Employee redundancy during the COVID-19 lockdown

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For many New Zealand businesses, the Level 4 lockdown restrictions imposed to limit the spread of COVID-19 have been a major blow. Hospitality and tourism businesses, along with many other non-essential businesses that have been forced to close, will right now be looking for ways to reduce costs in order to stay afloat during the lockdown period.

For a struggling business, reducing staff numbers may look like a sensible way to reduce outgoings during this time. But if you’re a business owner thinking about making employees redundant over the lockdown, you need to be careful. There are strict requirements and a process that must be followed to lawfully end employment, and getting it wrong could be costly.

For employees, it pays to understand the requirements and the process for making staff redundant too. If your employer doesn’t follow these, you may have grounds to take action for unfair dismissal.

Redundancy requirements – in a nutshell

To lawfully end employment, there needs to be a good reason, and the dismissal needs to be carried out via a fair process.

Is there a good reason to end employment?

To let a staff member go lawfully, the employer must first have a good reason for ending employment. Redundancy is a good reason for ending employment, but be aware of the definition of redundancy.

Redundancy is the situation where a position is superfluous to the needs of the employer. It is concerned with a position as opposed to a person. The position must not be needed any more, so you can’t make an employee redundant because someone else can do their job, because that would mean the position still exists.

Remember – the government’s wage subsidy is available to all employers to help them avoid having to make staff redundant over the lockdown. Employers are expected to top up the wage subsidy to 80% of the employee’s normal wage, or more if you can, but at the very least to pass on the entire subsidy to the employee, and keep them employed for the full 12 weeks the subsidy covers.

But it’s also important to note that any changes to an employee’s wage – including reducing it to 80% over the lockdown period – represent a change to the employment contract, and must be agreed with the employee in writing. An employment lawyer can help with this, to make sure it’s done correctly.

The process of making staff redundant needs to be fair

If there is no other option but to make staff redundant during the lockdown, the process must still be fair to be lawful. In order for the process to be fair, there needs to be genuine consultation between the employer and their employee.

The requirements and steps to be taken to make employees redundant are fairly prescriptive, and missing a requirement could mean that the dismissal is unjustified. This gives the employee recourse for action, and could end up costing the employer more in the long run.

If your business is thinking about making staff redundant to survive through the COVID-19 lockdown period, make sure you talk to an employment lawyer first. At Henderson Reeves, we have experienced employment lawyers waiting to help, to ensure the correct process is followed, and keep you on the right side of the law.

If you’re an employee who has been made redundant, and you feel that this was unfair, you can talk to us now for expert guidance. If your employer has breached your employment contract, or not followed the correct process, it may be that you can raise a personal grievance for unjustified dismissal, and you may be entitled to legal remedies for that.

Ring us at Henderson Reeves on 09 430 4350 or email reception@hendersonreeves.co.nz.

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