No Process, No Defense: Redundancy Gone Wrong

Despite there being no work available, and considerable financial pressure, simply telling their employee they were redundant cost STLand Contracting Limited (in liquidation), $45,000 in the Employment Relations Authority.

Ronald Shea started employment with the company (STL) in January 2025 as a truck driver. He was given an unsigned, undated and incomplete employment agreement (IEA). His hours of work was not filled in, and this created a significant challenge for the employer when they later came to rely on it.  Initially, he worked substantial hours, often reaching the limits permitted under transport industry work-time rules.

Over the approximately 2-month period Mr. Shea had been employed, and the company’s financial circumstances deteriorated. Two out of four trucks were taken off the road, work reduced significantly, and the employee’s hours dropped from around 70 hours per week to approximately 25 hours per week.

The relationship between Mr. Shea and Mr. Hartstone, the owner, also became strained. The employee alleged he was subjected to repeated inappropriate conduct, including the use of an unwanted nickname, comments relating to past trauma, and pressure to circumvent transport industry compliance requirements.

On 18 March 2025, the employee contacted Mr. Hartstone to discuss the lack of available work. During that conversation, he was told there was no further work available. He never worked for the company again. 2 months later the company went into liquidation. No consultation process was undertaken, no restructuring proposal was presented, and no formal notice was provided.

The ERA accepted that the company was experiencing genuine financial difficulties and that there may have been legitimate grounds to consider changing the employee’s role or reducing available work. However, that did not excuse the employer from following a fair process.

Importantly, the Authority found:

• The employee had not resigned.
• The employer’s actions amounted to a dismissal.
• The dismissal occurred without any process being followed.
• The employment agreement itself required procedural fairness before termination.
• The employer had genuine business reasons to consider redundancy, but failed to undertake any fair consultation process before making the decision to do so.

The Authority noted that a fair process could potentially have resulted in justifiable changes to the employee’s role or hours. The problem was not necessarily the business rationale, it was the complete absence of consultation, communication, and procedural fairness.

As a result, the dismissal was found to be unjustified.

The decision is also notable for the Authority’s comments regarding workplace bullying.

Although the employee had not formally raised bullying concerns during employment, the Authority found that repeated use of an unwanted nickname, references to the employee’s past trauma, and behaviour that undermined or pressured him amounted to repeated and unreasonable conduct. The Authority concluded that the behaviour created a psychologically unsafe workplace and constituted an unjustified disadvantage.

The remedies awarded were significant:

• $5,600 for the employee’s contractual notice period.
• $16,000 for lost wages.
• $8,000 compensation for the failure to provide a safe workplace.
• $15,000 compensation for unjustified dismissal.
• $1,000 contribution towards legal costs.

In total, the employer was ordered to pay $45,600, plus costs.

Employer lessons:

• A genuine business reason does not remove the obligation to follow a fair process.
• If work reduces, an employer is obliged to consider alternatives to redundancy.
• Be careful what you say in informal discussions.
• The financial consequences of process failures can be significant, and the recent legislative changes does not change this in redundancy cases.
• Having a valid employment agreement, with a valid 90 day trial period, and a well-worded hours of work clause could have meant that STLand could have avoided the personal grievance and significant penalties they now face.
• Going into liquidation doesn’t prevent the employer from facing up to the ERA.
• If you don’t attend the ERA hearing, the authority will take the employee’s word as gospel.
• A Director can be held personally liable where the Authority has awarded statutory minimum entitlements if the company is in liquidation.

Many employers facing reduced work understandably focus on commercial survival. However, this decision demonstrates that failing to follow a proper process can significantly increase the financial consequences of an already challenging situation.

Where reduced work, restructuring, redundancies, or changes to hours are being considered, employers should ensure they have a robust and legislatively compliant process in place before taking action. A genuine business reason may justify a change, but it will not justify skipping the process required to get there.

This is a time when expert help at the beginning could save you significantly later on. If you are contemplating reducing your staffing, please give us a call.