REDUNDANCY IN THE CONTEXT OF COVID-19

Posted by Kalev Crossland on May 25 2020 in News

As the world is slowly coming out of lockdown after the Covid-19 pandemic, employers are now able to assess the impact. Many employers need to consider options for ensuring business sustainability including making a role or roles redundant.

Employers’ obligations are unaffected by Covid-19. Thus, the existing principles of fair process and good faith obligations contained in the Employment Relations Act 2000 continue to apply. Further, there are additional things employers must consider before making a role redundant.

The first thing employers must know…

is that there is a contractual obligation that applies to employers who have applied for the Wage Subsidy. This obligation requires employers to either retain (if applied after 26 March 2020) or use their best endeavours to retain (if applied for before 26 March 2020) their employees who are receiving the Wage Subsidy, for the 12-week period of the subsidy. If the effect of redundancy would be to terminate an employee’s employment before the expiry of the 12-week period, it may amount to a breach of the employer’s good faith obligations. In this scenario, those employers will also need to repay the Government any balance of the Wage Subsidy that remains after the employee’s notice period has been paid.

The second thing to remember…

is that employers cannot use Covid-19 to justify termination of the employment of an employee whose performance is poor. It is necessary for employers to identify reasons for targeting specific roles within their business and set up an objective and transparent selection process for roles that are to remain.

Further, before deciding on redundancies, employers must consider other options. This includes converting full-time positions to part-time positions or implementing wage cuts across the board. Employers must also consider the option of utilising any schemes that are currently being provided by the Government, including the Wage Subsidy and Small Business Cashflow Scheme (SBCS).

Thirdly, if an employer has…

an employee who is currently on parental leave or has recently returned from parental leave, the employer needs to remember that they have an enhanced requirement to keep that employee’s position open. Alternatively, the employer must consider the option of that returning employee filling any vacant position which is substantially similar to the position held by the employee at the beginning of the employee’s parental leave.

To comply with this higher threshold, employers who are thinking of making such returning employee/s redundant must take extra precautions to ensure that the returning employee is actively and meaningfully involved in the consultation process in the same way as the other employees.

If you would like more information regarding the above, or have any questions, please contact us.

Kalev Crossland | Partner
t +64 9 300 8755 | Kalev.Crossland@shieffangland.co.nz

Tony Sung | Solicitor
t +64 9 379 0655 | Tony.Sung@shieffangland.co.nz

Dew James | Solicitor
t +64 9 300 0655 | Dew.James@shieffangland.co.nz