Restructuring – how not to get it wrong!

May, 2021

By: Jason Tuck

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EMA consultant Jason Tuck helps numerous clients through restructuring to improve efficiency, reduce costs and become more flexible businesses, but has noticed a general lack of understanding on how to successful manage a retsructure.

If you get it wrong you could up on the wrong side of a personal grievance, unfair dismissal or unjustified action causing disadvantage claim, costing you money and reputation.

 Some common areas of confusion include:

  • Lack of Contestable Process – where you are reducing the number of the same type of role, and have to ensure all the roles are disestablished before appointing remaining roles from that pool
  • Selection Criteria – where restructuring creates contestable roles, requiring a quantitative selection criteria and process
  • Technical Redundancy – being able to identify when roles fall into this category and knowing how to appropriately manage the situation
  • Redeployment – understanding your legal and contractual obligations in this area.

Restructuring is a mine field of risk for businesses as the processes that needs to be followed is guided by ‘Good Faith’ in the Employment Relations Act, while the detail of what needs to be done has been established through case law via issues that have gone through legal challenge.

The following are important requirements to consider when going through a restructuring process:

  1. Substantive justification– the employer must be able to establish that there are genuine business / commercial reasons for the proposed changes; and
  2. Procedural fairness– a fair process must have been followed, which includes the following:
  3. Information– the employer must prepare and provide sufficient and relevant information to the potentially affected employees about the proposed changes and the reasons for the same;
  4. Consultation– the employer must provide an adequate opportunity for the potentially affected employees to consider the information relating to the proposed changes and to provide their input on the same (including an opportunity to suggest potential alternatives);
  5. Genuine consideration– the employer must genuinely consider the employees’ input with an open mind before deciding how it wishes to proceed with the proposed changes;
  6. Consideration of alternatives– if the employer has decided to proceed with certain proposed changes and this involves disestablishing an employee’s existing position, the employer must consider and explore with the affected employees how to redeploy surplus staff to other positions (if any) that could potentially be suitable for the affected employee;
  7. Fair selection and process– where the proposed changes affect some, but not all of the employees in a similar role, the employer needs to provide information on the proposed criteria for selecting the employee(s) who would be affected by the proposed changes.  As part of the consultation process, the potentially affected employees must have the opportunity to provide their input into the process and criteria for selection; and
  8. Compliance with employment agreement and policies– in addition to the requirements imposed by law, the employer also needs to follow any other requirements contained in employment agreements and policies.  This may include other procedural requirements, the length of notice periods and providing any redundancy compensation.  

 Where an employer dismisses an employee or takes a course of action which detrimentally affects the employee’s conditions of employment, the affected employee will have a right to raise a personal grievance. As such, it is important for an employer to justify its actions and the process undertaken before making its decision.

If the employer does not meet its legal requirements, the employee could end up in front of the Authority or the Court.  

Before you begin implementing changes to the roles and structures in your organisation, it is a good idea to consult a professional as it could save substantial costs and reduce the risks of undertaking restructuring incorrectly.

Jason Tuck is an EMA consultant who specialises in all aspects of Human Resources and Employment Relations. Contact Jason on 021 992 192 or email Jason.Tuck@ema.co.nz


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