France, here the New Zealand labour market comes! The Employment Court’s long march to re-regulate

If the Employment Court had its way, New Zealand case law under the Employment Relations Act regarding redundancies and layoffs would be as strict as those in France. As top employment lawyer Peter Cullen explained in the Dominion Post today:

Former Employment Court chief justice Tom Goddard said employees could not be made redundant unless the company would otherwise go to the wall.

The employer appealed.

The Court of Appeal said something quite different. Its view was that if a business could be run more efficiently without a particular position, then it was entitled to disestablish it.

The Court of Appeal made it plain that it would not critically examine the logic behind the employer disestablishing a role. If the reason behind the redundancy was genuine, that was all that really mattered. Of course a fair process and consultation ought to precede any decision, but the outcome nevertheless was that the position could go.

The Employment Court wanted the position to be the same as at that in France where layoffs are permissible only to avoid bankruptcy:

…firms still cannot lay off workers to improve competitiveness when the business is healthy; they can only make economic dismissals to preserve competitiveness when already in financial straits. In France, it ought to be legal to fix small problems before they become big.

This French standard of regulation of layoffs and redundancies, if it had survived on appeal, would have come as a surprise to many, including the OECD who rates New Zealanders having no regulation of layoffs in its Index of Employment Protection.

Source: OECD employment protection index.

But you can’t keep an activist Employment Court down. It’s next tactic was salami tactics. Chipping away at the right of the employer to run its business and decide how large its labour force is. Peter Cullen again with the Employment Court pretending it can second-guess entrepreneurial judgements and arithmetic:

In the case between Grace Team Accounting and employee Judith Brake, the Employment Court found that the decision to make Brake’s position redundant was based upon mistaken arithmetic. The Court of Appeal held that Brake’s redundancy amounted to an unjustified dismissal.

Next cab off the rank was requiring employers to give preference to redundant employees pretty much no matter what. Peter Cullen again:

In the case of Neil Wang and his employer the Hamilton Multicultural Services Trust, the trust encouraged Wang to apply for another role within the organisation.

However, the Employment Court said the trust should have considered whether they should have simply offered Wang the position without having to go through an application process.

The court found that even though the other role was not the same, it required the same skills and minimal retraining and so the trust should have simply given Wang the role.

It is standard in the redundancies and restructurings I’ve been involved with for non-managerial employees to go through internal reassignment panels. Some didn’t make it and were laid off.

It’s common for the managerial vacancies to be advertised externally so that redundant managers must compete with external applicants so that the workplace can renew itself. Quite a few managers don’t make it through this process because of the external competition.

This clear preference for existing employees is a major reregulation of the labour market. Now, every redundant employee can engage in vexatious litigation and squeeze a few thousand dollars extra out of the employer by threatening to go to the Employment Court for a second opinion on the entrepreneurial judgements of the employer. To save managerial time as well is legal fees, it’s cheaper for most employers to pay the redundant employee off with a small settlement.

Anything that makes it more expensive to fire an employee makes it more expensive to hire an employee. This will reduce job creation in New Zealand now that the French standard applies:

…businesses remain obligated to assist laid-off employees in finding other jobs and in retraining them for their new positions – a distinctly French phenomenon. For businesses with more than 1,000 employees, this limbo period before dismissal can last from four to nine months.

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