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Wrestling with angels and redundancy

3 March 2015

The moral issues that the Pope was recently wrestling with in Rome are the very same ones that our courts have wrestled with in New Zealand.

Pope Francis recently declared at his morning mass at St Martha's House that paying employees off the books is a very serious sin. The Pope said Christians must live their love for God and their neighbour coherently.

He also warned against the kind of attitude that sees people sending cheques to church but behaving unfairly to their children, grandparents or their employees.

Pope Francis has of course shifted people around and changed their responsibilities within the Vatican. But he is really saying that making an employee redundant with no new role is wrong.

Redundancy or restructuring is often used by employers to remove surplus or inefficient employees. This often involves money exchanging hands. Many do not end up with ongoing work.

Perhaps the most celebrated case of redundancy in recent employment history is the Hale case.

Former Employment Court chief justice Tom Goddard said employees could not be made redundant unless the company would otherwise go to the wall.

The employer appealed.

The Court of Appeal said something quite different. Its view was that if a business could be run more efficiently without a particular position, then it was entitled to disestablish it.

The Court of Appeal made it plain that it would not critically examine the logic behind the employer disestablishing a role. If the reason behind the redundancy was genuine, that was all that really mattered. Of course a fair process and consultation ought to precede any decision, but the outcome nevertheless was that the position could go.

Some more recent decisions of our Employment Court which have been upheld by the Court of Appeal have shifted the centre of gravity back towards the position of former Chief Judge Goddard, and indeed the Pope.

In the case between Grace Team Accounting and employee Judith Brake, the Employment Court found that the decision to make Brake's position redundant was based upon mistaken arithmetic. The Court of Appeal held that Brake's redundancy amounted to an unjustified dismissal.

In addition to the court carefully scrutinising the employer's case as to whether they need to remove a position, employers must also consider whether there are alternatives to removing the employee as well. Particularly they must consider whether that employee can be redeployed.

In the case of Neil Wang and his employer the Hamilton Multicultural Services Trust, the trust encouraged Wang to apply for another role within the organisation. However, the Employment Court said the trust should have considered whether they should have simply offered Wang the position without having to go through an application process. The court found that even though the other role was not the same, it required the same skills and minimal retraining and so the trust should have simply given Wang the role.

You can see that there is a greater emphasis now on carefully checking the business case and logic of restructuring and better protecting employee rights.

It may well be that the moral theology enunciated by the Pope and civil law in New Zealand set different standards. However there is clearly a human dimension that both Francis and our courts have wrestled with. On the one hand, employers have a right to run their businesses more efficiently. The risk and investment is theirs and if they can increase profit by restructuring then why shouldn't they? On the other hand, employees depend on their work for their livelihood and an outcome that sees them without any work should be a last resort.

Cullen - The Employment Law Firm was one of the first eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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