role until she returned from parental leave.

The employer had simply said that “she had too many demands” to respond, being too busy carrying out the restructure.

Within two days, W had tendered her resignation and advised that she did not wish to work out her notice period.The employer accepted the proposal and W received her months’ notice in lieu and her redundancy entitlement.

W later raised a personal grievance, claiming that she had been unjustifiably disadvantaged when Opus did not consider her offer to work in the temporary fixed term parental leave position after the restructure. Opus denied that she was unjustifiably disadvantaged and claimed that they had followed a fair process throughout the restructure.

Was W disadvantaged?

The Employment Relations Authority (“ERA”) had to determine whether Opus had acted in a way which led to W being disadvantaged. W claimed there was a breach of good faith during the restructure process, in that Opus had failed to adequately consider and respond to her offer to cover Ms D until her return from parental leave.

The ERA found that Opus had failed to act in good faith towards W when it refused to consider her request, both when the offer was made and later during the meeting to discuss the outcome of the interviews for the new position.

Employer breached duty of good faith

The ERA considered that Opus had a duty of good faith to discuss the situation and allow W to provide feedback on the decision not to take up her offer for that fixed term position. W did not have an opportunity to provide feedback on the decision, as she had done throughout the restructure proposal.

Significantly W was an extremely long-serving employee and the ERA found that a fair and reasonable employer would have at least provided some response, discussed that response with W and given her time to provide feedback on that final decision.

W had been unjustifiably disadvantaged. She was not awarded any lost wages but she did receive $3,000 in compensation.