HR Insights NOVEMBER 2024 | Restructures with Michael Prisk

November 2024 Update

Unjustified Dismissal - Restructuring Case Law Development

A recent case, Ahluwalia v The New Zealand Anti-Vivisection Society Incorporated, highlights the importance of Employers providing sufficient economic or financial information during a restructuring process. What makes this case particularly interesting is that this well-established charitable organisation was not driven by normal commercial imperatives.

Background

Mr Ahluwalia was employed by the New Zealand Anti-Vivisection Society (NZAVS) as a part-time campaign manager. NZAVS was a well-established charity that worked to end animal experimentation and the harmful use of animals for science. His employment was terminated on 23 May 2023 following a restructuring process that made his position redundant. On 30 August 2023, Mr Ahluwalia applied to the Employment Relations Authority (ERA) and claimed he had been unjustifiably dismissed due to a flawed redundancy process.

By the end of 2020, NZAVS was running an unsustainable deficit. A restructuring proposal suggested reducing staffing costs to address the problem. Rather than explain the deficit issue to the five staff members and invite them to offer cost-saving ideas, Mr Ahluwalia’s role was identified as one that could be absorbed into a different role. The result of this process for Mr Ahluwalia was that his employment was terminated on 23 May 2023

Decision and Penalties

The ERA found that Mr Ahluwalia had been unjustifiably dismissed. Mr Ahluwalia was awarded $14,414.40 for six months of lost wages. Mr Ahluwalia was also paid $16,000 as compensation for hurt and humiliation. Costs were reserved.

Key Takeaways

• Employers must genuinely consult and consider the feedback of potentially affected employees
• Employers must act in Good Faith to potentially affected employees by providing sufficient economic/financial information* to explain and support the rationale for making a position redundant
• Make sure alternatives to redundancy are genuinely considered
• Provide employees with the opportunity to comment on the redundancy proposal before finalising the decision to disestablish a position.

*In passing, the ERA noted that, while economic/financial information is commercially sensitive, NZAVS could have sought an undertaking to bind Mr Ahluwalia to confidentiality upon sharing such information with him. Not providing this information was viewed as a ‘significant procedural flaw’.

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