Redundancy – Don’t Jump the Gun!

The Employment Relations Authority’s recent decision in Buckingham v St John (“Buckingham”) serves as reminder for employers to ensure their redundancy policies and procedures are sound.

What started with some “minor procedural inadequacies” on behalf of employer St John led to an unfortunate misunderstanding with employee, Ms Buckingham, regarding the redundancy package set out in her employment agreement.

Background

Ms Buckingham had nearly 20 years of service at St John and was employed as a Territory Manager. In July 2021, St John issued a document to staff proposing that the Territory Manager role was to be disestablished and advised a consultation process had begun. Staff were informed that following the proposed disestablishment of Territory Manager, several other roles would be created.

Following the consultation period, St John issued its final decision and confirmed the Territorial Manager positions were to be disestablished in February 2022 and replaced by the roles proposed. Given the disestablishment was not to take place for several months, St John advised staff there would be an assessment process for those applying for a new role. First consideration for the newly established roles was to be given to those affected by the restructure.

In September 2021, shortly after St John’s final decision had been released, Ms Buckingham wrote to St John that she did not consider the newly established roles to be ‘substantially similar’ to her role of Territory Manager. She believed she was therefore entitled to redundancy compensation in accordance with her individual employment agreement and proposed she give her one month’s contractual notice, ultimately ending her employment by way of redundancy.

During this time, Ms Buckingham had found a new role with a new employer and was set to start in November 2021.

St John disputed that the newly established roles were not ‘substantially similar’ to her present role and advised her that St John did not support her request to be made redundant. It was reiterated there was a recruitment/redeployment process to be followed and the Territorial Manager role was not to be disestablished until February 2022.

Ms Buckingham proceeded to terminate her employment in October 2021 and raised a personal grievance claiming St John had committed a breach of good faith in its dealings and had constructively dismissed her. She sought payment of redundancy compensation, amounting to 26 weeks salary.

Outcome

The Authority found that whilst there were some minor procedural inadequacies on St John’s behalf in providing information to employees in a timely manner, there was no unjustified disadvantage caused by St John’s actions. Ms Buckingham had accepted a new role with a new employer and chose to terminate her employment with St John.

The key factor here is that Ms Buckingham initiated the termination of her employment, not St John. Redundancy applies when an employee’s role is terminated by an employer and not through the course of conduct of an employee. St John had not made Ms Buckingham redundant and she was therefore not entitled to any redundancy compensation.

Conclusion

This case serves as a reminder for employers to ensure communication with employees is always clear and concise. Any information surrounding redundancy should be given in a timely manner to avoid any misunderstanding.

Taking time to develop a robust proposal, consulting in good faith and having a genuine redeployment and selection process is vital to justify a redundancy. Proposing a redundancy does not give employees an opportunity to jump the gun and claim any redundancy package that may be available to them. Redundancy is ultimately a decision for the employer to make and not something an employee can just opt into or speed up. There is an important process for employers to follow and it is crucial that they do so.

With a recession looming, redundancies are inevitable. If you require guidance or advice regarding the redundancy process, contact Jaesen or Caylee.

Buckingham v The Hospital of St John of Jerusalem [2023] NZERA 39