Steel yourself for a restructure

New Zealand Steel Limited went to bat in the Employment Court in an attempt to overturn an Employment Relations Authority (Authority) determination that it had unjustifiably dismissed Mr Haddad in a redundancy process. The Employment Court dismissed the challenge. Mr Haddad maintained his reinstatement to the role of Project Manager in Engineering Services, his compensation for lost earnings was increased to a period of 14 months and his compensation was increased to $25,000.

So, what went wrong? A quick rundown of the facts:

  • Mr Haddad worked as a Process Computing Manager and was with the company for seven years.
  • The company put together a two-phase restructure:
    • phase one to establish a ‘target state’ for the Information Services Team by shuffling reporting lines and creating three new roles: Business Engagement Manager, Legacy Platform Support Manager and Platform Integration Manager.
    • phase two to reconfigure and align the Process Computing team with this new target state by shifting its engineers and developers to other teams and disestablishing the Process Computing Manager role.
  • Mr Haddad was not consulted in relation to phase one and was advised this restructure was ‘out of scope’ in relation to the Process Computing team.
  • During phase two, NZ Steel discussed with the Process Computing team where the various engineers and developers should be shifted, but Mr Haddad was not informed about these discussions, nor was he made aware of the contents of those discussions. Mr Haddad was only made aware that there was a proposal to disestablish his role and he expressed clearly his wish to be redeployed. He advised his interest in the Legacy Platform Support Manager role, as well as two Project Manager roles and any other opportunities which might suit him.
  • Mr Haddad was not kept in the loop or offered a chance to interview for either Project Manager role despite him following up in relation to the roles several times. In internal communications, the manager who led the appointment process was dismissive towards Mr Haddad’s application, referring to it as “saving his bacon”.
  • On 24 October 2019 Mr Haddad received confirmation that his role would be disestablished. He then wrote a cover letter to urgently apply for the three newly established managerial roles.
  • NZ Steel set up interviews for Mr Haddad, but Mr Haddad felt that he was entitled to automatic redeployment as the roles were very similar to his previous role. He was humiliated by the requirement to interview, given the company could assess his suitability from his achievements over the past seven years instead. He therefore chose to not attend the interviews.
  • On 9 December 2019 the company terminated Mr Haddad’s employment due to exhaustion of options for redeployment.

The case provides a useful ‘lessons learnt’ summary of classic missteps employers should take note to avoid, as well as tips for employees in handling a restructure/redundancy that comes their way.

Employers should:

  • Consult early and transparently on restructuring – better to be safe than sorry if a reshuffle may mean other employees not ‘within the scope’ of an initial restructure will likely be impacted down the track. The Employment Court noted that, given the aim of NZ Steel’s restructure was to optimise the Information Services department structure, the outcome to Mr Haddad’s position became “inevitable” once phase one concluded. Mr Haddad should therefore have been consulted from the get-go, and the failure to do so meant the decision was predetermined.
  • Ensure any internal management communications is not inconsistent with their open approach, as “behind the scenes comms” may in fact be disclosable (as was the case here). The Court considered the “saving his bacon” comment to be particularly enlightening, as well as senior management discussions leading up to the phase two restructure.
  • Engage actively and constructively in relation to redeployment. Employers are obliged to work to maintain employment relationships where possible and where there are several candidates lined up for one role, each candidate needs to be assessed fairly and reasonably. That other roles are ‘up for grabs’ does not detract from this duty.

Employees should:

  • Press forward with any redeployment opportunities offered to them, even if they are understandably frustrated by requirements to interview. The Employment Court considered Mr Haddad’s refusal to attend the interviews “understandable but unwise”, noting such a decision is a “high risk strategy” and as an alternative, the employee should consider “recording their concerns and then attending on a without prejudice basis. In that way… the employer can be put to the test”.

Generally, it should be noted that:

  • ACC payments are taken into account in lost wages awards (i.e. ACC payments are deducted from any lost wages awards) where an employee has been told by ACC that they will not need to repay them.
  • Contractual redundancy compensation will need to be repaid to the employer when an employee is reinstated to their position (if the reinstatement is backdated to the dismissal).

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