As of 2020, the word “Corona” will have a very different connotation from a Mexican beer we once enjoyed with a slice of lemon. COVID-19 and the resulting lockdown has caused significant changes and disruption to the norm as we knew it. For many non-essential businesses, and particularly those sectors in hospitality, construction and tourism, the impact, in some cases, has been devastating despite the support packages provided by the Government. The ASB chief economist has recently stated the virus and lockdown will cause the worst recession since the Great Depression, and far worse than the GFC. With a huge drop to GDP and unemployment rates expected to rise to double digits, redundancy will be an inevitable consequence for numerous businesses which will affect both employers and employees.
Employers must truly understand their onerous obligations when terminating an employment relationship through redundancy. Employees, on the other hand, may find themselves dashing through their old employment agreement in order to check their rights, should they face the dreaded “R” word. So, how will you protect yourself?
Apart from rent, salary/wages are one of the largest fixed expenses for most businesses, and when the income tap is turned off or clogged, a reduction of this fixed expense will become an unavoidable reality as already widely evidenced.
Some employers have traditionally used restructure and redundancy to disguise dismissal and terminate unwanted staff. The Employment Relations Authority and Court has previously gone as far as requiring the employer to “open up its books” in order to prove the redundancy as being genuine. Nevertheless, employers should always be aware that “due process” and “good faith” are the foundation of the Employment Relations Act 2000. An employer wanting to consider redundancy must firstly start by reviewing the relevant employment agreement and terms.
Redundancy should always follow good faith, a genuine reason and due process. A “genuine reason” is that the position is no longer required. Acting in “good faith” and following “due process” may be tricky during this virus era. For example, misunderstandings could easily arise during lockdown as it’s difficult for the parties to meet face to face. We recommend that employers should consult our redundancy checklist for guidelines on what to consider and what steps to take when considering a redundancy. The checklist is available online at:
There have already been news of employers that acted prematurely by cutting staff without following due process. They will now be exposed. They may be liable to the employees, but also the Government if they have obtained the wage subsidy. The obligations to the Government will depend on if the employer applied for the wage subsidy and the specific situation of the employer. It is uncertain whether an employer can make an employee redundant during the 12 weeks if they obtained a subsidy. It is not impossible to terminate an employment relationship but this must be done correctly. If you are considering redundancy as an employer or have already taken steps and are concerned, you should seek tailored legal advice to minimise risk.
Alternatively, it may also be gut-wrenching for employers having to let go of staff they treat as family. But it is important that the correct procedure is followed to ensure that there are no future claims.
Employers may also consider other recent changes including the safe harbour rules, loans to SMEs and recent tax changes all designed to see employers through these difficult times.
If you are going through or have gone through the redundancy process it will be a very difficult and stressful time for you. If you believe that your employer’s decision was questionable, you have 90 days to raise a personal grievance claim so it is best that you seek legal advice as soon as possible. You may or may not be entitled to some legal remedies which may include, for instance, compensation of lost wages until you are able to find another job.
The Government has made a public list of employers who have applied for the wage subsidy so employees will be able to swiftly check whether their employers applied and obtained the wage subsidy. If they have, this will likely increase their obligations to you.
Where you are unsure or require any assistance, please do not hesitate to contact the experts at Queen City Law. Max Shin and Tina Hwang have acted for both employers and employees and can offer employment assistance and tailored legal advice for you. You can contact them at the following email addresses:
We have taken care to ensure that the information given is accurate, however it is intended for general guidance only and should not be relied upon in individual cases. Professional advice should be always be sought before any decision or action is taken to ensure the best possible results.