Employment Relations Act 2000 Compliance During a Restructure: A Practical Guide

The Employment Relations Act 2000 (ERA 2000) is the governing statute for all employment relationships in New Zealand. During a restructure, it imposes specific obligations on employers — obligations that go well beyond simply giving notice and writing a final pay cheque.

This guide covers the key ERA 2000 compliance requirements for employers undertaking a restructure: what the Act requires, where employers most commonly go wrong, and how to structure a process that will withstand scrutiny from the Employment Relations Authority (ERA) or Employment Court.

Why Compliance Matters

A restructure that fails ERA 2000 requirements can be found to constitute an unjustified dismissal even if the underlying business rationale is sound. The Employment Relations Authority takes a two-stage approach:

Was the dismissal substantively justified? — Was there a genuine commercial reason to disestablish the role?

Was the process followed fair? — Did the employer comply with the good faith obligations in section 4 of the ERA 2000?

Both stages must be satisfied. A genuine restructure carried out without proper process is not protected. This is a frequent and expensive surprise for employers who assume a real business need alone is sufficient.

Part 1: The Good Faith Baseline (Section 4)

Section 4 of the ERA 2000 requires all parties to an employment relationship to be:

Active and constructive in maintaining a productive relationship

Responsive and communicative — each party must be genuinely open to feedback from the other

Honest and transparent — the employer must not mislead or deceive the employee about matters affecting their employment

For restructures specifically, section 4(1A)(c) is the critical provision. It requires the employer to provide employees with access to information relevant to the continuation of the employment and to give them an opportunity to comment on that information before the employer makes a decision.

The phrase "before the employer makes a decision" is not decorative. Courts interpret this strictly. An employer who has already decided to make roles redundant before the consultation begins — even informally — is not meeting the good faith standard. In *NZ Fasteners Ltd v Tahi* [2004] ERNZ 488, the Authority found a breach where the employer's consultation was "an exercise in going through the motions".

Part 2: Part 6A — Vulnerable Employees

Part 6A of the ERA 2000 (sections 69A–69OI) provides special protections for employees engaged in specified services who are at risk of losing their employment because of a transfer of business. Specified services include:

Cleaning services

Food catering services

Laundry services

Orderly services

Security services

Where Part 6A applies, affected employees have a right to transfer their employment to an incoming employer on the same terms and conditions. The outgoing employer must provide written notice to affected employees and the incoming employer at least 21 days before the transfer date.

Part 6A compliance is strict. There is no discretion for the ERA or court to excuse a failure. If you operate in, or are restructuring, any of these service areas, specialist legal advice is essential before you issue any proposal.

Part 3: Collective Agreements

If any affected employees are covered by a collective agreement (CA), the CA governs many aspects of the restructure process — often in ways more protective than ERA 2000 minimums. Key areas to check include:

Redundancy compensation: Many CAs specify a payment formula (e.g., 4 weeks per year of service, capped at 20 weeks). Where a CA provides for redundancy compensation, it is contractually enforceable and must be paid.

Consultation procedures: Some CAs require consultation with the union, not just the employee — and may specify minimum timeframes or meeting requirements. Failure to follow CA consultation provisions is both a contract breach and potentially a good faith breach.

Redeployment obligations: Several CAs require the employer to actively offer redeployment before making a role redundant, and give the employee a right to decline redeployment without it affecting their redundancy entitlements.

Selection criteria: Where multiple roles are at risk and the employer is selecting who will be made redundant, a CA may specify selection criteria (e.g., skills matrix, seniority). Deviating from agreed criteria is a common basis for personal grievances.

Before issuing any restructure proposal, pull the relevant CA and identify every provision that applies. Do not assume the ERA 2000 is the ceiling — it is the floor.

Part 4: The Genuine Redundancy Test

Under section 103A of the ERA 2000, a dismissal is unjustified if a fair and reasonable employer could not have dismissed the employee in the circumstances. The Employment Relations Authority applies an objective test: not "could this employer have done this?" but "could a fair and reasonable employer have done this in this employer's position?"

For redundancy, the Authority looks at whether:

The role genuinely ceased to be needed

The selection process was fair (if multiple roles were at risk)

Genuine consultation was provided

Redeployment was genuinely considered

The role, not the person, must be redundant. If the role's duties are simply transferred to another person — particularly a person brought in after the affected employee was made redundant — this is strong evidence that the role was not genuinely surplus. In *Unison Networks Ltd v Carew* [2020] NZEmpC 82, the Court found the employer had restructured a role to remove a specific employee and held the dismissal unjustified.

Part 5: Redeployment Obligations

ERA 2000 does not impose an explicit statutory obligation to redeploy, but good faith requires active consideration of redeployment as an alternative to redundancy. The obligation is to genuinely look, not to guarantee a result.

Best practice documentation includes:

A list of all current vacancies reviewed and the date they were reviewed

The criteria against which the affected employee was assessed for each vacancy

The outcome of any redeployment discussions (accepted, declined, not suitable — and why)

Documenting this process protects against personal grievance claims alleging the employer made up its mind without considering alternatives.

Part 6: Personal Grievance Exposure

An employee has 90 days from the date of their dismissal (or the date they became aware of the action giving rise to the grievance) to raise a personal grievance under section 114 of the ERA 2000.

Common personal grievance bases in restructures:

| Grievance basis | Description |

|---|---|

| Unjustified dismissal | Process or substantive failure — most common |

| Breach of contract | Failure to follow CA or IEA redundancy provisions |

| Unjustified disadvantage | Failure to consult on selection criteria before applying them |

| Discrimination | Restructure used as a pretext for removing a protected characteristic |

Remedies available include reinstatement, lost wages, and compensation for humiliation, loss of dignity, and injury to feelings — which regularly runs to $15,000–$30,000 per claim.

Part 7: The Selection Process

Where more roles are at risk than will actually be disestablished — that is, where the employer is choosing who will be made redundant — the selection criteria and process must be fair.

Objective criteria are required. "We kept the better performer" is not acceptable without an objective measurement. Selection criteria typically include:

Skills and experience relevant to the restructured roles

Performance (supported by documented appraisals, not impressions)

Flexibility and adaptability

Disciplinary record (used carefully — must not be used to settle old scores)

Seniority ("last in, first out") is not required by law unless a collective agreement specifies it, but it has the advantage of being objective and difficult to challenge.

Before finalising selection decisions, share the criteria with affected employees and give them the opportunity to respond — this is both a good faith requirement and good practice.

What Effective ERA 2000 Compliance Looks Like

In summary, a defensible ERA 2000-compliant restructure process includes:

A documented commercial rationale that justifies the restructure before any proposal issues

A written proposal issued to all affected employees (and, where applicable, their unions)

Reasonable consultation period with genuine openness to feedback

Documented consideration of every piece of feedback received

Active redeployment assessment with written records

Objective selection criteria applied consistently and shared with affected employees

Final decision communicated in writing with reasons

All statutory and contractual entitlements paid at exit

The common thread is documentation. The ERA and Employment Court reconstruct what happened from written records. Where records are absent, the Authority draws inferences — usually against the employer.

Using Technology to Support Compliance

Restructured is built specifically for New Zealand HR teams navigating the ERA 2000. The platform:

Guides you through a legally sequenced process aligned with the ERA 2000 good faith requirements

Generates consultation proposal documents, meeting records, and feedback trackers

Tracks deadlines for consultation periods and collective agreement requirements

Creates an auditable record of every step — including redeployment assessments and selection decisions

Flags obligations specific to collective agreement provisions entered into the system

When an employee raises a personal grievance 80 days later, the documentary record is already built. You are not reconstructing a process from memory.

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*This guide provides general information about ERA 2000 compliance and does not constitute legal advice. For specific advice on your situation — particularly where collective agreements or Part 6A obligations apply — consult a New Zealand employment lawyer. Employment New Zealand also provides free guidance.*