Restructuring and Redundancy in a Covid environment
In these uncertain times, redundancies and restructures are quickly becoming a reality for many businesses.
Without being alarmist, who would have imagined at the start of the year, the world we live in today?
Although Covid-19 has made huge disruptions to our workplaces, we still need to operate in good faith and follow a process. If you’re considering downsizing or redundancies, you will need real world statistics or evidence for doing so. Just claiming it is a result of the Covid-19 isn’t enough. You’ll need to prove you’ve sought government assistance and have financial evidence to justify your decision.
These are big decisions that impact people’s lives and livelihoods, so it’s important they’re handled properly and with sensitivity. Delivering the news about organisational restructures and redundancies is never easy!
More, now than ever, employees and their lawyers (or advocates) will be looking to attack your evidence or claim the restructuring or redundancy measures are not genuine and being done for other reasons.
It is best practice to have a documented proposal, which you can share with your employees outlining the relevant information. You will need to provide a valid reason for the proposed changes, again, simply stating Covid-19 is not enough. A significant downturn in sales/revenue, a loss of customers/suppliers, and/or a shift in market requirements, could amount to a genuine reason for restructuring or redundancies. However, it’s important to ensure that your business case and reasons are documented, with supporting evidence.
If you are considering restructuring or making someone redundant it is important to remember that the process is about the position and not the person. In regards to redundancy, you need to ensure that you have done everything possible to retain the person, considered alternative, and demonstrate that redundancy is the last resort.
After you have completed your proposal it is a good idea to look at any potentially affected employee’s current employment agreement. There may be a redundancy and restructuring clause in there that will outline the process you have agreed to and highlight what provisions they are entitled to, for example, notice period, payments, etc.
Once you are ready, you will need to meet with your employees to discuss and provide them with the proposal. Whilst we would ordinarily recommend consultation meetings with employees during the process, the reality is that such meetings may not be possible, particularly if employees are working from home or in isolation. Ultimately, you must be able to show that your actions were "what a fair and reasonable employer could have done in all the circumstances at the time" . In the current situation, this may mean:
communicating with employees via video conference, telephone, or in writing; and
if change is particularly urgent, working to shortened time-frames during the consultation process.
Consultation is now more important than ever. You still to be sure to provide a reasonable period of time, (however as indicated above this can be a truncated time-frame if the need for change is urgent), for your employee’s to consider the proposal, the impact of this for them, and to prepare the required feedback. There remains a heightened obligation to consult where employees are not present in the workplace and may not have the same information, or access to the same information as other employees. We encourage all employers to consider how provision of information may be compromised by annual leave / working from home / sick leave etc. in terms of consultation obligations.
It is important that you do not treat the proposal as a done deal, as you must genuinely consider the feedback they have provided and be responsive.
The biggest mistake we so often see, is a lack of process, or failing to refer to a written employment agreement which outlines how things should be done. As an employer, not getting the process right or terminating someone without any due process opens you up to an unjustified dismissal grievance from your former employee. You can also expect awards of $20,000 plus costs and legal expenses for both parties. Your final total you could face for an unjustified dismissal may be closer to $30,000. It’s better for you and your business if you avoid these fines by following the right process from the beginning. The Government has made it very clear that employment law rules and principles must be followed, even during Covid-19 and as a result of it.
Disclaimer This article, and any information contained on our website is necessarily brief and general in nature, and should not be substituted for professional advice. You should always seek professional advice before taking any action in relation to the matters addressed.