Care urged over technical redundancy | Stuff.co.nz

What does the term technical redundancy really mean and are the obligations arising in a technical redundancy any different from a conventional redundancy?

Technical redundancy refers to circumstances in which an employer will no longer be able to offer employment because of developments, such as the sale of the business.

Upon the settlement of a sale, the business is handed over to the purchaser and at that point the vendor/employer no longer has work to offer to the existing work force.

Those are the circumstances in which the employees are described as being "technically" redundant.

There are a number of well-established obligations on an employer contemplating any form of redundancy. These include consultation with potentially affected staff ahead of any decisions actually being made. That obligation is reinforced by the statutory obligations in section 4 of the Employment Relations Act 2000 which require both parties to an employment relationship to be responsive and communicative with each other.

In particular, an employer proposing to make a decision likely to have an adverse effect on the continuation of employment (such as a sale of the business) is obliged to give the employees access to information relevant to the continuation of their jobs and an opportunity to comment on the information before any decision is made. This obligation can create some difficulties for an employer/vendor contemplating sale of the business. First, the employer may not want to unsettle the work force by discussing a possible sale in case nothing actually eventuates. Most employers in those situations tend to think a discussion with the work force will only be necessary once a sale is actually negotiated and confirmed. Further, many purchasers in the negotiation of a prospective business purchase insist on negotiations remaining confidential. What then is the answer to the tension between commercial expectations and the communication obligations described?

A recent decision of the Employment Relations Authority clearly confirms the obligations on an employer when a technical redundancy arises are no different from those in any other circumstances. The authority determined that a business called JMV Agri Ltd unjustifiably dismissed an employee when negotiating the sale of the business and did not consult with him until advising that the business had been sold.

The authority accepted the sale was genuine and accordingly that the employee's redundancy was genuine.

However, the failure to observe procedural requirements rendered the dismissal unjustified.

There may well be some difficulties in balancing the obligations owed as an employer with the desire to achieve commercially realistic outcomes. Getting that balance wrong will have significant financial consequences.

Simon Menzies is a partner at Harkness Henry, Lawyers, Hamilton.

- ? Fairfax NZ News

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Source: http://www.stuff.co.nz/business/small-business/7876385/Care-urged-over-technical-redundancy

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