Worker argues 'predetermined decision' ignored genuine consultation and good faith obligations
The Employment Relations Authority (ERA) recently dealt with a redundancy case where a software architect challenged his dismissal, arguing that the decision was predetermined and the consultation process was fundamentally flawed.
The worker claimed his redundancy was unjustified because team resignations had already reduced staff numbers, negating the need for forced redundancies.
He argued there was a failure to genuinely consult with him about the redundancy proposal or any potential redeployment opportunities, and therefore his dismissal was not justified.
The employer defended its decision, citing genuine financial reasons for the restructure and arguing that a thorough selection process using a matrix was applied to determine which team members would remain.
The company said the selection criteria was consulted on and the process followed was therefore fair and reasonable.
The employer operated as a digital software provider creating solutions for sports and hobby clubs, associations, and non-profit organisations.
The worker had initially been employed as a software developer from 26 July 2021 by another company, before his employment transferred when that company merged with another entity to form the current employer.
The company faced serious financial difficulties that required immediate action. A board advisor, who later became CEO, described the company as being "in poor financial state" and recommended undertaking a restructure to address the financial situation. A human resources company was engaged to assist with this process.
The board advisor was appointed as CEO on 24 October 2023, and the restructure proposal was communicated to staff the following day.
The worker attended a meeting on 25 October 2023 where he learned about the restructure and subsequently received the written proposal via email.
The proposal document outlined the background to the restructure, referencing "the current economic environment in New Zealand impacting on [the employer] as well as challenging client contractual changes" which meant the company needed to alter its projections for the future.
The restructure proposal aimed to reduce the software developer team from five positions to three by cutting two roles.
Additionally, two other positions would be eliminated while a new principal engineer position would be created.
A significant change was that all remaining software developer roles were to be based in the office full-time, representing a major shift from existing remote work arrangements.
The selection process involved assessing all software developers against detailed criteria including length of service, industry experience, attendance records, performance metrics, attitude and teamwork, additional skills, goal achievement, and professionalism.
Each person would be assessed using a matrix system with scores compared across team members.
However, significant issues emerged regarding the accuracy of information underlying the consultation process.
The worker was aware that one of the five software developers had already resigned, but the employer's evidence showed "this employee actually resigned on 10 October 2023 which is prior to the redundancy proposal circulated on 25 October."
This meant the consultation was based on incorrect information about actual team numbers, with the proposal stating it would reduce developers from five to three, when in reality it was reducing from four to three due to the earlier resignation.
The worker provided written feedback on 26 October, clearly stating his wish to be considered for retention.
He confirmed he would be "available to work in the [office] full time" and could be "in the office two to three days a week in accordance with what the rest of the team were currently doing." He also agreed to increase his working hours from 36 to 40 hours per week from his existing work-from-home arrangement.
The CEO contacted the worker asking him to complete the matrix assessment before their meeting to discuss results.
The worker completed his self-assessment and returned it on 3 November, with their meeting scheduled for 6 November via video link.
During this meeting, there was agreement that the worker was highly experienced and considered a senior software developer with 25 years of industry experience.
The CEO confirmed in his evidence that the worker "had scored highly and was considered to be a very experienced member of the team."
The worker had no performance issues and enjoyed good working relationships with colleagues.
Despite this positive assessment, complications arose when the CEO's evidence revealed that additional factors beyond the published selection criteria were considered in the decision-making process.
On 8 November, the CEO and human resources met with the worker and informed him he had been unsuccessful in retaining his position and would be made redundant.
The same day, a second employee in the software development team told the worker they had also resigned earlier in the week, though the CEO's evidence differed on the exact timing of this resignation.
The CEO's evidence revealed that when asked how the second employee's intention to resign was factored into decision-making, he considered that this employee "was earning significantly less than [the worker]" and that he wanted them to stay because of their useful experience.
The CEO also explained that while the worker was a senior developer who scored highly on the matrix, the second employee's role was very important because they had specific knowledge that was valuable to the company.
When questioned about whether specific work streams or priorities were reflected in the selection criteria, the CEO explained he looked at the matrix "as context and we looked at salaries."
However, salary was not listed as a factor in the published selection criteria matrix, raising questions about what factors were actually considered in the final decision.
The Authority identified multiple flaws in the redundancy process. The consultation was based on incorrect information about team numbers, with the worker's termination letter confirming "the reduction in the number of developers from five to three when in fact it was a reduction from four to three."
The Authority found that if the second developer had resigned before the final decision, "there would only be three developers left in the team. That means the proposal's objectives could have been met without making any developers redundant."
Regarding the employer's approach to distinguishing between intention to resign versus actual resignation, the Authority stated: "that is not a complete answer for [the employer] given the good faith obligations in the Act."
The timing of resignations and their impact on decision-making became central to the case.
The Authority emphasised that "selection criteria must be available to the employees, relevant, adhered to and consulted and the Courts and Authority have found that flaws in the process when using selection criteria will render a dismissal unjustifiable."
The Authority found that "if the selection criteria and therefore the matrix are considered to be contextual by the employer it is difficult for the employees in the process to know what they were being assessed on."
The Authority concluded: "I find the dismissal to be both substantively and procedurally unjustified and [the worker] is entitled to an assessment of remedies."
The worker was awarded $20,000 compensation for humiliation, loss of dignity and injury to feelings, plus three weeks' lost wages.
