United Kingdom Legal Documents


Termination of employment

UK employment resignation, termination & settlement agreements.

16

How to dismiss an employee

The requirements for a lawful dismissal

In order to be lawful, the dismissal of an employee

  • must be substantively justified, and
  • must be conducted in a procedurally fair manner

In order to be substantively justified, there must be a genuine reason for a dismissal. The requirements of procedural fairness may vary depending on the circumstances; for example, in serious cases the employer will be justified in dismissing the employee without first giving a warning (see below).

If an employer issues a warning or dismisses an employee unlawfully, an employee can lodge a personal grievance claim with the Employment Relations Authority. The employee can be awarded lost wages and damages for distress. See How to defend a personal grievance claim brought by an employee.

The Employment Relations Service in the Department of Labour can provide information and mediation services to help deal with employment problems. Contact them on 0800 800 863. In order to be substantively justified, there must be a genuine reason for a dismissal. The requirements of procedural fairness may vary depending on the circumstances; for example, in serious cases the employer will be justified in dismissing the employee without first giving a warning (see below). The test of whether the dismissal was justifiable and the procedure was fair is an objective one - namely, whether it meets the standard of what a fair and reasonable employer would have done.

Dismissal without notice for serious misconduct ("summary dismissal")

If there has been serious misconduct, a summary dismissal will be justified – that is, the employee can be dismissed without receiving any earlier notice or warning. However, the dismissal must still be procedurally fair (see below for the general rules of procedural fairness). Examples of serious misconduct include:

  • theft or some other act of dishonesty
  • fighting in the workplace or assaulting an employer or co-worker
  • breaching work rules
  • deliberately disobeying a lawful and reasonable instruction from the employer
  • possessing illegal substances at work

Even if an employee is dismissed for serious misconduct, he or she is still entitled to outstanding wages, holiday pay and any other entitlement under the employment contract.

Poor work performance and less serious misconduct

However, if the ground for taking action is poor work performance or some less serious form of misconduct, the employer cannot dismiss the employee unless there have been previous warnings about the poor performance or misconduct.

The accepted procedure is usually to first give an oral warning, then a formal written warning, then a final written warning, and then, if necessary, dismissal.

General rules of procedural fairness

An employer is generally required to perform the following steps to ensure that a dismissal is procedurally fair. These will apply whether it is a summary dismissal or a dismissal after warnings.

  • You must carry out a full investigation into the alleged behaviour.
  • The employee should be informed about the exact nature of the allegations and, where appropriate, that dismissal is a possible outcome of the disciplinary process.
  • The employee should be given an opportunity to be heard.
  • The employee should be given the option of having a support person or lawyer present when the hearing takes place.
  • Unless the conduct in question justifies summary dismissal, the employee must be warned and asked to stop the misconduct or improve the poor performance. In appropriate cases, the employee should be given assistance in this. An accepted procedure is to first given an oral warning, then a formal written warning, then a final written warning.
  • The employee should be given the reasons for the decision that you eventually reach. It is advisable that these be given before any dismissal. However, the employee has the right, within 60 days after the dismissal or after becoming aware of it, to request you to provide a written statement of the reasons; you must then provide the statement within 14 days.
  • A dismissal should be notified in writing.

An employee can be suspended on full pay pending the outcome of the disciplinary process.

Compliance with the employment contract

The employer must also ensure that any dismissal is carried out in compliance with any specific terms of the employment contract. For example, the contract might set out the warning procedure that must be followed or a definition of "serious misconduct".

Probationary employees

The EMPLOYMENT RELATIONS ACT 2000 allows an employment agreement to provide that the employee will serve a period of probation or trial, in which case the agreement must state this is writing.

However, this does not mean that the employer does not have to follow the requirements of procedural fairness in dismissing the employee: the employer must still provide the proper warnings and provide the employee with assistance, training and opportunities to improve his or her performance, the same as with any other employee.

However, it may be that an employer will be permitted a wider discretion in the area of substantive reasons for the dismissal than is the case with permanent employees.

Cautionary notes
  • It can be difficult for an employer to decide whether misconduct is serious enough to justify a summary dismissal or whether only a warning is justified. If a warning is given and the misconduct is repeated, an employer must still comply with the requirements of procedural fairness set out above before taking any further action.
  • Every situation is different, and the way in which the guidelines given above should be applied can vary. It is therefore essential for an employer to obtain legal advice throughout the disciplinary process.

How to bring a wrongful dismissal claim against your employer

Introduction

If you can show you have been wrongfully (or "unjustifiably") dismissed, you can bring a personal grievance claim against your employer to the Employment Relations Authority. For information on personal grievances, see How to bring a personal grievance against your employer.

The courts have interpreted unjustified dismissal as including both actual and "constructive" dismissals (see below for constructive dismissals).

When is a dismissal justified?

For a dismissal to be justified it must be both substantively and procedurally fair – that is, there must have been a good reason for the dismissal ("substantive fairness"), and the way in which the dismissal was carried out must have been fair ("procedural fairness"). The employer must have acted fairly and reasonably. The new EMPLOYMENT RELATIONS ACT 2000 (which came into force on 1 October 2000) also requires employers to act in good faith when taking disciplinary action.

There are a variety of substantive reasons that would justify dismissal. Serious misconduct justifies immediate (or "summary") dismissal, without the need for any warnings to be given; examples of serious misconduct include theft, assault, breaching work rules and disobeying direct instructions. Lesser forms of misconduct or poor work performance require warnings to be given before a dismissal will be justified.

Unjustified dismissal on the grounds of procedural unfairness

Frequently claims for unjustified dismissal will arise where a proper procedure has not been followed leading up to the termination, even though there might have been a legitimate reason for the dismissal.

If you are dismissed for poor work performance or misconduct there are procedures that your employer must follow, including a proper investigation of the facts, the opportunity for you to consider and respond to any allegations, and the right to be represented. Any breach of this procedure is likely to make the dismissal unjustified. For this procedure, see How to discipline an employee and How to dismiss an employee.

"Constructive" dismissal

There may also be an unjustified dismissal even though there was formally no dismissal at all - this is known as a "constructive" dismissal. Examples are where:

  • an employee is given a choice between resigning or being dismissed, or
  • an employer follows a course of conduct with the deliberate and dominant purpose of coercing an employee to resign, or
  • there is a breach of duty by the employer leading an employee to resign (such as an unsafe work environment, false accusations of misconduct, a unilateral variation of an employment agreement, or a gross breach of the employer's contractual obligations)

It is unlikely that the Employment Relations Authority (which replaces the Employment Tribunal) will find in your favour if it considers that the employer acted reasonably and with justification or if there has been no breach of duty by the employer.

Termination of fixed-term contracts

The premature termination of a fixed-term employment contract may justify lodging a personal grievance claim based on unjustified dismissal. In this situation the damages will usually be the salary for the remainder of the term of the contract.

Cautionary notes
  • Whether or not you have been unjustifiably dismissed will depend very much on the circumstances of your particular case. It is therefore vital that you receive legal advice as soon as possible so that the appropriate procedures are followed and the necessary action is taken.
  • You have only 90 days from your dismissal to submit a personal grievance to your employer (see How to bring a personal grievance against your employer. You should consult a lawyer before taking this step.

How to challenge being made redundant

Introduction

What is a redundancy and what can I do about it?

A redundancy is when an employer dismisses an employee on the ground that the employee's position is being discontinued for business reasons.

In general, an employer is entitled to make you redundant if this is for genuine business reasons, and is not required to pay you compensation unless there is a specific agreement with you to do this.

But in some situations – for example, if the process by which you are made redundant is unfair – you will be able to apply to the Employment Relations Authority for a remedy against your employer.

Redundancies and restructuring

Special laws protect employees affected by restructuring where the work they do will be carried on by employees of a new employer or by another person. Employees in specified industries where restructuring is frequent and employees have little bargaining power (such as cleaning and food-catering services) have the automatic right to transfer to the new employer on the same terms and conditions. If the new employer then makes the employee redundant, the employee is entitled to redundancy payments, either as agreed with the new employer or as set by the Employment Relations Authority: see below, "Protections for vulnerable workers affected by restructuring".

Employees outside the specified industries are given a lesser form of protection. Their employment agreement must include a negotiated provision setting the process and content for negotiations between the employer and any new employer in a restructuring situation as it affects the employees, and the process for determining what entitlements, if any, will be available to employees who don't transfer to the new employer: see below, "Restructuring: Protection for workers outside the specified industries".

Compensation for redundancy

Am I entitled to compensation if my employer makes me redundant?

You have no automatic right to be compensated for being made redundant.

Whether or not you are compensated will depend on whether you or your union has agreed on this with the employer, either in your employment agreement (that is, before the redundancy) or after the redundancy has been planned.

The rule that there is no automatic right to compensation does not apply in the case of restructuring in specified industries where workers are particularly vulnerable (such as cleaning and food-catering services), if the new employer makes a transferring employee redundant: see below, "Protections for vulnerable workers affected by restructuring".

Challenging a redundancy

On what grounds can I challenge being made redundant?

You can challenge the redundancy if:

  • the redundancy was not for genuine commercial reasons (that is, it was not substantively justified), or
  • your employer did not act fairly and reasonably in carrying out the redundancy (procedural unfairness), or
  • your employer did not comply with any terms of your employment contract dealing with redundancy

If one of these grounds apply, what action can I take?

If any of these grounds apply, you can bring a personal grievance against your employer to the Employment Relations Authority: see How to bring a personal grievance against your employer. (There are a number of grounds for bringing a personal grievance: a personal grievance on the basis of a redundancy comes under the general ground of unjustified dismissal.)

It may be that your employment agreement deals in some way with redundancy and that your employer hasn't complied with those contractual terms. For example, your employer may have refused to pay some or all of the compensation due to you under the agreement, or the employer may not have followed the procedure that the agreement specifies for selecting the employees that will be made redundant. If this is the case, then you also have the additional right to apply to the Employment Relations Authority to have those terms enforced. In the employment legislation this is called a "dispute", and is separate from the personal grievance procedure.

Whereas you must raise a personal grievance with your employer within 90 days, there is no such restriction in the case of a "dispute". The only time limit is that you must apply to the Employment Relations Authority within six years of when the events in question happened.

If your agreement is silent on the question of redundancies, then your only course of action is a personal grievance (on the basis that the employer did not have genuine commercial reasons or that the process was unfair). But it may be that an employer's failure to follow contractual terms will be the ground, or one of the grounds, for a successful personal grievance. For example, if the employer ignores a selection procedure set out in the agreement, the courts are very likely to see this as procedural unfairness justifying a personal grievance.

Employment agreements in most industries must have a negotiated provision protecting employees affected by restructuring where their work will be carried on by employees of a new employer or by some other person. The provision must set out, among other things, the process for determining what redundancy entitlements, if any, will be available to employees who don't transfer to the new employer. These rules covering restructuring are explained in detail below, under the heading "Restructuring: Protection for workers outside the specified industries" and the headings that follow it.

What are "genuine commercial reasons"?

For a redundancy to be substantively justified, there must be genuine commercial reasons for it.

This does not mean "adequate" commercial reasons. The courts are interested only in whether the employer is genuinely motivated by business considerations, and in general will not substitute their own judgement for the employer's about whether the reasons for the redundancy are adequate. Provided the employer made a business decision in good faith, the courts will leave it up to the employer to decide what is best for the business.

This means that you will not succeed against the employer on this point merely by showing, for example, that the redundancy was avoidable and that the business would have survived had your job continued. To be successful you must show that the employer had improper motives for the redundancy – for example, that the employer was unhappy with your work performance.

If the employer creates a new position that is substantially the same as the old position the redundancy is not justified.

The EMPLOYMENT RELATIONS ACT 2000 also specifically requires employers to act in good faith when making employees redundant.

When can I challenge a redundancy for "procedural unfairness"?

Even if you were made redundant for genuine commercial reasons, you may still have a remedy of some kind if the procedure that your employer followed was unfair.

The requirements for procedural fairness will vary depending on the particular circumstances, and it is possible to give only some general guidelines here. In some cases, particularly where there are only a few employees involved, the courts will place more extensive requirements on employers, and in determining whether the process was fair will consider such things as whether the employer consulted you, whether redeployment options or other alternatives were considered, whether you were given access to counselling, and whether you were given reasons for the decision.

In other cases, however – for example, if redundancies are inevitable because of major restructuring or solvency problems – the requirements of a fair process will be relatively minimal, and will probably focus on the selection process for the redundant employees, the notice they are given, and the payment of any compensation. (Note that employment agreements in most industries must include a negotiated provision to protect employees where the work they do will be carried on by employees of a new employer as a result of restructuring. The provision must set out, among other things, the process for determining what entitlements will be available for employees not transferring to the new employer: see below, "Restructuring outside the specified industries".)

If your employer has ignored relevant procedures specified in your employment agreement, the courts will very likely see this as procedural unfairness.

How much notice must I be given?

If the employment contract specifies a particular period of notice, then you must be given that period of notice.

If the contract doesn't deal with notice, then you must be given a "reasonable" period of notice. What is reasonable will depend on the particular circumstances.

What remedies are available to me?

The Employment Relations Authority can impose a number of remedies in personal grievance cases, including reinstatement or monetary compensation.

If your employer had improper motives in making you redundant, then the Authority may reinstate you in your former job.

If there has been procedural unfairness, you may be awarded compensation for the distress caused by the manner in which the redundancy was carried out. In these cases, the remedy is directed to the particular wrong done to you: the Authority will focus on the stress and trauma that you were caused by the way in which the redundancy was carried out, and not on the effects of losing your job. Therefore any compensation cannot take into account future economic loss.

Protections for vulnerable workers affected by restructuring

The EMPLOYMENT RELATIONS ACT 2000 gives you some protection when, as a result of restructuring, the work you do would be carried out by employees of a new employer or by another person.

The level of protection depends on whether you work in one of several industries specified by the Act in which workers are particularly vulnerable. In those industries, you can choose to transfer to the new employer, on the same terms and conditions as you had before.

Workers outside those specified industries are given a lower level of protection. Their employment agreement must include a negotiated provision setting the process and content for negotiations between the employer and any new employer in a restructuring situation as it affects the employees, and the process for determining what entitlements, if any, will be available to employees who don't transfer to the new employer. See below "Restructuring: Protection for workers outside the specified industries".

What are the specified industries in which workers are given extra protections?

These are industries in which restructuring is frequent and has tended to undermine terms and conditions of work, and in which workers have little bargaining power, namely:

  • cleaning or food-catering work in any workplace
  • laundry work in hospitals, rest-homes or educational institutions
  • orderly work in hospitals or rest-homes
  • caretaking work for schools, universities, polytechnics and other educational institutions

What types of restructuring are covered by the protections for vulnerable workers?

If you work in one of the specified industries, you'll be protected in the following types of restructuring situations:

  • when the company you work for is sold
    • for example, you clean for a cleaning company and that company is sold to a different cleaning company
  • when the company you work for loses the contract for the work you do to another business (the Act calls this "subsequent contracting")
    • for example, you work for a catering company that has a contract with an airport, and the airport then gives the catering contract to another catering company
  • when the work you do is "contracted out"
    • for example, you work for a school doing cleaning work and the school then gives the cleaning work to a cleaning company
  • when the company you work for loses the contract for the work because the customer wants to do the work themselves (the Act calls this "contracting in")
    • for example, you work for a catering company doing catering work for a rest-home, and the rest-home then decides to get the catering done by its own employees

Employee can transfer to new employer

In those restructuring situations, you have the right to transfer to the new employer, on the same terms and conditions.

Before the restructuring your existing employer must tell you that you have the right to transfer, and tell you the date by which you must decide. You must be given a reasonable opportunity to make a decision. The employer must give you access to all the relevant information about the restructuring.

The new laws do not prevent you, before you decide whether to transfer to the new employer, from bargaining with your existing employer for alternative arrangements. Any alternative that you agree on must be in writing.

If you decide to transfer, you become an employee of the new employer, on the same terms and conditions, including as to whether you're full-time or part-time. This means that your old employment agreement continues, except that it's now with the new employer.

The date of the transfer is set by agreement between you and your previous employer; if you can't agree, it's the date on which the restructuring takes effect.

Your employment will be treated as continuous for the purpose of service-related entitlements, including annual holidays, sick leave, bereavement leave and parental leave. However, the new employer does not have to pay you for any annual holidays not taken before the transfer.

You cannot also receive redundancy entitlements from the previous employer under the previous terms and conditions.

What if I decide not to transfer to the new employer?

If you decide not to transfer to the new employer, this may mean that you're made redundant. The standard laws governing redundancies will then apply. If any term or condition of your employment excludes redundancy entitlements where you have the right to transfer to a new employer but choose not to transfer, that exclusion will still apply.

What if I transfer but the new employer makes me redundant?

If the new employer decides to make you redundant, you'll be entitled to any redundancy payments in your employment agreement. If your agreement doesn't provide for, or doesn't exclude, redundancy entitlements in that situation, you'll be entitled to redundancy payments from the new employer, with the appropriate amount to be agreed through negotiation with the new employer.

If you can't agree, you or the new employer can apply to the Employment Relations Authority for it to investigate. The Authority will rule on how further bargaining should happen, if it thinks further bargaining is possible. Alternatively, if it thinks further bargaining isn't warranted, the Authority will decide what amount of redundancy payment the new employer should pay you.

What if I have a fixed-term agreement?

If the reason for your agreement having a fixed term is linked to the end of your employer's contract to perform the services, or linked to an anticipated restructuring, you can still choose to transfer to the new employer despite your agreement having a fixed term.

If you transfer, the length of your employment agreement with the new employer will depend on what kind of restructuring it is:

  • If the work you do is "contracted out" (that is, your employer contracts another business to perform work that you were doing for your employer "in-house"), or if the company you work for loses the contract for the work you do to another business ("subsequent contracting"), your employment agreement will end when your new employer's contract to do the work ends.
  • If your new employer is taking over the work permanently because the company you work for is sold to them, or because the new employer is now doing the work in-house, you become a permanent employee.

If the reason for your agreement being fixed-term isn't linked to the end of your employer's contract or to an anticipated restructuring, you can still choose to transfer, but your agreement will end on the date or in the situation described in your fixed-term agreement.

What if I leave the job after I transfer to the new employer?

You receive holiday pay and other entitlements as if you had always been employed by the new employer.

Restructuring: Protection for workers outside the specified industries

If you work outside the specified industries listed above, you're given a lower level of protection in restructuring situations. In those cases, your agreement must include an "employee protection provision", which specifies the issues that your employer must negotiate with the new employer in relation to your situation, and the process that this negotiation will follow (see below for more details). The level of protection that employees will receive will therefore depend on what is negotiated between the employer, the employees and, where applicable, their unions.

Also, this protection does not apply to all of the types of restructuring in which workers in the specified industries are protected.

What types of restructuring are covered by the protections for workers outside the specified industries?

If you work outside the specified industries, you're protected when:

  • the work you do is "contracted out" (that is, your employer contracts another business to perform work that you were doing for your employer "in-house"), or
  • the company you work for is sold (including if it sells only the part of the business that affects you)

You're not protected when:

  • the company you work for loses the contract for the work because the customer wants to do the work themselves ("contracting in"), or
  • the company you work for loses the contract for the work you do to another business ( "subsequent contracting")

What does the "employee protection provision" in my agreement have to include?

If you work outside the specified industries in which workers are particularly vulnerable to restructuring, your employment agreement must include a provision that covers the following:

  • the process that your existing employer must follow in negotiating with a new employer about a restructuring, as it affects employees
  • the issues to be negotiated, including whether the employees will transfer to the new employer on the same terms and conditions
  • the process that will be followed to determine what entitlements, if any, are available to employees who don't transfer

Affected employees can choose whether or not to transfer

When an employer has arranged for an affected employee outside the specified industries to transfer to the new employer, the employee has a choice whether or not to transfer.

Cautionary notes
  • Because of the latitude the courts give employers in deciding whether a redundancy is substantively justified, it may well be that any remedy available to you will be for the process by which the redundancy was carried out. The requirements that your employer would have to meet in order for the process to be fair depends on your particular circumstances, and you will need to consult your union or legal adviser to determine whether the requirements have been breached in your case.

How to make an employee redundant

Introduction

If you are an employer and you wish to make an employee redundant, you must ensure:

  • that there are genuine commercial reasons for doing this (that is, that the redundancy is substantively justified)
  • that the process by which this is done is fair (procedural fairness), and
  • that you comply with any relevant terms in the employment agreement

Redundancies and restructuring

The EMPLOYMENT RELATIONS ACT 2000 also protects employees affected by restructuring where the work they do will be carried on by employees of a new employer or by another person. In some cases, where employees in certain industries have transferred to a new employer and are then made redundant, redundancy entitlements can be set by the Employment Relations Authority: see below, "Protections for vulnerable workers affected by restructuring" and the other headings that follow it.

When redundancies are justified

A decision to make an employee redundant is justified if you have genuine commercial reasons for doing this.

What are "genuine commercial reasons"?

What is important here is not the particular judgement that you make about what is in the best interests of your business; rather it's that you make your decision in good faith, that your reasons are genuine.

The courts have made it clear that they will not attempt to second-guess an employer's commercial judgement in making a position redundant. They will intervene if, say, it is shown that an employer's real motivation for making an employee's position redundant was because of the employee's poor work performance; in that case, genuine commercial reasons do not exist. But if the decision is based genuinely on commercial considerations, then the courts will leave you to decide how to run your business.

It is not necessary for it to be a matter of the survival of your business. You will be justified in making a position redundant even if this is part of normal business restructuring – adopting new technology perhaps, or dispensing with less profitable operations.

The EMPLOYMENT RELATIONS ACT 2000 also specifically requires employers to act in good faith when making employees redundant.

The process of making an employee redundant

How do I ensure that the redundancy process is procedurally fair to the employee?

What is procedurally fair to the employee will depend on the particular case. You will need to obtain legal advice to determine exactly what steps a fair process would require in your situation.

In situations where redundancies are essentially inevitable – for example, the business is insolvent or there is a major restructuring – it is likely that the requirements of procedural fairness will be fairly limited. In those cases, it will probably concern the selection process for the redundant employees, the notice they are given, and the payment of any compensation. (Note that employment agreements in most industries must include a negotiated provision to protect employees where the work they do will be carried on by employees of a new employer or by another person as a result of restructuring. The provision must set out, among other things, the process for determining what redundancy entitlements will be available for employees not transferring to the new employer: see below, "Restructuring: Protection for workers outside the specified industries".)

But in other cases, particularly where there are only a few employees made redundant, the requirements of procedural fairness may be more extensive. It may be necessary to consult with the employees, to consider possible alternatives to redundancy, and to provide employees with counselling.

If the employment agreement specifies procedures for making employees redundant, your failure to comply with them will very likely be seen by the courts as procedural unfairness.

The selection of employees to be made redundant

You are given a wide discretion to determine the criteria for selecting employees to be made redundant. But these must be relevant to the needs of the new business, and your selection must be based on proper motives.

It may be that the employment agreement sets out a selection process, in which case this must be followed.

How much notice do I have to give employees?

If the employment agreement specifies a particular period of notice, then you must give that period of notice.

If the agreement doesn't deal with notice, then you must give a "reasonable" period of notice. What is reasonable will depend on the particular circumstances.

Compensation for redundancy

Do I have to pay compensation to the employees made redundant?

You are under no automatic obligation to pay compensation for redundancies. The matter is determined by the relevant employment agreement, and if the agreement doesn't provide for compensation, the employees aren't entitled to any.

The rule that there is no automatic right to compensation does not apply in the case of restructuring in specified industries where workers are particularly vulnerable (such as cleaning and food-catering services), if the new employer makes a transferring employee redundant: see below, "Protections for vulnerable workers affected by restructuring".

"Technical" redundancies

The phrase "technical redundancy" describes the situation where a business is sold and the new owners agree to take on the business's employees under substantially the same terms and conditions.

In this situation, because an employment agreement cannot simply be transferred from the old business owner to the new, the old employment ceases and therefore technically the employees have been made redundant. This means that if the old employment agreements provide for compensation for redundancies, the employees would be entitled to this compensation even though their employment has effectively continued.

To avoid this, employment agreements often specifically exclude technical redundancies from any provision for redundancy compensation.

However, the EMPLOYMENT RELATIONS ACT 2000 gives employees in certain industries a right to transfer to the new employer and to receive redundancy payments if the new employer decides to make them redundant: see below "Protections for vulnerable workers affected by restructuring". Employees in other industries get a lower level of protection: see below, "Restructuring: Protection for workers outside the specified industries".

Challenges by employees to a redundancy

Personal grievances

The employee can bring a personal grievance against you to the Employment Relations Authority if:

  • you did not have genuine commercial reasons for the redundancy
  • the process was unfair, or
  • you did not comply with the employment contract.

See How to defend a personal grievance claim brought by an employee.

The Authority can impose a number of remedies in personal grievance cases, including reinstatement or monetary compensation. If there has been procedural unfairness, the employee may be awarded compensation for the distress caused by the manner in which the redundancy was carried out.

Challenging a breach of an employment agreement

If you haven't complied with the terms of the employment agreement, the employee also has the additional right to apply to the Employment Relations Authority to have those terms enforced (called a "dispute" in the legislation).

This right is separate from the personal grievance procedure, and whereas a personal grievance must be raised with the employer in 90 days, there is no such restriction in the case of a "dispute". The only time limit is that the employee must apply to the Authority within six years of when the particular events happened.

Employment agreements in most industries must have a negotiated provision protecting employees affected by restructuring where their work will be carried on by employees of a new employer or by some other person. The provision must set out, among other things, the process for determining what redundancy entitlements, if any, will be available to employees who don't transfer to the new employer. These rules covering restructuring are explained in detail below, under the heading "Restructuring: Protection for workers outside the specified industries" and the headings that follow it.

Protections for vulnerable workers affected by restructuring

The EMPLOYMENT RELATIONS ACT 2000 gives some protection for employees where, as a result of restructuring, the work they do will be carried on by the employees of a new employer or by another person.

The level of protection offered depends on whether the employee works in one of several industries specified by the Act in which workers are particularly vulnerable (see below). Workers in those industries have the right to transfer to the new employer, on the same terms and conditions.

Workers outside those specified industries are given a lower level of protection. Their employment agreement must include a negotiated provision setting the process and content for negotiations between the employer and any new employer in a restructuring situation as it affects the employees, and the process for determining what entitlements, if any, will be available to employees who don't transfer to the new employer. See below "Restructuring: Protection for workers outside the specified industries".

What are the specified industries in which workers are given extra protections?

These are industries in which restructuring is frequent and has tended to undermine terms and conditions of work, and in which workers have little bargaining power, namely:

  • cleaning or food-catering work in any workplace
  • laundry work in hospitals, rest-homes or educational institutions
  • orderly work in hospitals or rest-homes
  • caretaking work for schools, universities, polytechnics and other educational institutions

What types of restructuring are covered by the protections for vulnerable workers?

Employees in one of the specified industries are protected in the following types of restructuring situations:

  • when the company they work for is sold
    • for example, they clean for a cleaning company and that company is sold to a different cleaning company
  • when the company the employee works for loses its contract for the work the employee does to another business (the Act calls this "subsequent contracting")
    • for example, the employee works for a catering company that has a contract with an airport, and the airport then gives the catering contract to another catering company
  • when the work done by the employee is "contracted out"
    • for example, the employee works for a school doing cleaning work and the school then gives the cleaning work to a cleaning company
  • when the company the employee works for loses the contract for the work because the customer wants to do the work themselves (the Act calls this "contracting in")
    • for example, the employee works for a catering company providing catering services for a rest-home, and the rest-home then decides to get the catering done by its own employees

Employer's obligations before the restructuring

Before the restructuring the employer must inform the affected employees that they have the right to transfer, and tell them the date by which they must decide. The employees must have a reasonable opportunity to make their decision. They must also be given access to all the relevant information about the restructuring.

The new laws do not prevent the employee, before deciding whether to transfer to the new employer, from bargaining with the existing employer for alternative arrangements. Any alternative agreed on must be in writing.

Employees who choose to transfer to new employer

If the employee decides to transfer, they become an employee of the new employer, on the same terms and conditions, including as to whether they're full-time or part-time.

The date of the transfer is determined by agreement between the employee and the previous employer. If they can't agree, it's the date on which the restructuring takes effect.

Their employment will be treated as continuous for the purpose of service-related entitlements, including annual holidays, sick leave, bereavement leave and parental leave.

A transferring employee cannot also receive redundancy entitlements from the previous employer under the previous terms and conditions.

Employees who choose not to transfer to the new employer

If employees decide not to transfer to the new employer, this may mean that they're made redundant. The standard laws governing redundancies will then apply. If any term or condition of their employment excludes redundancy entitlements where they have the right to transfer to a new employer but choose not to, that exclusion will still apply.

What if the new employer makes a transferring employee redundant?

If the new employer decides to make a transferring employee redundant, the employee will be entitled to any redundancy payments in their agreement.

If the agreement doesn't provide for, or doesn't exclude, redundancy entitlements in that situation, the employee will be entitled to redundancy payments, with the appropriate amount to be agreed through negotiation with the new employer. If they can't agree, either party can apply to the Employment Relations Authority for it to investigate.

The Authority will rule on how further bargaining should happen, if it thinks further bargaining is possible. Alternatively, if it thinks further bargaining isn't warranted, the Authority will decide what amount of redundancy payment the new employer should pay.

Obligation to provide new employer with information about employee transfer costs

From December 2006, potential new employers in a proposed restructuring have the right to be given information about the labour costs of employees who would have the right to transfer if the restructuring goes ahead.

They can request the information for the purpose of:

  • deciding whether to terminate a contract or to let a contract lapse
  • negotiating a contract
  • entering into a contract, or
  • tendering for work

What information is the new employer entitled to?

The information to which they're entitled includes:

  • how many employees are eligible to transfer
  • the wages or salary payable to those employees in a given period for doing work that may be subject to the restructuring
  • the total number of hours in that stated period spent by the employees doing the work that may be subject to the restructuring
  • the cost of all service-related entitlements, whether legislative (for example, under the HOLIDAYS ACT 2003) or as agreed between the employer and employee – such as the costs of annual leave and sick leave balances
  • the cost of any other employee entitlement, such as agreed entitlements that aren't due until a future date (long service leave, for example)

Who can ask for, and who has to provide, information about employee transfer costs?

  • Contracting in: If for example a rest-home is considering whether to bring in-house some catering work that it currently contracts out, the rest-home can ask the catering contractor for information about employee transfer costs.
  • Contracting out: If for example a school is considering entering into an agreement with a cleaning company to do cleaning work that is currently done by school employees, the cleaning company can ask the school for information about employee transfer costs.
  • Sale or transfer of business: If for example a cleaning company is considering whether to sell its business, potential buyers can ask the company for employee transfer costs information.
  • Subsequent contracting: If for example an airport's contract with a catering company is about to end and the airport has asked for tenders, a potential independent contractor can ask the airport for employee transfer costs information.

What if I don't have the information?

It may be that you don't have the information because the work has been subcontracted and is not performed by your employees. In that case, you must ask the subcontractor to provide you with the information; they must do so.

How much time do I have to provide the information?

You must provide the information in sufficient time to allow the person requesting it to use the information when deciding whether to enter into a restructuring.

Restructuring: Protection for workers outside the specified industries

A lower level of protection is given to employees in restructuring situations outside the specified industries in which workers are particularly vulnerable. In those cases, the employee's employment agreement must include an "employee protection provision", which specifies the issues that the existing employer must negotiate with the new employer in relation to the affected employees, and the process that this negotiation will follow (see below for more details). The level of protection that employees will receive will therefore depend on what is negotiated between the employer, the employees and, where applicable, their unions.

Also, this protection does not apply to all of the types of restructuring in which workers in the specified industries are protected.

What types of restructuring are covered by the protections for workers outside the specified industries?

An employee outside the specified industries is protected when:

  • the work they do is "contracted out" (that is, their employer contracts another business to perform work the employee was doing for their employer "in-house"), or
  • the company the employee works for is sold (including if it sells only the part of the business that affects the employee)

The employee is not protected when:

  • the company the employee works for loses the contract for the work because the customer wants to do the work themselves ("contracting in"), or
  • the company the employee works for loses the contract for the work the employee does to another business ( "subsequent contracting")

What does the "employee protection provision" in the agreement have to include?

If an employee works outside the specified industries in which workers are particularly vulnerable to restructuring, their employment agreement must include a provision that covers the following:

  • the process that the existing employer must follow in negotiating with a new employer about a restructuring, as it affects employees
  • the issues to be negotiated, including whether the employees will transfer to the new employer on the same terms and conditions
  • the process that will be followed to determine what entitlements, if any, are available to employees who don't transfer

Affected employees can choose whether or not to transfer

When an employer has arranged for an affected employee outside the specified industries to transfer to the new employer, the employee has a choice whether or not to transfer.

Cautionary notes
  • It has been possible to give only some general guidelines here about the requirements of procedural fairness. The precise requirements will depend on your particular case, and you should therefore obtain legal advice about the steps you should take.

NZ$44.40

This is a compromise agreement (or severance agreement) containing all the necessary legal provisions so as to prevent a later claim before an employment tribunal or county court.

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NZ$8.40

Amicable letter from the employer, acknowledging the employee's resignation, stating the effective date of termination, final salary payments and other resignation matters.

Document Delivery Format:Delivery format: Download MS Word file
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NZ$8.40

Use to assess the employee's reasons for leaving the position and to finalize outstanding issues with the employee.

Document Delivery Format:Delivery format: Download MS Word file
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Letter from employer to be used once the employee has worked their notice period.

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Letter from employer terminating the employment contract. Payment in lieu of notice is given.

Document Delivery Format:Delivery format: Download MS Word file
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NZ$8.40

Formal letter to employees to inform them of the sale of the business and their rights. Aids compliance with employment law and helps to prevent claims for unfair dismissal.

Document Delivery Format:Delivery format: Download MS Word file
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Help Support Email/Telephone:Limited - not legal advice
Country:England, Wales or Scotland jurisdiction
State:n/a
MainSiteUrl:www.NetLawman.co.uk
NZ$8.40

Formal letter to employees to inform them that the business will be contracted out to another location. Aids compliance with employment law and helps to prevent claims for unfair dismissal.

Document Delivery Format:Delivery format: Download MS Word file
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Document User Guide Available:Comprehensive document Guide Notes
Document Assembly Method:User fills in template blanks
Document Preview/Sample Available:Incomplete sample available
Help Support Email/Telephone:Limited - not legal advice
Country:England, Wales or Scotland jurisdiction
State:n/a
MainSiteUrl:www.NetLawman.co.uk
NZ$8.40

Letter verifying summary dismissal (without notice) for gross misconduct (with or without previous warnings), following a disciplinary hearing where the Standard Dismissal and Disciplinary Procedure applies.

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This letter will only be used in exceptional circumstances, where an employee may be dismissed immediately without a hearing under the 'Modified Dismissal Procedure' according to the Employment Act.

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NZ$8.40

Letter to an employee confirming their dismissal. Provisions to add you own relevant and unique reasons, with notes and guidance on how to do this so that you comply with relevant legislation.

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NZ$8.40

Letter detailing the reason for the employee's dismissal. Ensures that the employee understands why they were legitimately dismissed, thereby reducing the probability that they will make an unfair dismissal claim against you.

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State:n/a
MainSiteUrl:www.NetLawman.co.uk
NZ$8.40

Formal letter to an employee who has been accused of misconduct. Sets out the details of the suspension and aids compliance with employment legislation.

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Document User Guide Available:Comprehensive document Guide Notes
Document Assembly Method:User fills in template blanks
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Help Support Email/Telephone:Limited - not legal advice
Country:England, Wales or Scotland jurisdiction
State:n/a
MainSiteUrl:www.NetLawman.co.uk

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