Redundancy - Employers Must Get the Process Right

 Deed v Procraft Construction Ltd, [2025] NZERA 654 

This case highlights that employers are still getting restructuring processes wrong. A failure to genuinely consult and a lack of clear business justification resulted in more than minor procedural flaws — and ultimately proved costly for the company.

Background

Mr Deed was employed as a carpenter by Procraft Construction Ltd from 13 November 2023. On 28 February 2024, the sole director and manager, Mr Farrand, made Mr Deed redundant. Mr Deed subsequently raised a personal grievance for unjustified dismissal.

Mr Farrand advised that the position was being disestablished due to the loss of contracts and that redundancy was applied on a “last on, first off” basis, with two weeks’ notice issued in line with company policy.

However, the Employment Relations Authority (ERA) found the redundancy was not supported by genuine business reasons. Evidence showed the company remained financially viable. In fact, by October 2024 the company had launched a new website, rebranded its vehicles, and hired additional staff.

Procedural Failures Identified

For a restructure to be procedurally justified, employers must meet good faith obligations — including providing relevant information and meaningful opportunity for feedback before decisions are made.

The Authority identified four key failures:

1. No financial information provided to justify the redundancy, denying the employee the ability to meaningfully respond.
2. The “last on, first off” rule was not set out in the employment agreement or company policy.
3. Selection criteria were disclosed only after the decision had been made — again removing the opportunity for input.
4. No evidence that alternatives to redundancy were properly considered.

Decision

The Authority found the procedural flaws were more than minor and determined the dismissal was unjustified.

Procraft was ordered to pay:

• $4,690 in lost wages
• $15,000 in compensation for hurt and humiliation

Key Takeaways for Employers

• Ensure genuine business reasons exist before initiating a restructure — and communicate the supporting information.
• Provide draft selection criteria to affected employees and invite feedback before final decisions are made.
• Document and evidence consideration of alternatives to redundancy.

Getting the process wrong exposes organisations to significant financial and reputational risk.

Support & Training

Business Canterbury is running a Restructuring and Redundancy ‘hot topic’ workshop to assist employers to get these processes right and avoid costly financial mistakes. Refer attached link for more information and how to register on Tuesday 24 March 2026.

For more information and specialist avice in this area, please contact me at hradvice@businesscanterbury.co.nz