Three-day consultation period raises red flags; costs employer almost $20k in penalties
The Employment Relations Authority (ERA) recently dealt with a case where a worker argued that his redundancy was unjustified, both in process and substance. The worker was employed as a consultant at a recruitment firm when his role was disestablished with immediate effect.
The worker argued that he received no prior notification about the purpose of the redundancy consultation meeting and was given just three days to provide feedback on the proposal. When another employee was promoted to a consultant role in a different branch shortly after his dismissal, he questioned the genuineness of the redundancy.
The case highlighted issues around proper consultation timeframes, documentation of decision-making processes, and redeployment considerations during restructuring.
The worker was employed as a consultant from August 2022 until October 2023. The employer operated recruitment branches in both Wellington and Auckland, with the Wellington branch employing seven full-time and one part-time staff member.
On September 26, 2023, the employer's director held a virtual Microsoft Teams meeting where he informed the worker about a proposal to disestablish his consultant role and another position due to financial losses.
The proposal document stated the Wellington branch was "no longer profitable" and that losing "significant amounts of money" was not sustainable.
The worker received the proposal documentation at approximately 11:45AM after the meeting and was given until 1PM on September 29, 2023, to provide feedback. During this process, the employer initially cited being under budget by $400,000 but later corrected this figure to $200,000.
The worker responded with several cost-saving alternatives, including suspending commissions and implementing organisation-wide wage reductions. During the ERA investigation, internal documents revealed different figures from those presented to the worker.
One document dated September 20, 2023, indicated that disestablishing the worker's role along with a part-time position would save $10.4K monthly.
The employer's response to the worker's suggestions stated: "We need to be able to save or make close to $30,000-$50,000 a month. That is why it was important for us to look to cut staff costs as well as the other measures you have highlighted."
The ERA found: "[The employer] was unable to articulate the rationale as to how the Board came to the conclusion that the role of 'consultant' was superfluous to its needs apart from a generic reference to needing to find savings and the slow Wellington market."
Eight days after the worker's role ended, the employer's Auckland branch announced the promotion of an employee to a consultant role.
When questioned during the ERA investigation, the director said this was an administrative exercise to formally reflect duties already being performed.
The ERA observed: "When I step back, I find that [the employer's] reasoning for promoting a staff member into the role of 'Consultant' does not stack up when it decided to make [the worker's] 'Consultant' role redundant a week prior and advised him he could not be redeployed anywhere within the company."
Despite claiming extensive board discussions about the restructure since June 2023, the employer did not provide any board minutes to the ERA when requested. The ERA noted: "Such timing is disproportionate to the seriousness of the proposal made to [the worker]."
The ERA determined that both the substantive and procedural aspects of the redundancy were unjustified. It found the three-day timeframe for consultation inadequate, and the employer failed to demonstrate how the worker's role had become superfluous to business needs.
The worker's wife provided evidence about the impact of the sudden redundancy, describing the stress and anxiety it caused their family, particularly with three dependent children and the pressure of finding new employment before the Christmas period.
The ERA ordered the employer to pay the worker $2,884.62 in lost wages and $18,000 in compensation for humiliation, loss of dignity, and injury to feelings.
