Restructuring steps including selection process

During the first part of 2025 I provided many clients with assistance to restructure.

While most businesses understand they need substantive justification for the changes they are proposing and then must follow a procedurally fair process, many are not as familiar with the requirement to consult over selection criteria.

Where a business has a pool of employees employed in the same or similar positions, and that are consulting over a proposal to reduce the number of those roles, employers must also consult with the affected employees over the selection criteria and process that will be used to appoint individuals to the remaining positions.

The following recent Employment Relations Authority case is a timely reminder of this requirement:

Berridge v Triple S Management Ltd [[2024] NZERA 774; 23/12/24; A Gane]

Employer deemed to have missed restructuring steps including selection process

Triple S Management (Triple S) was a management company established to facilitate administrative functions across three companies, one of which was Strata Networks. Mr Berridge was employed as a service desk technician by Triple S in January 2019. His primary role was to support Strata Networks. He subsequently raised a personal grievance for an unjustified dismissal, arising from a flawed restructuring process.

In 2019, Strata Networks suffered a significant financial impact when income from its primary client substantially decreased. To ensure Strata Networks remained financially sustainable, Mr Cameron and Mr Comer, directors of both Triple S and Strata Networks, discussed restructuring the subsidiary companies. They decided the best approach was to start “at the bottom” and to balance saving money with retaining skills.

In August 2019, Mr Berridge was called into a meeting with Mr Comer without any forewarning to discuss proposed redundancies at Strata Networks. Mr Berridge was upset and left the meeting after a few minutes. Mr Comer still delivered a letter setting out that his role was to be made redundant. The letter also invited Mr Berridge to a meeting to discuss the proposal and included limited financial information about the reduction in monthly revenue.

At the meeting, Mr Comer stated that he had already informed Mr Berridge of the business reasons for the proposal and that the company was considering making his role redundant to reduce costs. He also said Triple S had considered other options as alternatives to redundancy but decided not to go with them, and asked Mr Berridge for ideas.

Mr Berridge was given one week to review the proposal and provide feedback, and Triple S took another week to consider the feedback. Mr Berridge was then dismissed by way of redundancy.

The Employment Relations Authority (the Authority) accepted Strata Networks had genuine business reasons for its restructure, but found its process was not procedurally justified. Under the Employment Relations Act 2000 (the Act), employers must provide employees with adequate information during a restructure, and a genuine opportunity to comment on said information.

First, the proposal letter from Triple S contained minimal financial information. Mr Berridge was not provided the relevant information he needed to provide meaningful feedback on cost-saving options.

Second, Mr Berridge was one of two service desk technicians who worked for Strata Networks. However, he was the only one given a redundancy proposal letter. As the roles were being reduced, Triple S should have carried out a selection process with the two technicians and consulted with them about the selection criteria.

Triple S also failed to genuinely consider alternatives to redundancy. It did not propose any redeployment options to Mr Berridge, instead putting the onus on him to suggest redeployment options.

The Authority held that the restructure process was procedurally flawed, and that Triple S had not acted as a fair and reasonable employer. Therefore, Mr Berridge succeeded in establishing a personal grievance for unjustified dismissal.

The Authority deemed that reimbursement for one months’ wages of $4,166 was reasonable. The dismissal also caused Mr Berridge significant stress, hurt his feelings and damaged his confidence. Triple S was therefore also required to pay him $15,000 as compensation for hurt and humiliation. Costs were reserved.

 

If your organisation is looking to undertake restructuring that will reduce the number of same or similar positions feel free to contact me for information on how to consult over an appropriate selection process.