Redundancy Entitlements

22 Aug 12

Vulnerable workers have statutory rights to “redundancy entitlements” which may or may not include redundancy compensation.

It is reasonably common these days for employment agreements to provide that no redundancy compensation is payable.  But “redundancy entitlements” is a wider concept and in some circumstances employees may still have rights to entitlements other than compensation.

Cleaners and caterers and some other workers in particular industries are commonly known as “vulnerable workers”.  Amendments to the Employment Relations Act in 2004 gave them special rights to transfer from one employer to another in the event of restructuring, and to “redundancy entitlements” if they are then made redundant as a result of that transfer.

When Massey University cleaning contracts expired on 30 June 2010, the University chose a new cleaning contractor, OCS Limited.  Cleaners could and did choose to transfer from the outgoing provider to OCS.  OCS then disestablished their jobs, offering them redeployment on less favourable terms as an alternative to redundancy.  The cleaners claimed their right to “redundancy entitlements” even though their employment agreements expressly excluded “redundancy payments”.

Considering this matter the Supreme Court recently held that this right only applies if the relevant employment agreements not only do not provide for redundancy entitlements but also do not expressly exclude redundancy entitlements.  In this case only redundancy payments were expressly excluded.  Therefore the cleaners had a right to redundancy entitlements other than redundancy payments.

By way of example redundancy entitlements could include the following:

  • retraining
  • time off to attend interviews for alternative jobs
  • written reference
  • assistance with preparing a CV
  • preference for re-employment if a vacancy arises

The Act goes on to provide that if the employer and employees cannot agree on appropriate redundancy entitlements, then either party may ask the Employment Relations Authority to fix the redundancy entitlements to be provided.

To avoid this situation, employment agreements for vulnerable workers should either spell out exactly what redundancy entitlements are provided, or expressly exclude all redundancy entitlements, not just compensation or “payments”.

Prepared by Lesley Brook