Age discrimination held to be ulterior motive for dismissal

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Before 2013, case law on restructures and redundancies held that it was not for the Authority or the Employment Court to interfere with business decisions and retrospectively judge whether any decision or course of action made by a company was sound. Any redundancy resulting from a restructure would be justified, unless there was clear evidence of an ulterior motive.

It would be fair to say that for the 20 years before  2013, many a restructure was a thinly veiled targeted exercise in dismissing a difficult employee, without fear of reprisal.

Between 2013 and the present, however, a number of pivotal employment law cases have significantly altered the restructure/redundancy landscape. Employers were increasingly asked to justify restructures which led to dismissals, and also became obligated to offer redeployment to a redundant employee if there were any vacant positions that the redundant employee may be able to perform.

For employers and/or their advisors who have not kept up with these changes, a poorly thought out restructure designed to rid an employer of a troublesome employee, can prove a costly exercise.

A prime example is the May 2019 determination from the Authority; Davis v On All Floors (2016) Limited [2019] NZERA 313.

In 2016, On All Floors Limited was purchased by Doug and Katrina Robertson under the company name On All Floors (2016) Ltd (‘OAF’). The Robertsons had virtually no experience in flooring and readily offered an existing employee, Ian Davis, employment with the new company.

Davis was highly experienced and skilled in flooring, having worked in the industry for 42 years, including the last 25 years as the manager of Hills Flooring in Auckland and Hamilton. The Robertsons told Davis that they saw him as a key employee, and implied that he may soon be promoted in the business.

Davis’ duties increased significantly over the first two months, as he was responsible for all the measuring, quoting and drawing up of flooring plans. It soon became apparent that additional staff were needed, and Davis’ wife, who had also worked in the flooring industry, was employed as a part-time office assistant to help clear the backlog. Davis also suggested to Doug Robertson that employing a dedicated measurer might be a good idea.

For reasons not clear, Robertson reacted angrily to the suggestion of employing a dedicated measurer, and asked Davis if he thought he was the manager. The relationship appeared to deteriorate from this point, and Robertson made numerous comments about Davis being “too old” and not physically up to some of the tasks he was required to do. Davis was also disciplined for allegations he considered to be untrue, and the written warning he was issued with was subsequently held to be unjustified by the Authority.

Within three months of purchasing the business, the Robertsons contacted an employment advocate, saying they wanted to restructure and disestablish Davis’ position, and sought advice on how to do so in a “legally correct manner”. The restructure proposal was put to Davis on February 8 2017, and he was informed of the termination of his employment on February 21 2017 and told he did not need to work out his one week’s notice period. Despite there being a vacant position for a carpet/vinyl layer position, it was not offered to Davis as he was considered to be too old to physically do the job.

Despite being the most experienced employee in the business, Davis’ opinion was never sought on whether disestablishing his position, which largely did measuring and quoting, and distributing these tasks to the other layers, was a feasible option. Indeed, it appeared not to be the case as several months following Davis’ dismissal, the person whose name Davis had put forward when initially suggesting the company employ a dedicated measurer was employed in that role.

The Authority held that the evidence supported Davis’ concerns that the restructure was carried out for no other reason than to exit him, and further, that failing to offer him redeployment to the layer position based on the assumption that he was too old to carry out the physical requirements of that position, was age discrimination in breach of sections 104 and 105 of the Employment Relations Act 2000, rendering his dismissal unjustified.

Davis was awarded a total of $25,000 compensation for hurt and humiliation. As noted in the determination, the Authority could not order any additional remedies (such as lost remuneration, which can be anything from one to 12 months’ salary), as Davis had not asked for any, and the Authority cannot award remedies that an applicant has not sought.

Over the past five years, the onus on employers to justify a business decision to restructure which leads to redundancies, has increased significantly. By no means does this mean an employer cannot restructure their business to make it more efficient and productive, merely, that the old days of targeting an unwanted employee via a vaguely-supported restructure are long gone, and only genuine restructures are likely to be upheld as justifying a redundancy.

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About Author

Erin Burke

Employment Lawyer and Director at Practica Legal Email: erin@practicalegal.co.nz phone: 027 459 3375