Redundancy – a need for genuine business reasons

October 22, 2013

in Employment

iStock_000016394154SmallIn the past, where Courts have been satisfied that dismissal on the grounds of redundancy was based on ‘genuine business reasons’, they tended not to go further and inquire into the reasons for employers decisions to restructure their business.  Recent cases in the Employment Court however, have shown that Courts are prepared to take the view that the Court is now entitled to review an employer’s business reasons for restructuring, in order to determine whether or not the dismissal on the grounds of redundancy was fair and reasonable.  The Courts have also shown a changing willingness to look at how the decision to restructure was reached and whether that decision was what a fair and reasonable employer could have done in all the circumstances.

There are two recent cases of note in the Employment Court.  The first being the decision in the Totara Hills Farm case, where the Court held that if a redundancy is challenged by the employee, the employer cannot simply say there was a genuine business reason without the Court examining the merits of the claim.  In this case, the Court also emphasised the duty of good faith on the employer, which should in cases of restructuring extend to consideration of redeployment for the employee prior to the decision to make the employee redundant.

The second case of note is Kreider v Vodafone.  The position which Mr Kreider held of General Counsel was disestablished and a new role created of Legal Director, for which Mr Kreider was unsuccessful in securing.  The Court carried out a detailed comparison of the two roles and found that a reasonable employer could not conclude the differences between the two roles were sufficient to justify a ‘contestable selection process’.  The Court concluded Mr Kreider should be appointed in the new role, despite there being other candidates.

These are just two recent cases which highlight the potential risks for an employer when looking at making an employee redundant.  It is therefore crucial you take legal advice before embarking on restructuring.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co who normally advises you, or alternatively contact:

Kirsten Maclean

(03) 477 8870 or (09) 379 0055


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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