Redundancies in challenging circumstances

David Burton, an Employment Law Barrister, looks at a recent case involving the rushing of a redundancy process that negatively affected both the employer and employee.

Businesses do not tend to thrive through financial downturns, or even worse, recessions. Hard decisions need to be made; efficiencies need to be found, changes or redundancies may be required.

Often these hard decisions are made in circumstances where managers are trying to work out what is around the corner: how long will this downturn last, will our customers stay with us, or will they be making changes, too?

Perhaps we have been through the most challenging circumstances we are ever likely to see for generations: the global COVID-19 pandemic, our international borders closed and national and regional lockdowns being imposed.

Standards unchanged

No matter how challenging the circumstances, the recent decision of the Employment Court of Drivesure Limited v McQuillan and Ors confirms that the usual “fair and reasonable” standards required by employment law will continue to apply.

Drivesure provides vehicle testing services at various sites. It had a contract with the Penrose Compliance Centre (PCC) to carry out such services at its site. That contract was unexpectedly terminated by a letter dated 6 March 2020, effective from 8 May 2020. Mr McQuillan and two other defendants were employed by Drivesure at the PCC site. The case involves a restructuring that ran into the nationwide lockdown in March and April 2020.

Drivesure unsuccessfully attempted to get PCC to reconsider terminating the contract. On 10 March, Drivesure advised the defendants of the termination of the contract with PCC. In letters dated 17 March, Drivesure wrote to each of the defendants proposing that all the positions at PCC would be made redundant. Drivesure said it had considered redeployment to other sites, but that was not possible.

Rushed job?

Drivesure wanted to meet with the defendants to receive feedback on the proposal, with a meeting suggested to take place on 24 March 2020. There was some correspondence between Drivesure and the defendants after the letter of 17 March, including a request from Mr McQuillan to postpone the meeting until 26 March because his legal advisor was busy. Drivesure was not prepared to defer the meeting but offered to meet any time before then, including before work and in the evening.

Circumstances intervened, and on 23 March 2020, the Prime Minister announced that New Zealand was immediately moving to Alert Level 3 under the Government Alert Level Framework and would move to a strict Alert Level 4 lockdown two days later. It was after that announcement that Drivesure said it intended to make a decision on the redundancy proposal by 25 March 2020.

The defendants sent an email on 23 March 2020, and again the following morning, outlining why they could not meet, including their frames of mind, health and safety reasons for meeting in person, and their legal advisers being unavailable.

Time to consider feedback?

Drivesure considered that, because of the lockdown, it was critical to act quickly to preserve the whole Drivesure business. Drivesure responded to the defendants on 24 March, saying that if the defendants did not wish to meet that day, then they were to provide any further feedback on the proposal in writing by 25 March 2020, after which Drivesure would consider all feedback received and make a decision. Each of the defendants responded in different ways.

• Mr McQuillan asked questions about the selection process for staff and asked to attend mediation.

• Mr Raj questioned the rationale for the proposed redundancy and questioned that PCC was his fixed site.

• Mr Rafiq thought the decision was unfair, having regard to his history and experience with Drivesure. He offered to make changes, including changing his workplace to another site, reducing his working hours or days, or helping out in other areas of the business.

On 25 March 2020, Drivesure emailed each of the defendants advising that the proposal would go ahead and their employment would be terminated.

Judge Holden found that, even taking account of the circumstances Drivesure was facing, the last part of the process was unduly rushed. It was not a process that was open to a fair and reasonable employer in all the circumstances.

The Court found no reason to reduce the relatively modest compensation awarded by the Employment Relations Authority of $8,000 for each of the defendants.

Interestingly, the case was argued on the basis of unjustified disadvantages rather than unjustified dismissals. The process was successfully challenged, but the substantive reasons for the redundancies were not challenged. Drivesure Limited v McQuillan and Ors [2022] NZEmpC 176

David Burton is an employment law barrister. David has over 30 years of employment law experience in New Zealand and overseas. His expertise is recognised by his peers. For six years, he was appointed to the Employment Law Committee of the New Zealand Law Society. Before that, he served on the Workplace Relations and Employment Law Sub-committee of the Law Institute of Victoria, Australia. For more info, visit www.burtonlaw.co.nz or email david.burton@burtonlaw.co.nz