Redundancy and parental leave – mutually exclusive?
Can someone be made redundant when they are on parental leave? This article looks at when this can occur, the obligations of employers, and what is considered fair process during restructuring when an employee is on parental leave.
Sometimes the needs of a business change and therefore restructuring must occur. This restructuring often includes making roles redundant. In accordance with the Parental Leave and Employment Protection Act 1987, employers cannot terminate the employment of any employee during their absence on parental leave, or during the 26 weeks beginning with the day after the date on which any period of parental leave ends. However a legislated exception to this is where there is a legitimate redundancy situation.
While it is legally possible to terminate an employee’s employment by making their role redundant while they are on parental leave, employers need to take a cautious approach and be vigilant to ensure they follow fair process. Due to parental leave legislation and New Zealand’s international obligations, there is a higher standard on employers to ensure both procedural fairness and genuine reasons for the restructuring where the employee is on parental leave (as compared to the employee not being on parental leave).
A brief overview of the restructuring process is as follows:
- The employer creates a restructuring proposal setting out the proposed changes, the business reasons behind these proposed changes, and the evidence to support these reasons;
- Affected employees (including those who are indirectly affected) are presented with the proposal and invited to attend a meeting and/or to submit about the proposal;
- Affected employees then have a reasonable period of time to consider the proposal, seek advice, and provide feedback to the employer about the proposal;
- The employer genuinely considers all feedback provided by employees;
- The employer makes a decision about whether they will go ahead with the restructuring proposal;
- The employer notifies employees of their decision.
Failure to follow these steps is a failure to follow fair process and can leave employers vulnerable to personal grievances. When these types of personal grievances are successful, employers are often ordered to heavily compensate the employee and in some cases reinstate them to their previous position
Rights of employees affected by restructuring when on parental leave
Persons on parental leave should be afforded the same rights as all other employees affected by restructuring. They should be given a real opportunity to be actively involved in the restructuring consultation process and employers must take extra precautions to ensure this happens.
The leading case in this area – Lewis v Greene  2 ERNZ 55 – states at :
“… an employer who is contemplating the redundancy of an employee on parental leave is bound to take extra precautions to ensure that she has an opportunity to be actively involved in the consultation process in a meaningful way that is at least equal to that of the employees who remain at work.”
The rationale goes back to the old adage “out of sight, out of mind”. When an employee is not present in the workplace it is much easier to fail to actively consult with them and to take their feedback into account. By nature of not being present they are more vulnerable and therefore there is an increased obligation on the employer to actively consult. Extra measures need to be taken to ensure these vulnerable employees are able to engage in the process in a way that is equal to other employees. “Active consultation” will differ depending on the reasons for the restructuring, however there are a few key things to keep in mind.
- Provide them with the necessary information When an employee is on parental leave they may not be privy to the state of the business in the same way that the employees actively engaged in work are likely to be. Due to this lack of day to day contact with the business they may need to be given additional information so they have a full understanding of the alleged need for their role to be made redundant. Care should be taken to provide the employee with holistic and up to date information.
- Give enough time to provide feedback Employees on parental leave are more likely to need to request further information as they won’t necessarily have an up to date understanding of the current state of the business. They also are likely to have a limited ability to speak with other staff members and seek independent advice. Therefore they may need to be given extra time to consider the proposal and provide their feedback.
Considering or affected by a restructure?
Restructuring a business can be difficult at a procedural and at a relationship level. To ensure an appropriate and legitimate outcome it is important employers follow a fair process, particularly where affected employees are not present in the workplace due to parental leave. Whether you are an employer or an employee, our experienced team is well placed to help you avoid pitfalls and assist you throughout the process.
Want to know more?
If you have any questions about employment law issues, please contact our specialist Employment Team.
The above article was included in the most recent edition of our quarterly newsletter Employment News. For this and other articles, please click on the following link: Employment News – Edition 5