This is general information on employment law in New Zealand. It is not employment advice, nor does it constitute legal advice. If you need employment law advice on a specific matter, please contact us for assistance.
1. Both employers and employees are under a statutory duty of good faith in all dealings.
2. It’s important to get written employment agreements in place. Not only is it a legal requirement, it aligns expectation and provides certainty on terms, including trial periods, notice periods, redundancy compensation, confidentiality and intellectual property obligations, restrictive covenants, etc.
3. Founders are usually employees too – they can also bring a personal grievance against the company for unjustified disadvantage or unjustified dismissal – an employer’s actions must be both substantively and procedurally fair. Where the employer’s actions what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred?
4. An employee does not have a right to continued employment if a business can be run more efficiently without that position. The key question is whether there is a genuine commercial reason for determining that the position is redundant. Evidence of the rationale (e.g. detailed analysis of the proposal and commensurate savings) should be prepared and maintained to provide evidence of the genuine commercial reason for a restructuring proposal.
5. Without limiting the duty of good faith, an employer is required to give an employee access to relevant information and an opportunity to comment on that information before making any decision that will, or is likely to, have an adverse effect on the continuation of their employment.
6. Consultation requirements and timetable will depend on the nature of the workplace (number of staff, etc.) and context in which any restructuring is to take place (e.g. full business closure? Or individual redundancies?).
7. It is useful to provide affected employees with a written copy of the restructuring proposal – they often will not take in all the information during a first meeting.
8. Keep the costs of terminating the workforce in mind. In a redundancy situation where you’re looking to close the door tomorrow, even if no redundancy compensation is payable each employee remains entitled the notice period set out in their employment agreement, together with all outstanding salary and leave entitlements. (Accrued sick leave has no cash value and will not form part of any benefit payable on termination.)
9. Consider the impact of termination of any employee on your shareholder arrangements. Is there an employee share scheme in place? Do shares vest in the employee on termination? Is the employee required to sell shares back to the Company on termination?
10. Employee vs Contractor. It’s not as simple as claiming a party is one or the other. The real nature of the relationship is important – substance over form. If a “contractor” is determined to be an employee, that party may be able to make a personal grievance claim, claim for unpaid holiday, leave, etc., and tax issues will arise. Relevant matters include the actual operations of the parties, the level of control and integration, supply of own materials and ability to work for others and intention.