Worker seeks compensation after redundancy following performance improvement
The Employment Relations Authority (ERA) recently dealt with a personal grievance claim involving a national sales and marketing manager who was made redundant after seven years with a confectionery company, claiming his dismissal was neither substantively nor procedurally justified.
The worker argued that his redundancy was not genuine, pointing to previous attempts by management to exit him from the business and claiming the consultation process was flawed.
He contended that the restructure was based on false assumptions about client contracts and industry changes, and that his role's marketing component was not properly understood.
Employment history and previous restructure attempts
The worker was employed as national sales and marketing manager at the confectionery company from February 2017, earning $187,460 annually plus company vehicle and bonus payments.
He was responsible for managing major client relationships and marketing activities with a budget of approximately $20,000.
In January 2019, the company first proposed to disestablish the worker's role as part of a sales and marketing division restructure.
The worker raised a personal grievance for unjustified disadvantage through his lawyer, and after discussions with the board of directors, the company decided to give him another year to demonstrate results.
The restructuring process was subsequently withdrawn, and his employment continued.
Four years later, in June 2023, the company embarked on a nine-week performance improvement process for the worker, though he did not raise a personal grievance on this occasion.
The general manager decided in August 2023 that the worker's performance had improved and no further disciplinary action was required, with the company continuing to employ him and paying a bonus of $9,373 in April 2024.
Business changes and restructure proposal
In December 2023, the company's board discussed restructuring the sales team and the "possibility of disestablishing the national sales and marketing manager position."
Board minutes from January 2024 recorded that directors were "aligned" in their decision to continue with the proposed restructure after receiving legal advice and cost estimates.
On 21 February 2024, the company presented a written proposal to make changes to its sales and marketing team.
The consultation document stated that the worker's role may be surplus to business requirements due to major clients being secured for the next 2-3 years and "significant changes to [the] model for sales."
The proposal explained that major client contracts with grocery companies were secured and only needed maintenance in the short term.
Additionally, a major grocery group was moving towards "centralised sales" where head office would be the sole point of contact rather than individual store owners, meaning "we will no longer be servicing directly 69 x individual billing clients, and this will be reduced to dealing with 4 x Distribution Centres and [the grocery group's] Head Office."
Worker's comprehensive response and concerns
On 28 February 2024, the worker provided a detailed nine-page reply pointing out various assumptions and shortcomings in the proposal.
He argued that the proposal made no reference to how the marketing team functioned, including the sales and marketing administrator who reported to him, and stated that due to his marketing qualifications, he had improved the company's marketability and profitability beyond what the general manager could achieve.
The worker contended that the reasons for his role being surplus appeared "superficial or ill-considered" because contracts with key customers were not 'set and forget' for the next 2-3 years.
He noted there was no certainty the Commerce Commission would approve the merger of the grocery group's North and South Island businesses, and that managing key accounts extended beyond the major clients mentioned.
The worker suggested involving an independent third party in the process and provided a cost comparison showing only nominal differences in cost savings between disestablishing his role versus other positions.
He recommended a comprehensive time-and-motion study of all sales roles, including that of the general manager who had been relieved of operational duties by the recent recruitment of an operations manager.
Company response and consultation timeline
The general manager responded on 1 March 2024, acknowledging the worker's concerns but maintaining that major contracts were secured for two to three years and any remaining duties would be absorbed by management.
He confirmed the board had appointed him to carry out the restructuring process and therefore no independent party would be appointed.
Regarding the grocery group merger uncertainty, the general manager stated:
"I acknowledge the North Island and South Island businesses are currently separate, and that a proposed merger is under review for clearance by the Commerce Commission.
We anticipate that the merger will go ahead. Regardless of whether it does or not, [the grocery group's North Island division] is still looking to change its sales mode,l which will significantly reduce our sales workload."
The general manager's response was emailed at 5:14 pm on Friday, 1 March 2024, inviting any further feedback by the close of business that day.
No further reply was made by the worker, and on 4 March 2024, the company advised its final decision to proceed with disestablishing his role.
The worker was offered redeployment to three vacant roles, but did not apply as they were not based in Auckland, where he lived.
ERA analysis of redundancy genuineness
The ERA examined whether the redundancy was genuine, noting the worker's argument that this was the third attempt by management to exit him from the business.
The Authority found the 2019 restructure to be unrelated due to the "significant effluxion in time" of four years, but acknowledged closer proximity between the performance improvement process ending in August 2023 and the restructure beginning in February 2024.
However, the ERA found that if the predominant motive was to exit the worker, the company "would have done so in 2023 rather than keep him on for a further five to six months into 2024."
The Authority noted the company continued paying him and also spent the discretionary bonus in April 2024, which was not an entitlement under his employment agreement.
The ERA accepted that while the general manager was incorrect about the grocery group merger (which the Commerce Commission ultimately declined in October 2024), his prediction about the North Island division changing to a centralised sales model was accurate.
The Authority found evidence of "considerable 'chatter' between different territory sales representatives" about how centralisation and "category review" would adversely affect their ability to negotiate with head office, concluding the restructure was "motivated by genuine business reasons."
Consultation process and procedural fairness
The worker argued his opportunity to provide further feedback was cut short because the company's response was sent outside normal business hours on Friday evening.
The ERA noted the general manager stated he was still working and didn't realise the time, but found this was not unfair given the worker was known to communicate with customers outside normal hours as a senior employee who could access emails on his mobile phone.
The ERA found the worker "would have known the timeline for submissions" and had submitted his comprehensive nine-page response on the deadline date without legal assistance.
The Authority determined that while the general manager's invitation for further comment after the deadline had passed was an error, it "has not resulted in unfairness" as the response contained no new material requiring additional comment.
The ERA concluded that proper consultation had occurred, noting the general manager had "notified employees of specific allegations, provided a real opportunity to respond, and ensured an unbiased impartial consideration of any explanation given."
The Authority found the worker was appropriately consulted despite the timing error and determined his dismissal was "what a fair and reasonable employer could have done in all the circumstances at the time."
