This is our third blog on employment law issues for those affected by the Christchurch Earthquake. We answer the question:
My business is not going to open again or, at least, not in the near future, can I make all or some of my employees redundant?
Yes, if you can show that the position filled by an employee is no longer needed, or you have made a genuine decision for commercial reasons to discontinue employment (e.g. reducing employee numbers to increase business efficiency, restructuring your operations including a change in the organization’s roles or location, closure of the business and outsourcing). In other words, you cannot make an employee’s position redundant for reasons relating to the employee personally (e.g. performance issues).
You must also follow a fair process, which would include:
(a) Consulting with the affected employees, including giving them all relevant information (e.g. what you consider the issues are your goals) and an opportunity to comment on that information and discussing any possible alternatives to redundancy such as reduced hours or temporary suspension of payment of wages by agreement); and
(b) Paying out your employee’s notice period (often one month but this will depend on the terms of their employment agreement) and any redundancy compensation set out in their employment agreement).
It is important to check the employee’s employment agreement and any relevant in-house policies before beginning the redundancy process as this may set out additional processes/employee entitlements that you have to follow.