Redundancy And The Road To Recovery – Now What?

August 4th, 2020

Redundancy issues for employers

Tori McGaugh, Employment Relations Specialist, BuckettLaw

Following a long 7 weeks of lockdown, two lots of Wage Subsidies and the vast changes to the employment landscape that have taken place in this time, our attention turns to recovery.

The COVID-19 situation has imposed volatile conditions on businesses; meaning they have needed to quickly become adaptable and able to execute rapid or frequent change in response to the impacts of the pandemic. Many organisations have faced the awful task of making many of their valued employees redundant in a time of economic uncertainty.

This same ethos of adaptability applies to the road to recovery.  Many sectors and organisations will find themselves operating at a lesser capacity as they were pre-pandemic, whereas others may see an unexpected rapid return, which was detailed in the recent TVNZ article.  The latter scenario can lead to a business requiring capabilities or resources to complete duties or functions that were previously considered redundant or no longer required.

Can I rehire roles that previously were deemed redundant?

The answer is, you can, but proceed with caution.

Section 4 of the Employment Relations Act 2000 requires employers to act in good faith when making employees redundant. And the vast majority of employers will have done this and will have enacted restructuring strategies to enable the likelihood of survival.  Therefore, it is absolutely key that businesses have performed reasonable due diligence ahead of any restructure and subsequent strategy, and that they keep all of this as record of fair and reasonable process.

Former employees are at liberty to raise a personal grievance for unfair dismissal within 90 days of their termination date.  If a position that was made redundant is re-created within a short timeframe, an employee who was dismissed may claim this is evidence the job continued to exist and the termination was therefore not a case of genuine redundancy.

Arguably, re-hiring of a role within, say, three months of termination, whilst not impossible it may require robust justification by the employer. Therefore, it is important to be sure that when making the position of an employee or group of employees redundant, that an employer can prove, if challenged, that the redundancy was genuine given the circumstances.

 

Can I rehire former employees whose position has been made redundant?

There is nothing under the Employment Relations Act 2000 which specifically prohibits the re-employment of a former employee whose position had become redundant, provided the termination was a genuine redundancy. However as previously stated, the employee who was dismissed may claim this is evidence the position was not actually redundant and the termination was therefore not a case of genuine redundancy. 

Some companies may have policies which prevent re-employment of a redundant employee within a specified period of time. In addition, some employees may be contractually required to repay redundancy entitlements if they are re-employed.  However, it is worth noting that many employment agreements have a clause that supersedes previous agreements – leaving the employee with no liability to repay.

Where the reason for termination was due to a downturn in trade, the period between termination and re-engagement by the same employer may be unlimited. However, the period the employee was not employed does not count as service for the purposes of determining total service.

Note that it is always a good idea to consult with your financial advisor to ensure that you are not running into any tax difficulties by doing so.

When evaluating the risk in hiring for a position that was previously deemed redundant, consider whether the case for change is justified. What has changed (since the termination of the previous incumbent) that warrants the role, the function or the responsibilities to recruit or re-hire to fulfil your business requirements.

Please note that this article cannot be taken as legal advice.

If you need advice on redundancy or other employment issues, please contact our offices for a confidential discussion.

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