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NZ Steel learns how not to do redundancy and redeployment

20 Apr 2023

| Author: Nadia Sussman

Merits review of redeployment decision upon redundancy – appeal from Employment Relations Authority – Employment Relations Act 2000, ss 4 and 103A – Jinkinson applied – Thwaites distinguished – employment contract secondary to good faith obligation –

New Zealand Steel Ltd v Haddad [2023] NZEmpC 57 (Judge Kathryn Beck)

Please note: This decision refers to New Zealand Fasteners Stainless Ltd v Thwaites [2000] 2 NZLR 565 (CA) and Jinkinson v Oceana Gold (NZ) Ltd (No 2) [2010] NZEmpC 102.

NZ Steel Ltd’s 2019 restructure disestablished the process computing manager role held by Ra’ed Haddad. Upon notice, Haddad applied for all three of the new managerial roles in Information Services.  He also expressed interest in roles outside IS. The terms of Haddad’s employment agreement (IEA) required NZ Steel to “consider redeployment” as the “first option” in a redundancy situation.

Haddad declined invitations to interview for the new IS roles.  After seven-and-a-half years in a managerial position with NZ Steel, it was apparent to him that interviewing would be futile and humiliating. NZ Steel terminated Haddad’s employment for redundancy.

Haddad’s personal grievance for unjustified dismissal was successful in the Employment Relations Authority: Haddad v New Zealand Steel Ltd [2021] NZERA 106.  He was reinstated and awarded three months’ lost earnings and $15,000 compensation.

NZ Steel appealed on the basis it was justified in terminating Haddad’s employment, having no obligation to redeploy him.  His role had been disestablished and he had refused to interview for a new role.

Whether a dismissal was justifiable is determined objectively per s 103A (2) of the Employment Relations Act 2000. “The test is whether the employer’s actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred.”

NZ Steel relied upon the Court of Appeal’s finding in Thwaites that a failure to redeploy in an instance of genuine redundancy could not constitute an unjustified dismissal under the Employment Contracts Act 1991. Under that legislation, the employer’s obligations to deal fairly with an employee extended to the employee only within their existing role.

NZ Steel sought to distinguish Jinkinson, an Employment Court decision which addressed the legislative developments since Thwaites. Per Jinkinson, the Employment Relations Authority and the Employment Court may use s 103A of the Act to assess the merits of an employer’s decision not to redeploy an employee.

Applicable principlesThwaites distinguished – Jinkinson applied – the focus of employment legislation has moved from the contract between parties to the promotion of a good faith relationship, ss 4(1A) and 103A of the Act – the court is not always well placed to conclude whether redeployment should be offered but it can, after considering the reasons for a refusal or failure to redeploy, conclude that the process followed to arrive at those reasons was not fair and reasonable or, further, that those reasons were not substantively justified – to the extent that a merits review of an employer’s redeployment decision limits the right to freedom of association, that limitation is demonstrably justified.

Where a position has become redundant, an employer must consider whether to redeploy the employee – in considering whether to redeploy an employee, an employer must comply with the good faith obligations in s 4 of the Act, including to consult and to be active and constructive in maintaining the relationship, subs (1A)(c) and (b).

Held: The process undertaken by NZ Steel in disestablishing the process computing manager role was not fair or reasonable. NZ Steel had predetermined the disestablishment. The purported consultation and the failure to provide all relevant information fell short of the good faith obligations required by ss 4 and 103A (3) of the Act.

NZ Steel did not treat Haddad fairly and reasonably in relation to redeployment, failing to meet its obligations under the IEA and the Act. His dismissal was unjustified.

Haddad to remain in the project management position to which he was reinstated following the Authority’s determination. NZ Steel to reimburse lost remuneration from the date of dismissal.  NZ Steel to pay a further $10,000 compensation pursuant to s 123(1)(c)(i). Haddad to repay his contractual redundancy payment.

Obiter: It is a high-risk strategy for an employee to refuse to attend an interview for positions to which they might be redeployed. A safer course is to put the employer to the test, recording concerns in advance and attending on a ‘without prejudice’ basis.

Nadia Sussman is a senior tutor and research assistant at the University of Auckland Faculty of Law

Haddad v NZ Steel [2021] NZERA 106

NZ Steel Ltd v Haddard [2023] NZEmpC 57

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