Costly Mistakes in the Redundancy Process

New Zealand Steel Limited (NZSL) found out the hard way, the cost of getting a redundancy process wrong. The employee, Mr Haddad was awarded $25k in compensation, 18 months lost wages and was reinstated, so is now back working at NZSL. Mr Haddad did have to repay the redundancy payment he had received.

Although it was determined the restructuring was genuine, the decision to dismiss Mr Haddad was deemed unjustified. The case primarily rested on the company’s decision not to redeploy Mr Haddad to newly created positions and how soon in the restructuring process they consulted with him.

The restructuring was conducted in two phases. Phase one did not directly impact Mr Haddad’s role as Process Computing Manager although was the precursor to phase two which did impact his role. The purpose of phase one was to establish a ‘target state’ for the Information Services Team by changing reporting lines and creating three new roles: Business Engagement Manager, Legacy Platform Support Manager and Platform Integration Manager. In the second phase the company realigned the Process Computing team with this new ‘target state’ by shifting its engineers and developers to other teams and disestablishing the Process Computing Manager role.

The company did not begin to consult with Mr Haddad until the later stages of phase two and he was not provided with the information or feedback from others on the early stages of phase two. Mr Haddad applied for all three new positions, was ultimately offered interviews for them but he declined to attend saying he shouldn’t have to apply as the company knew enough about him after 7 years’ service, and the decision not to appoint him was already made.

The Employment Court noted Mr Haddad’s refusal to attend the interviews was “understandable but unwise”, saying the decision was a “high risk strategy” and as an alternative, the employee should consider “recording their concerns and then attending on a without prejudice basis. In that way… the employer can be put to the test”.

The lessons here include ensuring you consult early and transparently if there is a possibility an early decision may have a subsequent impact on an employee. Secondly, redeployment considerations are critical and a primary consideration even if the employee may need some retraining to fulfil the role. Remember a redundancy is not about an employee’s performance.