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Employees given more scope to challenge redundancies

2 October 2015


A recent determination by the Employment Relations Authority has widened the avenues for which an employee may challenge a redundancy.

The authority has scrutinised how an employee was selected for redundancy, after a contestable process, and held that the selection of that employee was not reasonable.

This determination has come in the wake of Grace Team Accounting v Brake.

Human resources professionals will no doubt be familiar with the Court of Appeal case Grace Team Accounting v Brake. The case is significant due to its departure from the dominant principle that the court would not substitute its business judgment for the employer’s.

The court held that although the decision for redundancy was genuinely reached by the employer, if that decision was made based on mistaken arithmetic (or logic), then it was not a decision that a fair and reasonable employer could make.

Recent Authority decision Gibbs v The Vice-Chancellor of Lincoln University has applied the logic in Brake to the selection of an employee for redundancy.

Steven Gibbs was employed from 2006 as a senior lecturer in the Faculty of Agriculture and Life Science (AGLS) at Lincoln University.

In March 2014, following consultation, the University decided to reform its courses. As part of this reform, one full time position would be disestablished and two new positions created.

The university engaged in a selection process to determine which of three staff would occupy the two new positions. After conducting the selection process, the University decided that Dr Gibb’s employment would be terminated after he narrowly lost by having the lowest score.

The authority held that while the need for restructure and selection criteria were fair and reasonable, the university’s assessment of applicants against these criteria was not. The university was not even-handed in its scoring. Because Gibbs was a senior lecturer, the university assessed Gibbs to a higher standard than another applicant Dr B, who was a lecturer.

For instance, in relation to the supervision of post-graduates, the authority observed Dr Gibbs was the only applicant who was directly responsible for students with PhDs, and funded these students through his own research funding. The authority noted those students were all now gainfully employed in scientific fields.

On the other hand, Dr B had only co-supervised PhD students, all of whom were yet to finish their PhDs. Despite this, Dr B scored higher than Dr Gibbs. The authority found there was no evidence to support this evaluation.

The authority held that while a fair and reasonable employer could take steps to minimise one applicant’s disadvantage (in this case Dr B), “Care has to be taken not to in trying to level the playing field  tilt it in favour of one applicant in the process [sic]”.

The authority was also critical of other aspects of the university’s scoring. The authority found Dr B’s score had increased twice on the basis of additional student teacher evaluations which were provided. Dr Gibbs also provided additional teacher evaluations, but his score did not increase. The authority held there was no “objective basis” for the increase in Dr B’s score.

Similar increases to Dr B’s score occurred for other criteria, and the authority noted there was no separate record of the panel’s discussions for these increases, or that the reasons for the increases were “objectively unclear”.

The authority found that, objectively assessed, the scoring was an unfair process and not what a fair and reasonable employer could have done in the circumstances. The authority overturned the university’s decision and imposed its own: Dr Gibbs was awarded reinstatement, compensation of $10,000 and lost wages.

To protect against this risk, employers engaging in a restructure process can take two important lessons from this case. 

First, employers should endeavour to moderate and compare the individual scoring to ensure that one applicant has not been unreasonably favoured. 

Secondly, where employers are scoring, or reviewing scores, they should provide evidence and record their discussions to show they have a reasonable basis for their decision.

This may be particularly important where similar situations exist for employees, but one employee is treated more favourably than the other.

But the biggest warning employers should take from this new line of cases is that the authority is more inclined to review restructures and impose its own decision if it considers the reasons for the restructure are not genuine or that the process followed is unfair.

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

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