A recent case before the Employment Relations Authority (ERA) underscores the critical importance of good faith in redundancy processes. In this case, an employee successfully challenged their employer’s actions, resulting in an award of $16,000 for humiliation, loss of dignity, and injury to feelings, as well as three months’ lost wages.

Background of the Case

The employee was hired for a specialist role within the company. Just four months later, the employer issued a proposal to disestablish the role, citing insufficient billable hours and a lack of secured future work. While other roles within the team were deemed commercially viable, the employee’s position was targeted for redundancy.

The proposal was a complete surprise to the employee, who had not been informed that the viability of his role depended on meeting specific billing targets or securing future work. Although the employee provided feedback on the proposal, his role was ultimately disestablished. The employer also decided that the employee was unsuitable for any other roles within the company, without properly consulting him on redeployment options.

Findings of the ERA

The ERA found that the employer had failed in their good faith obligations in several key ways:

1. Lack of Transparency: The employer had hired the employee without sufficient client work to sustain the role and did not disclose that the position was contingent on achieving specific performance metrics.
2. Failure to Consult: The employer made a unilateral decision regarding the employee’s suitability for other roles, denying the employee a meaningful opportunity to comment on redeployment possibilities.
3. Poor Process: The redundancy process was not conducted in good faith, as required by law.

The ERA concluded that the employee had been unjustifiably dismissed.

Compensation Awarded

The employee was awarded:

• $16,000 for humiliation, loss of dignity, and emotional distress.
• Three months’ lost wages for the period following his dismissal.

Key Lessons for Employers

This case highlights the importance of:

• Clearly communicating role feasibility and performance expectations when hiring.
• Conducting redundancy processes in good faith, including transparent consultation and meaningful discussions about redeployment.
• Seeking professional legal advice to ensure compliance with employment law and avoid personal grievance claims.

Employers in Masterton, Wellington, and beyond should prioritise fairness and transparency in all employment matters. Trusted law firms offer fixed-price consultations to help businesses navigate these complex issues effectively.

Need guidance on the RMA changes or their implications? Contact Core Legal Wellington for expert advice tailored to your needs.