New Zealand: Redundancy – Getting It Right

Last Updated: 5 December 2006
Article by Erin Davies

In the past six months the Employment Relations Authority and the Employment Court have issued several decisions about redundancy. The prevalence of redundancy cases serve as a timely reminder that a redundancy must be justified and carried out in a procedurally fair manner. The following are recent redundancy cases that emphasise these requirements.

Mcguire V Rubber Flooring (NZ) Limited

The employee in this case began working for the family-owned business as sales and marketing consultant. After the resignation of a full-time manager and during the period of the managing director’s terminal illness, the employee’s management role increased by default. Following the managing director’s death, his son and wife took active management roles in the company. A proposal was made to restructure which would mean the loss of the employee’s job and a number of meetings were held culminating in the employee’s position being made redundant. The employee alleged she had been demoted from her position as manager and later dismissed on the purported grounds of redundancy which were not genuine. She also argued that even if the restructuring was genuine, it was not carried out in good faith and was procedurally unfair.

The Court held that the employee’s redundancy was genuine as the company was in a ‘parlous financial situation’ and it was commercially realistic to make employees redundant. However, it held that the consultation process was misleading and deceptive and had not been undertaken in good faith as its decision to restructure was made some months before consulting the employee. The Court said that a just employer, subject to the mutual obligations of confidence, trust and fair dealing, would implement the redundancy decisions in a fair and sensitive way. The employee was awarded $7,500 compensation for hurt and humiliation.

Westpac Banking Corporation V Smythe

In this case, the Court was required to consider whether the employee’s former role (electronic banking consultant) was "substantially similar" to a newly created position (transactional relationship consultant). The employee believed the levels of responsibilities, skills and competencies in the new role were not broadly comparable to her old role, which had been disestablished. As a result she was not willing to accept the new role and sought redundancy compensation. Her individual employment agreement provided that no redundancy compensation was payable if she declined an offer of a "substantially similar position", which included "comparable remuneration".

In determining whether the two positions were "substantially similar" the Court considered salary mid-point for the new position and found that it was 23% higher than the employee’s old position. As the two remuneration figures were not "comparable" in terms of the individual employment agreement, the Court held that they were not substantially similar. The Court found that the employer's failure to engage the employee in discussion concerning their differing views on comparability of the new job offered to her, breached its duty of fair treatment. The employee was awarded $6,000 compensation for hurt and humiliation.

Substantive Justification

An employer must be able to demonstrate that an employee’s position is genuinely surplus to its requirements. The Court of Appeal has confirmed that an employee does not have a permanent right to retain his or her job if the employer determines that the business can be run more efficiently without the employee (G N Hale & Son Limited v Wellington, etc, Caretakers, etc IUOW). However, the employee’s position needs to be genuinely surplus to the employer’s commercial operations (i.e. not a performance-based dismissal in disguise).

Procedural Fairness

The Employment Relations Act imposes a duty on parties to an employment relationship to deal with each other in good faith. This duty specifically applies when making employees redundant. Procedural fairness in respect of implementing a redundancy generally involves;

  • Consultation – Consultation prior to any decision to disestablish a position or to make an employee redundant will be necessary in most cases.
  • Consideration of alternatives – Once a final structure is determined and an employee’s position is to be disestablished, employers should then look at all practicable alternatives to dismissal, such as a transfer, redeployment or retraining.
  • Fair Selection Process – Where there are a number of employees who could be made redundant, the selection process to choose between them must be fair. Employees should be informed of the selection criteria and be given the opportunity to contest or discuss those criteria. The criteria should be objectively measurably.
  • Informing the Employee – Where possible, an employee who is to be made redundant should be informed of that outcome face to face.
  • Notice and Redundancy Compensation – Where the employment agreement imposes a notice period and redundancy compensation, these must be applied. Where the agreement does not contain a notice period, reasonable notice must be given based on the circumstances.
  • Representation – Throughout this process, the employee/s should be advised of the right to seek professional advice or representation.

The Courts have held that once guidelines have been set by a company as to the way in which it will conduct a restructuring, then the company should try and ensure that it sticks to its set guidelines. A dismissal for redundancy may be unjustified if an employer does not follow its own policies, particularly when these have been followed on earlier occasions.

Implications For Employers – Remedies

Where an employee’s redundancy is held to be unjustified there are several remedies available, including reinstatement, reimbursement of lost wages and benefits and compensation for hurt and humiliation. Where an employer fails to prove a redundancy was made for genuine reasons and that it was carried out in a procedurally fair manner, then it runs the risk of the employee being awarded any or all of these remedies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions