Restructuring & Redundancy – A Quick Guide for N.Z Employers
What is Restructuring and Redundancy?
Restructuring generally involves reorganising a business’s operations, roles, or reporting lines. A restructure may or may not result in redundancies.
Redundancy is a potential outcome of restructuring where an employee’s role becomes surplus to the employer’s requirements. Redundancy must relate to the role, not the person performing it.
A redundancy will only be lawful if it is:
Substantively justified – There is a genuine business reason for disestablishing the role, which can be clearly demonstrated by evidence; and
Procedurally justified – The employer follows a fair and reasonable consultation process, including holding a series of documented formal consultative meetings over a series of weeks prior to confirming a redundancy.
Failure on either limb exposes the employer to significant legal risk by way of financial remedies and orders for personal grievance claims, e.g. unjustified dismissal.
Core Legal Obligations
Good Faith (Section 4 of the Employment Relations Act 2000)
Employers must act in ‘good faith’ throughout any restructuring process. This includes:
Being open and transparent.
Not misleading employees.
Providing access to all relevant information.
Genuinely considering employee feedback before decisions are made.
Test of Justification (Section 103A of the Employment Relations Act 2000)
The Employment Relations Authority or Employment Court will assess whether the employer’s actions were what a fair and reasonable employer could have done in all the circumstances.
A flawed process, rushed consultation, or pre-determined outcome will usually fail this test.
Developing a Genuine Business Rationale
A restructuring process must be supported by a robust and well-documented business case. Common drivers include:
Financial or revenue downturns.
Loss of contracts or clients.
Technological change or automation.
Outsourcing or business sale.
Duplication of roles or efficiency gains.
Key risk: Using redundancy to address performance, conduct, or interpersonal issues is unlawful and will likely be characterised as a sham restructure. Such circumstances are very easy for legally trained employment specialists to identify and develop claims based on. Where successful sham restructures expose employers to significant liability – the Authority and the Court have zero tolerance towards employers who implement sham restructures and will not hesitate to make orders accordingly to ensure other employers who do the same are deterred from such approaches.
Employer Pro has a comprehensive Employer Toolkit available for managing ‘Restructures and Redundancies’, including step-by-step guidelines, practical walk-throughs, legal commentary, a template restructuring proposal and planning notes, various employer-focused templates letters to implement the correct consultation process and more.
Employers should ensure:
The rationale is clearly articulated in writing.
The reasons are supported by evidence (financial data, workflow analysis, organisational charts) – whatever information may need to be provided in writing to support the employer’s rationale for change.
Internal communications align with the stated rationale (bearing in mind discoverability of personal information under the Privacy Act 2020).
Disclosure of Relevant Information
A frequent and fatal error in restructuring cases is failure to disclose relevant information.
Employers must provide employees with all information that materially informs their change proposal, including:
Financial data relied upon.
Business plans or forecasts.
Organisational charts (current and proposed).
Any assumptions underpinning the proposed changes.
While limited confidentiality and non-disclosure exceptions exist, the threshold for withholding information is very high and not well tested in case law. Where information is withheld, employers must be prepared to justify that decision, accept legal scrutiny and risk that attaches to their decision to withhold important information.
Employer risk warning: Inadequate disclosure alone can result in a finding of unjustified dismissal, even where a genuine business reason exists.
Consultation: Process Requirements
Consultation must be meaningful, not a formality. Best-practice consultation involves staged engagement over a period of weeks and should include:
Proposal Phase – Providing a written proposal, outlining potential outcomes (including redundancy), and advising employees of their rights.
Feedback Phase – Allowing sufficient time for employees to seek advice and provide feedback.
Decision Phase – Genuinely considering feedback and communicating a reasoned outcome.
Each step must be clearly documented, including complying with the various procedural fairness considerations required by the Employment Relations Act 2000 and case law obligations such as advanced notice, notification of legal rights, disclosure of all relevant information, notification of potential outcomes, disclosure of access to all relevant information, etc.
Employers must avoid:
Predetermined decisions.
Compressed or artificial timeframes.
Announcing outcomes before consultation is complete.
Targeting employees for redundancy for ulterior reasons.
Redeployment Obligations
Redundancy is a last resort. Employers must actively consider redeployment where roles are available.
Key principles:
Suitable vacant roles must be offered, not merely advertised.
Employees should be considered even if training or upskilling is required.
If redeployment is declined, clear and defensible reasons must exist.
Failure to properly consider redeployment has repeatedly resulted in adverse findings and legal orders against employers.
Selection Criteria and Contestable Roles
Where multiple employees are affected and fewer roles remain, selection criteria may be required.
Selection criteria must be:
Objective and measurable.
Transparent.
Consulted on before application.
Acceptable criteria include skills, qualifications, experience and role requirements. Criteria linked to performance or disciplinary history carry heightened legal risk and should be avoided.
Case Law Snapshot – What Recent Decisions Tell Employers
Bowen v Bank of New Zealand [2025] NZERA 380
Ms Bowen was employed as a manager at the Bank of New Zealand and had made protected disclosures regarding alleged inappropriate behaviour by colleagues. Shortly afterwards, the bank proposed a restructure which resulted in the disestablishment of her role. The Employment Relations Authority (‘the Authority’) found that the redundancy was not genuinely justified, concluding that the restructure was driven by retaliation for her protected disclosures rather than a genuine business need. The Authority held that BNZ failed to show any credible commercial rationale for removing her role, and that good faith obligations were breached.
The Authority awarded Ms Bowen a very substantial remedy, including:
$105,000 compensation for humiliation, loss of dignity and injury to feelings (including an uplift for retaliatory motivation).
$329,687 in lost wages.
$48,000 for lost bonuses.
$4,378 KiwiSaver contributions.
$8,975 for medical costs.
$8,000 penalty to the Crown Trust Account.
Legal costs.
Employer Takeaway: This decision is a high-impact example showing that restructures must have genuine commercial foundations and be free of improper influence. Employers must document and communicate business rationale clearly, remain objective, and ensure good faith processes – particularly where an employee has raised workplace concerns. Failure to do so may lead not only to unjustified dismissal findings but also to very large financial remedies being imposed.
Franich v Edgesmith Limited [2025] NZERA 370
Ms Franich was dismissed for redundancy following a proposed business restructure. While the employer asserted there was a genuine business rationale, the Authority found the process was procedurally flawed, particularly in relation to selection criteria.
The Authority held that the employer failed to meaningfully consult on the criteria used to select Ms Franich for redundancy and did not give her a genuine opportunity to comment on how those criteria were applied before the decision was made. As a result, the dismissal was found to be unjustified.
The employer was ordered to pay over $20,000 in financial remedies and legal costs (excluding the employer’s own legal costs).
Employer Takeaway: Even where a restructure is commercially justified, failure to consult on and transparently apply selection criteria can render a redundancy unjustified and expose employers to significant financial liability.
Pyne v Invacare New Zealand Limited [2023] NZEmpC 179
Mr Pyne was dismissed following a restructuring process. While the employer relied on redundancy, evidence showed the dismissal was substantially influenced by unresolved conduct concerns that had previously been treated as closed. A workplace culture report (not disclosed to Mr Pyne) incorrectly stated no action had been taken regarding those concerns and later informed management’s decision-making.
The Authority found the dismissal was unjustified and involved breaches of good faith, awarding:
3 months’ lost wages.
$10,000 compensation (with a contribution reduction).
Mr Payne challenged the remedies he was awarded in the Employment Court (‘the Court’) upheld the findings but significantly increased remedies:
Lost wages increased to the equivalent of 6 months.
Compensation increased to $18,000, with no contribution reduction.
A $6,000 penalty imposed for serious and sustained good-faith breaches.
These amounts excluded the employer’s own legal costs, which would have been significant due to engaging specialist employment lawyers.
The Court emphasised that penalties serve a distinct punitive and deterrent purpose, separate from compensatory remedies.
Financial and Legal Consequences of Non-Compliance
Where restructuring processes are mishandled, employers may face:
Findings of unjustified dismissal.
Reinstatement orders.
Lost wages and compensation for humiliation, loss of dignity and injury to feelings.
Significant legal costs and reputational damage.
Remedies in sham or poorly managed restructures are frequently at the higher end of the scale.
Common Employer Mistakes
Treating redundancy as a shortcut for performance management.
Inadequate or selective disclosure of information.
Rushed consultation or pre-determined outcomes.
Failure to consider adequately manage redeployment obligations.
Poor internal documentation and inconsistent reasoning.
Employer Takeaways
Restructuring and redundancy processes carry high legal risk and require careful planning, transparency and disciplined execution.
Employers must ensure there is a genuine business rationale, full disclosure of relevant information, and a meaningful consultation process that genuinely considers employee feedback and redeployment options.
Even commercially sound decisions will fail if the process is flawed. Early advice, professional support and robust documentation are critical to reducing exposure to costly personal grievance claims, including for unjustified dismissal.
Compliance Warning
Restructuring decisions are frequently challenged where employers treat consultation as a formality, withhold relevant information, or reach decisions prematurely.
Failure to comply with good faith obligations, disclosure requirements, or redeployment duties can result in findings of unjustified dismissal, even where there is a genuine business need for change. Employers who mismanage restructuring processes face significant exposure to lost wages, compensation, reinstatement orders and legal costs. Careful planning, genuine engagement, and fair process compliance are essential to managing legal risk.
This article is provided for general information only and does not replace professional advice. Employers should seek advice specific to their circumstances from Employer Pro if unsure about managing a restructuring or redundancy process, including termination of employment for redundancy. Employer Pro has a range of employer focused resources and services available through our competitive Employer Protection Packages.
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