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Redundancy And Restructuring: Pitfalls And Penalties | BuckettLaw

Redundancy And Restructuring: Pitfalls And Penalties

May 20th, 2021

Covid times are uncertain times. More employers are resorting to restructure and redundancy as  a response. To the pandemic.

Redundancy does not give an employer special licence to dismiss. The same laws that apply to dismissal apply to redundancy.

Duties of good faith consultation and justification remain.

There must be a genuine  business reasons for the restructure/redundancy. These reasons must be supported by evidence and be the paramount reason for the redundancy.

The position must be superfluous.

The restructure cannot be personal. It is the need for the  continuance of the role  not the person  that must be the focus.

Significant changes to the role are required. Minor changes to the role do not count they must be significant. Roles that are sufficiently similar  will be considered still existing. Rule of thumb guideline  is that a change to be significant requires more than 20% change.

Not for improper purpose. Too many times restructure/redundancies are used for improper purpose to exit employees out of the employment. when the real problem is poor performance or misconduct.  An improper use of restructure/redundancy if uncovered can be costly to a business.

Good faith requires consultation and fair process.

Fair process means providing all relevant information relied upon to come to the decision to terminate for redundancy. Failure to provide all relevant information may potentially make a justified redundancy unjustified and give rise to a personal grievance fir unjustified disadvantage .

The process is a twostep process. The first is the disestablishment of the role. The second the exploration of redeployment options.

Too often employers get caught by the failure to understand the two-step approach. Truncating the process potentially will render an otherwise  justified  redundancy unjust.

Genuine redundancy means the role superfluous to the needs of the business.

It is  important to read  and follow the employment contract  or any relevant policy. 

A redundancy may be genuine  but contractually and procedurally so flawed  that a justifiable redundancy may be deemed unjustifiable.  This situation recently  cost an employer a $15K for a hurt and humiliation.

What is genuine will be objectively scrutinised by the court/authority.

Solid information or paper trail  is required. Misleading or insufficient information will also get an employer into hot water.

As an employer there is an overarching requirement to always act as a fair and reasonable employer. The test involves whether the decision is one that a fair and reasonable employer could make in the circumstances. The decision will be assessed in the same way as any dismissal.

The court/authority will look objectively at the validity of the reasons for the redundancy. If financial  then the finances will have to support and justify the decisions.

Where there is more than one role tagged for redundancy then selection for redundancy must be fair.

The criteria for selection must be objective , transparent, and relevant to the role.  Obvious Manipulation of  the criteria to favour one candidate may render the process unfair.   Fair selection  is a  no default process; it ought not to consider any previous misconduct or performance issues.

Because of the obligation to be constructive and productive in maintaining a productive employment relationship an employer is required as part of the redundancy process to make reasonable endeavours to find suitable alternative employment before ending the relationship.  This obligation exists even if the person is not the most suitable and does not have the necessary skills and

There is no legal obligation to pay redundancy compensation unless you have agreed to it in the contract.


  • Genuine business reason

  • Good faith obligations (provide all relevant information)

  • Meaningful consultation

  • Role not the person to be superfluous

  • Not for improper purpose (ie performance or misconduct)

  • Significant change to the role

  • Fair processes

  • Two steps (disestablishment and redundancy)

  • Selection

  • Redeployment


This is not an easy area of law.  It is a legal minefield. It is advisable to seek legal advice. Contact BuckettLaw today.

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