3 Reasons for Restructure/Redundancy & Checklist

June 21st, 2022

With uncertain times ahead, more employers are resorting to restructure and redundancy as a response. It's important that employers understand their legal requirements when undergoing redundancy. And that employees understand their rights and are treated fairly throughout the prossess.

Redundancy does not give an employer a special license to dismiss; the same laws that apply to dismissal apply to redundancy. An employer's duties of good faith consultation and justification remain. If there is any wrong doing, employees have the right to raise a personal grievance.

If you are looking for help navigating redundancy law, our helpful lawyers are here to help. Contact them today.

  1. Redundancy Legal Advice for Employees

  2. Restructure & Redundancy Legal Advice for Employers

3 Reasons for a Restructure/Redundancy

1. Must be a genuine business reason.

There must be a valid, well-documented, and pressing business reasons for the restructure/redundancy. Hard evidence must support these reasons and be the primary justification for redundancy.

2. Position must be superfluous & not personal.

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.

3. Significant changes to role.

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 & Fair process

Good faith requires consultation and a 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 for an unjustified disadvantage.

The process is a two step process. 

  1. The first is the disestablishment of the role. 

  2. 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 is 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 $15K for hurt and humiliation. What is genuine will be objectively scrutinized by the court/authority.

Information or paper trail

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 favor 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.

Before ending the employment relationship, the employer must try to find new work that suits the employee. This obligation exists even if the person is not the most suitable and does not have the necessary skills. There is no legal obligation to pay redundancy compensation unless you have agreed to it in the contract.

Redundancy Checklist

  • 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

 
Restructure/Redundancy 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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