Genuine redundancy or 'disliked' employee?

Authority explains importance of sufficient consultation period

Genuine redundancy or 'disliked' employee?

The Employment Relations Authority recently dealt with the application of a worker who was made redundant without sufficient consultation. He also questioned the grounds for his dismissal, citing that his employer had not suffered the financial losses that it claimed.

Yu Cheng, a design engineer, had his employment terminated due to redundancy by Metropolitan Glass & Glazing Limited on November 1, 2022. Cheng claimed that his dismissal was unjustified and that Metro had treated him unfairly. He also asserted that Metro breached its obligation of good faith during his employment.

Meanwhile, Metro refuted Cheng's claims, asserting that its redundancy process was both substantively and procedurally fair.

Background of the case

As a company specializing in supplying and manufacturing glass for the Australasian construction sector, Metro employed Cheng as part of its technical team within the market strategy group, overseen by General Manager Mr. Fergusson.

On October 18, 2022, Fergusson invited Cheng to a change proposal meeting for the following day, where the details of proposed team changes, including Cheng's redundancy, were explained.

Cheng was given an opportunity to provide feedback, which he did by October 26, 2022. Despite Cheng's questions and requests for further detail, Metro confirmed its decision to make Cheng's role redundant in a subsequent meeting on October 28, 2022.

Metro officially terminated Cheng's employment on November 1, 2022, citing redundancy. However, Cheng raised personal grievances against Metro on December 6, 2022, claiming unjustified disadvantage and dismissal.

Disputed financial standing

Cheng argued that Metro's financial reasons for restructuring were not genuine, citing increased revenue and ongoing investments by Metro.

He also disputed Metro's claim of reduced business demand, pointing to investments in new equipment and future projects. He argued that Metro did not consider alternatives to redundancy and that his previous duties were still necessary.

However, Metro maintained that its change proposal was supported by genuine business reasons, citing interim financial statements highlighting a decline in work volume.

Genuine redundancy or not?

Cheng claimed that Metro did not conduct “a fair and reasonable process.” He said Metro did not provide him with adequate notice of its change proposal. He also said Metro’s consultation process was a mere formality and did not allow for meaningful engagement or consideration of alternatives to redundancy.

According to the Authority, it must determine on “an objective basis” whether the employer’s actions and how the employer acted “met the statutory standard of what a fair and reasonable employer could have done in all the circumstances at the time.”

“The Authority does not make its own decision on whether a position was surplus to the needs of the employer. The Authority must consider whether Metro’s decision to make Cheng redundant was for a genuine business reason and not used as a pretext for dismissing a disliked employee,” the decision said.

Insufficient consultation time

The Authority said that “consultation during a restructure usually requires active ongoing communication between the employer and employee before any decision is made,” adding that “Metro did not meet this obligation.”

“More time should have been afforded to Cheng to provide meaningful feedback. This was especially so given Cheng was only informed about the change proposal nine calendar days before Metro decided to make his role redundant.”

“Metro had legitimate reasons for its change proposal and deciding to make Cheng’s role redundant. However, Metro did not provide him with sufficient opportunity to consider the proposal and provide meaningful feedback.”

Thus, the Authority said that the worker was treated unfairly, and his unjustified dismissal claim was successful. It then ordered the employer to pay compensation.

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