9.05.2018

Must an employer offer redeployment to employees who would otherwise be redundant?

The answer is not so straightforward

The answer is not so straightforward; there are contrasting views in two Court of Appeal cases on this point, and the Employment Court has plotted its own course in recent times.

The general position is that decisions of higher courts, such as the Court of Appeal, are both binding on lower courts (including the Employment Court and Employment Relations Authority), and are persuasive when the higher court is again considering the same matter.

But, as the reader will see from the cases below, this has not happened in the area of redundancy and redeployment.

1998 – Court of Appeal: Yes, the employer must offer redeployment (unless not feasible)

McKechnie Pacific (New Zealand) Ltd v Clemow (“McKechnie”) was a case that came before the Court of Appeal regarding a long-standing employee, Mr Clemow, who had been abruptly dismissed for redundancy.

The employer decided it did not have enough work to justify having a company secretary in New Zealand – the position Mr Clemow occupied – and, on the morning following that decision (made without consultation), Mr Clemow was given a letter advising his position would become redundant, with six months’ notice “to give you time to seek an alternative position whilst you are employed”.

Redeployment was not offered.

On appeal, the Court of Appeal found that the dismissal on grounds of redundancy was substantively justified, because the evidence suggested that redeployment was simply not feasible. However, the Court of Appeal did note that:

“In circumstances in which there was no longer any requirement for a full-time company secretary, a fair employer should have given consideration to redeployment. …If in fact another position existed within the McKechnie group in New Zealand which was suitable for Mr Clemow it could not be said that he was surplus to requirements, so that there would not be a situation of redundancy.”

2000 – Court of Appeal: No, the employer does not have to offer redeployment

In New Zealand Fasteners Stainless Ltd v Thwaites (“Thwaites”), the Court of Appeal disapproved the approach in McKechnie.

Mr Thwaites was employed as a finance manager. The employer decided that the finance manager position was redundant, and that a new full-time position at a lower level – financial accountant – would be created. Mr Thwaites was informed his position was redundant, and was not advised of the new financial accountant position (which in evidence he said he would have accepted had it been offered to him).

The Employment Court followed McKechnie and found that the dismissal was unjustified because the lower level financial accountant position was suitable for Mr Thwaites and should have been offered to him.

In a somewhat contradictory reasoning the Court of Appeal first commented that if termination by redundancy might have been avoided by redeployment or otherwise, it may indicate a lack of genuineness. However the Court of Appeal found that, in the absence of a contractual provision, it could not constitute unjustified dismissal to not offer the employee redeployment to a different position. In particular, the Court found the relationship between employer and employee applies in respect of the position and work the employee is contracted to provide. That may be varied consensually in the course of the relationship but it does not extend to any other position a Court might subsequently determine would be suitable to the employee.

2010 – Employment Court: Yes, the employer must offer redeployment

In Jinkinson v Oceana Gold (NZ) Ltd (“Jinkinson”), the Employment Court deftly distinguished and declined to follow the Court of Appeal’s approach in Thwaites (by finding that, with the passage of the Employment Relations Act 2000, the law had changed since Thwaites). The Employment Court focused on the objective review requirements of the Court within the test for justification in s103A, and the good faith obligation on the employer to its existing employees in s4 of the Employment Relations Act.

The employer, Oceana Gold, operated a gold mine in Otago. It had various field staff positions, including two particular roles – grade controllers and ore spotters. It instituted a restructure whereby seven occupied positions (four grade controllers and three ore spotters) would be disestablished, and six new mine technician positions created. Along with other affected staff, Ms Jinkinson, a grade controller, sought appointment to one of the new mine technician positions. She was unsuccessful, and raised a personal grievance.

In the course of the hearing, the employer accepted under cross-examination that Ms Jinkinson had all the practical skills necessary for redeployment to the mine technician position, and the only reason she was not appointed was the employer’s perception that she lacked the necessary team work skills. The Court found this perception was unreasonable, and, accordingly, the decision not to redeploy her into that role was unsustainable.

2013 – Employment Court: Yes, the employer must offer redeployment (if the employee has the skills and experience for the role)

The recent case of Rittson-Thomas t/a Totara Hills Farm v Davidson (“Totara Hills”) highlighted the question of redeployment again.

Mr Davidson was employed as one of two unit managers on a farm. The farm also employed a shepherd. Mr Davidson’s position was disestablished and his employer said he was entitled to apply for the junior shepherd position that was being created in place of the unit manager position.

The Court found that it was not enough for the employer to simply offer Mr Davidson an opportunity to apply for the new position of junior shepherd. The position should have been offered to him, as he clearly had the skills and experience for it.

In our view

The most recent Court of Appeal decision on this topic, Thwaites, was decided under the Employment Contracts Act 1991, and found that an employer did not need to offer redeployment. Since then, the Employment Relations Act 2000 (“Act”) has been passed, and amendments to the Act in 2004 and 2010 have changed the legal landscape. In particular, a statutory duty of good faith had now been enacted along with the s103A test for justification of what the fair and reasonable employer could have done in all the circumstances.

As the good faith obligation is to its existing employees, these cases seriously throw into question the practice of going “to Market” when an employer has positions available that an employee has suitable qualifications, skills and experience for or can gain those through training (covered in other cases).

It may no longer be open for an employer to find the ‘best’ candidate. These cases indicate a preference of employment for existing employees. In today’s legal setting, there may be an obligation on the employer to offer an employee an alternative position from the one he or she was engaged to perform, bearing in mind that redundancy is a ‘no fault’ dismissal. We note that an invitation to an employee to apply for an alternative position is not the same as actually offering the employee the alternative position.

Quite aside from any contractual or policy obligations which may have a bearing on redeployment, the parties are required to engage in a meaningful way about reasonable alternatives to dismissal. The good faith obligation to be active, constructive, responsive and communicative could lead to the redeployment of an employee to a position. If the employee has the required skills and experience to perform the alternative role it is likely to be a reasonable alternative to redundancy and should therefore be offered to the employee. However, redeployment to a position requiring a significant amount of retraining, or requiring skills and experience the employee does not have, is unlikely to be a reasonable alternative and the employer may not be obliged to offer the position to the employee.

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Kerry
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