Considering a Restructure: Consult, Consult, Consult

 

The Employment Relations Authority (“ERA”) requires Employers to provide two obligatory components for a justifiable restructure.

 

Firstly, the Employer must provide a true and honest (genuine) reason(s) for a restructure and secondly that the restructure is achieved by following a fair and reasonable process. This discussion will focus on the reason for a restructure and the distinction between disestablishing a position and terminating an employee on the basis of redundancy.

As a business changes, the needs of it change and go hand in hand with a re-think of how the human capital will be best placed to support the continued viability and success of the business. This could mean that:

  • The functions of positions are redeployed, or
  • The functions are contracted out, or
  • The description of a position changes to a degree that a new position comes into being; or
  • A position has become redundant.

In terms of employment, the Employer must hold to its good faith employment obligation where restructure is being considered and highlights a necessary distinction between disestablishment of a position and the termination of an Employee. By way of explanation let us consider the following scenario:

An Employer who owns an Early Childhood Centre employs five people, each a qualified teacher working for the Company in a dwindling rural town.  Young families have not moved to the area in recent years and the roll has fallen below a sustainable number to require the employment of five teachers.

Currently, there are three full-time teachers and two part time teachers. Each teaching position shares additional duties to teaching the children, such as food preparation, administration, cleaning etc.

The Employer decides that there is scope to redefine the parameters of the teaching positions which will allow some positions to continue teaching; redeploying some duties which are currently shared by all five teachers and out-sourcing some of the shared duties. Sadly, one full time teaching position is no longer needed to support the needs of the Centre due to the falling roll.

As per the ERA requirements, the true and honest reason for the changing needs of the Centre is the falling roll of the Centre which is further supported by the prevailing dwindling population trajectory of the rural town. A proposal for the impact on the five positions might be:

  • Retaining two of the three full-time teachers, redeploying their additional duties; and
  • Disestablishing the third full-time teacher position; and
  • Retaining the two part-time teaching positions but redeploying their functions to absorb the additional duties from the full-time teachers so that they are able to focus on teaching while the part-time positions support the full-time teachers; and
  • Outsourcing the food preparation duties to a contracting service provider.

The proposed new structure allows for the Employer to continue employing four Employees, but the position functions are all different which helps to illustrate the difference between disestablishment and termination.

The decision to disestablish a role does not in itself end a person’s employment. The obligation of the Employer at that time is to determine whether the employee can be offered a suitable alternative role within the organisation or not.  

Where the Employer determines that they can offer an affected Employee an ongoing position, that Employee’s ongoing employment depends largely on the Employee’s decision whether to accept the position offered or not. On the other hand, where an Employer determines that there is no ongoing employment available, the affected Employee’s employment is terminated based on redundancy.

The scenario above illustrates that the Employer might have a reduction in Employee numbers from five to four. Since one position had been disestablished and the others redefined, ongoing positions will be offered to the Employees and their acceptance or not will determine their ongoing employment status. Sadly, one Employee might face termination on the basis of redundancy. The Employer is obligated to make the process of this restructure fair and reasonable, thereby holding to the good faith principles.

To summarise, a restructure does not necessarily lead to a genuine redundancy situation and does not exist solely because the Employer disestablished the role the Employee was employed into. Both parties play an active role in the outcome of a business restructure. Therefore, a termination based on a redundancy only occurs if the Employer is either unable to offer the affected Employee a new (ongoing) position within the organisation or the Employee, having been offered an ongoing role, declines it.

If your business needs a restructure because of the changing needs of your organisation, contact us to discuss the effect it will have on your Employees and assist you to develop a plan to reflect the genuine reason and a procedurally fair transition.

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