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Restructuring

Restructuring is the process an employer follows to reorganise how work is done in the workplace. This involves proposing changes to the organisational structure: positions may be changed, merged, or removed as a result of the process.

During a restructure, employers are required to comply with the duty of good faith and follow a process that is substantively and procedurally fair.

In practice, this means:

  • ensuring that you are restructuring for a genuine reason,
  • providing all relevant information about the proposal to affected employees,
  • giving affected employees an opportunity comment on the proposal and information,
  • considering any feedback on the proposal before deciding whether to proceed,
  • applying a fair process to select which employees are appointed to contested roles, and
  • consulting about redeployment opportunities with any employee whose employment is at risk of being terminated by reason of redundancy.

There are special rules that apply in situations involving the sale or transfer of part of the employer’s business to a new employer (this is sometimes called “technical redundancy”).

There are also protections for certain groups of vulnerable employees in situations involving “contracting in”, “contracting out” and “subsequent contracting”. These groups include cleaning, catering, caretaking, laundry, and security workers. In those situations, there are additional procedural steps which involve giving protected employees an opportunity to transfer to the new employer on the same terms and conditions of employment.

Step 1. Prepare the Proposal

The Proposal Document is a critical component of the restructuring process. A clear and well-considered business case can be the difference between a smooth process which employees accept as genuine and a difficult process which undermines morale and generates disputes.

The Proposal Document needs to:

  • explain the business case for the restructuring
    • common reasons include reducing costs, increasing efficiency, introducing new technology, responding to market changes, or aligning structure with strategy
    • the Proposal Document must include all relevant information about the proposal – this includes all the background information supporting the business case
  • explain the changes that you are proposing to make
    • it is helpful to include diagrams of the current structure and the proposed structure together with a written explanation of the differences between the structures
    • in particular, you need to highlight positions that are proposed to be disestablished or changed
  • an outline of proposed selection criteria for any roles that may be contested
    • the proposal should invite feedback on the proposed selection criteria
  • an outline of the consultation process
    • this will usually involve asking for written feedback and inviting employees to book a meeting with the decision maker if they would prefer to give verbal feedback
    • employees are entitled to bring a support person or representative to feedback meetings (and any other meeting about the restructure)
  • an outline of the timeline for the process
    • as a rule of thumb employees should have at least a calendar week to provide feedback on the proposal
    • each subsequent round of consultation (for example, about preliminary selection criteria results) should be at least two full working days
  • explain support available to affected employees (such as EAP)

We recommend that the proposal document is provided to each affected employee with an individualised letter that explains how the proposal would affect them if it is adopted.

Step 2. Present the Proposal

Employees should be invited to a meeting to discuss a proposal for workplace change. They should be given an opportunity to bring a support person or representative to that meeting.

If you have an on-site union, we suggest giving the union a ‘heads up’ about the process so that an organiser is available to support their members. This may be required by your collective agreement.

Depending on the number of employees affected by the restructure, you could meet with affected employees in one or more groups, or individually.

The key message at the meeting is that no decisions have been made about the proposal. The next step is consultation. All affected employees will have an opportunity to give feedback on the proposal and the enclosed information. You will consider their feedback before making a decision about whether to proceed with proposal.

Don’t forget to engage with any potentially affected employees who are on annual holidays, sick leave or ACC, and parental leave.

Step 3. Consult about the Proposal

Affected employees can submit written feedback or arrange a meeting to give verbal feedback. Some staff may be more comfortable submitting feedback as a group – that is OK.

If an employee asks for additional information in order to give feedback on the proposal, consider providing that information to all potentially affected employees.

Affected employees should be given reasonable time during work hours to prepare feedback or obtain independent advice, where that’s practical subject to operational requirements.   

Step 4. Decide whether to proceed with the Proposal

All feedback received needs to be genuinely considered with an open mind. We recommend preparing a table of all feedback received (grouped by themes if you have received the same feedback from multiple employees) and your response to that feedback.

The options are:

  • deciding to proceed with the proposal
  • deciding not to proceed with the proposal
  • deciding to consult again about an adjusted version of the proposal

The same assessment needs to be made regarding any feedback received on the proposed selection criteria.

As a rule of thumb you do not need to consult again if you make minor changes to the proposal or if you are changing the proposal in response to an employee’s feedback and the employee who gave the feedback is the only person affected by the change. If you are significantly adjusting the proposal in response to feedback received then a further period of consultation about the revised proposal is required.

Step 5. Apply Selection Criteria

The next step is selecting employees for roles in the new structure. This process may be affected by the requirements in your employment agreement.

In general:

  • start by reconfirming employees in positions where their roles have not been affected by the new structure
  • then offer reassignment to employees whose roles have changed or been disestablished but there is a substantially similar role available under the new structure
  • then offer redeployment to employees where there is a suitable redeployment opportunity available for them (this means a role which may be substantially different to their current role but which they have the skills and experience to perform with an allowance for reasonable retraining)

It is best practice to provide employees with a list of all vacant positions, an indication of which roles the employer believes are suitable reconfirmation/ reassignment/ redeployment opportunities for the employee, and an opportunity to express interest in any of the vacant roles.

If there is more than one employee who could be reconfirmed/reassigned/redeployed into a vacant position, then selection criteria will need to be used to determine which employees are appointed to the vacant roles.

The employer provides preliminary selection criteria results to affected employees, gives the employee an opportunity to comment on their preliminary selection criteria result, and then the employer considers that feedback and confirms the final selection criteria result. Employees are then notified about the outcome of the selection process.  

In general, redundancy clauses provide that any employee who is offered reconfirmation or reassignment to a substantially similar position and who rejects that offer is not entitled to redundancy compensation. In contract, an employee can generally reject an offer of redeployment and retain their contractual entitlement to redundancy compensation.

(As part of this process you may consider offering voluntary redundancy to affected employees. Some collective agreements require employers to offer voluntary redundancy. We recommend that employers retain the right to decline any expression of interest in voluntary redundancy.)

Step 6. Redeployment or Redundancy

For any employees who have not been appointed to a vacant role the final step is meeting with the employee to consult about whether there are any other suitable redeployment opportunities for them within the business. It is likely that the answer to that question will be no.

If no suitable redeployment opportunities can be found then the employer provides notice of the termination of the employee’s employment by reason of redundancy. The employee will receive their contractual notice period (which may be paid in lieu), their holiday pay on termination, and any other contractual entitlements such as redundancy compensation.  

How to Avoid Common Pitfalls

1. RTFA (Read the Freaking Agreement)

The employment agreement will often include a redundancy clause that sets out procedural steps that are required during a restructure.

A fair and reasonable employer is required to comply with their own contracts and policies, so it is important to check the employment agreement of each employee who could be affected by the restructure, and any relevant policies, to make sure no steps are missed.

2. Do the hard work at the start

The proposal document is a critical component of your restructuring process. It sets out the business case for the changes you are proposing, explains the proposed changes, and starts the consultation process.

Extra work on the proposal document often saves time and prevents disputes. We recommend including your proposed selection criteria and draft position descriptions for any new positions in the proposal document. This means you can consult about those elements of the restructure at the same time as your consultation about the substantive changes.   

3. Put your cards on the table

The duty of good faith requires employers who are proposing to make a decision that could affect an employee’s ongoing employment to give affected employee all information relevant to the decision and an opportunity to comment on that information.

The relevant information will include the data and context supporting your business case, and anything else that you will consider when deciding whether to proceed with the restructure. This all needs to be provided with the proposal document.

If the relevant information is confidential or commercially sensitive, there are options for making the information available in a way that preserves confidentiality.

4. Choose your words carefully

Avoid using language that indicates that you have already decided about whether to proceed with the proposed restructure. A perfect proposal document can be undermined by other correspondence that suggests that a decision has already been made or that you are approaching the consultation process with a closed mind.

Some phrases that we like to use include “if the proposal is adopted”, “subject to consultation”, and, “to avoid doubt we have not made any decision about whether to proceed with the proposal.” 

5. Give feedback on the feedback

When an employee challenges a redundancy process, they often argue that the consultation process was a sham. This complaint (and the challenge itself) often comes from a genuine feeling that their feedback was ignored.

To avoid this, we suggest including a summary of the feedback you received about the proposal (grouped into topics or themes), and your responses to that feedback, in your decision letter. This helps affected employees understand how you reached your decision and demonstrates that you’ve taken their feedback into account.

Depending on the amount of feedback you receive this could be a few paragraphs, or a separate table attached to the letter as an appendix.

6. Use objective non-discriminatory selection criteria

The selection criteria should be as objectively measurable as possible. The selection criteria should be given an appropriate scale (for example, 0 – 3 marks) and weighting (generally equally weighted).

The selection criteria should not directly discriminate (for example, using employees’ visa status) or indirectly discriminate (for example, including selection criteria based on use of sick leave could indirectly discriminated based on disability or family status).

Employees need to be given a preliminary selection criteria score and an opportunity to comment on that preliminary score before it is finalised.

7. Consult about redeployment opportunities

This is an area of employment law where the goal posts have recently moved. Recent decisions from the Employment Court require employers to consult with employees who are at risk of redundancy about whether there are any suitable redeployment opportunities for them.

In general, a vacant position is a suitable redeployment opportunity if the employee has the skills and experience to perform the role with a reasonable amount of retraining.

If a vacant position is a suitable redeployment opportunity for an employee whose position has been disestablished, then the employer is required to offer it to that employee. (This means the employer cannot “test the market” for that position.)

We recommend that the final step of the redundancy process be consultation about whether there are any suitable redeployment opportunities available for them.      

Want to find out more about restructuring? Get in touch with us.

Sean Maskill
PARTNER

+64 6 759 5317
+64 27 555 1697
sean.maskill@abmm.co.nz

Philip McCarthy
PARTNER

+64 6 759 5322
+64 27 914 6796
philip.mccarthy@abmm.co.nz

Kayleigh Duncan
LAW CLERK

+64 6 759 5310
kayleigh.duncan@abmm.co.nz

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