Redundancy needs more than a business preference
Employers are allowed to restructure their businesses. They are not required to keep roles forever. But redundancy still has to be handled properly. A genuine commercial reason does not excuse a rushed or predetermined process.
Anderson Law assists employers with redundancy proposals, business case review, consultation letters, selection criteria, redeployment issues, final decision letters, mediation, and responses to Personal Grievances arising from redundancy.
The safest redundancy process is one where the employer can prove the business reason, show that consultation was genuine, provide relevant information, consider feedback properly, and explain why the final decision was made.
Redundancy is not a shortcut around performance management
One of the biggest risks for employers is using redundancy to remove a particular employee because of personal conflict, poor performance, or frustration. If the real reason is not the business case, the redundancy may be attacked as a sham or as a predetermined dismissal.
If the issue is performance or conduct, the employer should usually use a performance or disciplinary process. If the issue is a genuine business change, the documents should show that the role is affected because of business needs, not because the employer dislikes the employee.
That distinction matters. Employees and advocates will look closely at timing, manager comments, the business case, the selection process, and whether the role was actually disestablished or merely renamed.
What a redundancy process usually needs
- A genuine business reason: the employer should be able to explain the commercial or operational reason for the proposed change.
- A proposal, not a final decision: the employee should be consulted before the decision is made.
- Relevant information: the employee should receive enough information to understand and respond to the proposal.
- Reasonable time to respond: consultation should not be rushed without good reason.
- Genuine consideration: feedback should be considered before any final decision.
- Selection process: if employees are competing for fewer roles, selection criteria must be fair and properly applied.
- Redeployment consideration: the employer should consider whether there are suitable alternative roles.
- Clear final decision: the final decision letter should explain the outcome and the reasons.
The business case
The business case does not need to be a glossy corporate document. For many small businesses, it may be a practical explanation of the financial, operational, staffing, or structural issue that has caused the employer to propose change.
But it should be real. The employer should be able to explain what has changed, why the current role or structure is affected, what options were considered, and why the proposed structure is preferred.
Weak business cases create risk. Examples include vague references to "business needs", unsupported claims that work has reduced, no explanation of why one role is selected, or a proposal that appears to target one employee while the work continues under another title.
Consultation must be genuine
Consultation is not a box-ticking exercise. The employer should give the employee a real chance to respond before the decision is made. That means the proposal should be open to change, at least in principle.
Employers get into trouble when they send a proposal letter after the decision has already been made, tell staff the role is gone before consultation ends, advertise the replacement role too early, or ignore feedback without explanation.
A good consultation process records what the employee said, what the employer considered, and why the employer accepted or rejected the employee's points. That record becomes important if the redundancy is later challenged.
Selection criteria and redeployment
If a restructure reduces the number of roles but some employees remain, the employer may need selection criteria. Those criteria should be relevant, objective where possible, and applied fairly.
Employers should be careful with vague criteria such as "attitude", "fit", or "future potential" unless they can be properly explained and evidenced. Vague criteria can look like a way to target the employee the employer already wanted gone.
Redeployment should also be considered. If there are suitable alternative roles, the employer should think carefully before simply dismissing the employee as redundant. The employer should document what roles were considered and why they were or were not suitable.
Documents employers should prepare
A redundancy file should usually include:
- the business case or reasons for change;
- the proposed new structure;
- current and proposed organisation charts where useful;
- the proposal letter;
- information provided to the employee;
- selection criteria and scoring material where relevant;
- records of consultation meetings;
- employee feedback and employer consideration of that feedback;
- redeployment assessment; and
- the final decision letter.
Common redundancy mistakes
- deciding the outcome before consultation starts;
- using redundancy to remove a difficult employee;
- not providing enough information about the business reason;
- failing to explain why the employee's role is affected;
- using vague or manipulated selection criteria;
- not considering redeployment;
- announcing the restructure as final too early;
- not taking notes of consultation meetings;
- ignoring employee feedback; and
- creating a new role that is substantially the same as the old role.
Frequently asked questions
Can an employer make someone redundant because business is slow?
Possibly, but the employer should still be able to show the business reason, consult properly, and explain why the employee's role is affected.
Does the employer have to provide financial information?
It depends on the reason for the proposal and what information is relevant. If the employer relies on financial pressure, some financial information may be needed so the employee can respond meaningfully.
Can the employer select the weakest employee for redundancy?
Only with care. If selection is required, the criteria should be fair, relevant, and properly applied. Redundancy should not be used as a disguised performance process.
Can an employer settle a redundancy dispute?
Yes. Many redundancy disputes resolve at mediation or by agreement. The settlement wording should be clear and final, especially where confidentiality and reference wording matter.
Case law examples for redundancy and restructuring
Redundancy is not safe just because the employer says there is a business reason. The business reason matters, but so do consultation, information disclosure, selection criteria, redeployment, timing, and whether the final decision was predetermined.
Grace Team Accounting Ltd v Brake [2014] NZCA 541 - redundancy is subject to objective scrutiny
Grace Team is a core employer redundancy authority. It warns employers that the Court is not confined to accepting the employer's label of redundancy. The employer still needs to show that the decision and process were what a fair and reasonable employer could have done.
Vice-Chancellor of Massey University v Wrigley [2011] NZEmpC 37 - disclose relevant information for consultation
Wrigley is important because consultation is not meaningful if the employee is denied the information needed to comment. Employers should provide the business case, relevant financial or operational material, proposed structure, selection criteria, and redeployment information where those matters are relevant to the proposal.
Tertiary Education Union v Vice Chancellor Auckland University of Technology [2022] NZERA 690 - selection criteria and contractual obligations matter
AUT is useful for employers with collective agreements or detailed restructuring obligations. Selection tools and criteria must align with the applicable agreement and process. A commercial restructure can still fail if the employer uses the wrong method or ignores agreed rules.
A 2025 ERA redundancy determination, [2025] NZERA 191 - vague business cases create risk
This determination is a useful practical example of an employer redundancy proposal that lacked tangible detail about workload and staffing. The lesson is simple: if the proposal says there are too many staff, the employer should explain the numbers, the workload, the operational change, and the basis for the proposed role reduction.
DQJ v Commissioner of Inland Revenue [2025] NZEmpC 10 - do not mislabel incapacity or performance as something else
Although DQJ was not a standard redundancy case, it is relevant to employer restructuring strategy because it warns against forcing a difficult employee situation into the wrong legal box. If the real issue is medical incapacity, performance, conduct, or frustration, calling it a restructure will not make the process safe.
What a defensible redundancy file should contain
The employer should preserve the business case, financial or operational evidence, proposal letter, consultation notes, all feedback, selection criteria, scoring documents, redeployment analysis, final decision letter, and evidence that the decision was not made until after feedback was genuinely considered.
Need help with a redundancy or restructure?
Complete the employer form and provide the proposed restructure, business reasons, draft letters, employment agreement, and any employee feedback received so far.
