Restructuring law 'worrying employers'

The Employers & Manufacturers Association claims some employers are putting off restructuring their businesses because it's become too hard to do so under employment law.

In an annual analysis of decisions made by the Employment Relations Authority, some three quarters of employers who lost personal grievance cases were found to have followed inadequate processes during restructuring.  Overall some 69 per cent of employers lost in all restucturing-related personal grievances, 74 per cent of those because of inadequate process.

EMA employment services manager David Lowe says employers are saying making changes to their business are now so difficult they're discouraged from doing so because of the complicated procedural requirements of employment law. These requirements were not set out in the legislation but had ''morphed over time'' from a myriad of court cases, Lowe said.

Chen Palmer employment lawyer Susan Hornsby-Geluk said the law in relation to restructuring had shifted in the past two years where the Employment Relations Authority was not second-guessing employers' reasons for restructuring but had firmed up on procedural requirements, in particular getting stricter around obligations to provide all relevant information, consider redeployment, to explain the selection process when down-sizing and the level of consultation.

But Simpson Grierson employment lawyer Phillipa Muir described the employers association's concerns as ''scaremongering'' and said in her experience ''by and large most people now understand they have to have a good reason for restructuring and go through fair process''.

Employers point to an April case involving downsizing at Massey University where the institutation lost a personal grievance case after failing to give an academic who lost their job the interview and assessment notes of another employees in the same area that had been retained. The university was also criticised for some of the selection assessment not having been written down.

Many employers think the Massey University case, which was not appealed, went too far, says Hornsby-Geluk. ''The case had caused a lot of concern to employers about their restructuring because they have to cast the net extremely widely in terms of what information has to be provided,'' she said.

Muir said the Massey case was a ''bit of an aberration'' and did require more stringent procedures from employers than had previously been required but that didn't mean employers couldn't now downsize and are ''not able to get the process right''.

Overall the number of personal grievance cases for 2010 (591 claims) was similar to the 579 taken in 2009.

The cost of an employer defending themselves successfully was on average $9,880 and the total bill for employers who slipped up was on average $34,411. For employees who win the average pay out was $11,023 after legal fees and those who lost were facing an average bill of $13,058.

Both employment lawyers said they were concerned at the awards and costs granted by the ERA not matching the expense of taking the action, particularly because the more complex cases tended to end up with the authority rather than being settled beforehand.

''It's an area of concern that if an employer is successful in the authority the awards they're entitled to are only equal or less than the costs of getting there,'' said Hornsby-Geluk. The costs awarded in the ERA were much lower than in the High Court scale, said Muir, despite the cases being of similar complexity and she understood the government was looking at the issue.

The EMA's analysis also showed that 20 per cent of ERA cases were settled in Wellington compared to 8 per cent nationally. The difference is thought to relate to the higher number of public sector employers unwilling to pursue a case where taxpayers' money is at stake and possibly more experienced authority members in that region pushing for settlements.

- BusinessDay.co.nz