Redundancy During COVID-19 lockdown: The first grievance decision

The first case for a redundancy during COVID-19 lockdown has been decided by the Employment Relations Authority. It has cost the employer a pay out to two former employees a total of just over $58,000.

On 25 March, Solly’s Freight (1987) Limited (Solly’s), had applied for the wage subsidy for their employees including Timothy de Wys and Jesse Jenney who worked at the Christchurch branch. The two employees were made redundant on 2 April.

On the same day the wage subsidy was applied for, Solly’s also applied to be considered an essential service. Some of its work was deemed essential, while other aspects were non-essential. They reduced their workforce by no longer offering work to casual workers and contractors and making a number of permanent employees redundant. The basis of the redundancies was the impact of the COVID-19 Level 4 lockdown.

Prior to applying for the wage subsidy, on 23 March, Merv Solly the Managing Director, asked the Christchurch manager for a list of employees to be made redundant. This manager had been told half of the 22 staff had to be made redundant. After saying the branch couldn’t operate on 11 staff, it was agreed 7 would be made redundant. On 31 March the list of employee names was emailed to another Director.

That day Mr Solly sent a letter to all employees saying that if the wage subsidy was approved then “well and good, if not changes to our operations will become absolutely necessary”. The letter also said that even with the subsidy, no long-term guarantees could be made and “restructure may become necessary in time”.

Two days later, on April 2, Solly’s heard from a Ministry of Social Development official about their wage subsidy application. Solly’s advised them some of the names on the application would need to be removed. Later that day the 7 Christchurch employees listed by the branch manager received redundancy notice.

The Authority member concluded that Solly’s ‘knew or reasonably ought to have known’ on the morning of 2 April, that they would receive the wage subsidy. He also concluded that despite the 31 March Wage Subsidy declaration, which states the employer will use their ‘best endeavours’ to retain the employees named in the application, there was no evidence Solly’s had done this in respect of de Wys and Jenney, and there had been no consultation before the decision was made. Substantively and procedurally the redundancies were found wanting and therefore were deemed to be unjustified.

The Authority member concluded: “Considered objectively, no fair and reasonable employer could have decided that Mr Jenney had genuinely become surplus to the company’s requirements at 2 April, when its communications before then were reassuring about his employment at least in the short term if the subsidy was received.”

This decision reinforces the COVID-19 Level 4 lockdown did not diminish an employer’s obligations, and if anything, the wage subsidy declaration added some obligations.