Recession and Redundancy

The Spark October 2009
John Edmundson

As the recession has bitten, redundancies have risen and unemployment figures have begun to climb, Labour’s Darien Fenton has had her Private Member’s Bill drawn from the ballot. The Bill would enforce a minimum redundancy payout on all employers, starting at four weeks pay after one year of employment. The Labour Party of course is the party that introduced the Employment Relations Act, which does not even provide a definition of the word redundancy, let alone provide significant protection for workers. New Zealand workers actually have no legal right to redundancy compensation and very few have provision for it in their contracts.

Workers at LWR’s Wairarapa sites who were made redundant earlier this year have been told that they are unlikely to receive any more than seventy percent of their entitlement in redundancy and holiday pay. Approximately eighty percent of staff with written employment agreements (contracts) have no redundancy provisions at all according to a Massey University survey commissioned for the Department of Labour’s Restructuring and Redundancy Public Advisory Group.

The generally accepted legal definition of redundancy is the one provided by the Labour Relations Act of 1987. It states that a redundancy is “… a situation where…[a] worker’s employment is terminated by the employer, the termination being attributable, wholly or mainly, to the fact that the position filled by that worker is, or will become, superfluous to the needs of the employer…” New Zealand case law has always focussed on the position, not the worker, so it is the position that becomes redundant. What this means in effect is that it is the employer’s right to decide the structure of the business and, consequently, to make positions redundant, provided that the redundancies are “genuine” and are “carried out in a fair and reasonable manner”. The ERA added some largely worthless prerogatives to define “fair and reasonable”, primarily around the concept of good faith. Despite legal requirements for consultation with workers and their representatives and a 2004 amendment to the ERA intended to strengthen the definition of what a “fair and reasonable employer” would do, the Employment Court has consistently interpreted the law as placing the decision making power firmly in the hands of the employer:

“So long as an employer acts genuinely and not out of ulterior motives, a business decision to make positions or employees redundant is for the employer to make and not for the Authority or the Court…”

Those “genuine” reasons are very broadly defined: The introduction of new technology Rationalisations of staff to increase business efficiency Restructuring business operations Closure of the business Outsourcing Sale of the employer’s business

These conditions of “genuine” behaviour can be, and are, interpreted very broadly, making it very easy to define a job as a redundancy if it suits the employer to do so.

Workers cannot depend upon the Labour Party to gain them any improvements in their working conditions. Now in opposition after nine years in Government, Labour has suddenly discovered that the working people of this country have been having their rights and conditions eroded. Labour has proved time and time again that when in government they are both unwilling and incapable of delivering sufficient real gains for workers. That the Fenton Bill needed to be introduced as a Private Member’s Bill is itself indicative of Labour’s inability to deliver for workers. Workers will only get real gains when they fight for them as workers, because the Labour Party will not deliver.


  1. Darien Fenton says:

    John, thanks for drawing attention to my Redundancy Protection Bill. I could spend a lot of time going over why Labour didn’t bring in redundancy protection earlier. I could remind you that it was a manifesto promise in the 2008 election, but not so in earlier manifestos. I could say that was because it wasn’t a policy put forward by Labour members and affiliated unions, who had other priorities, such as protecting vulnerable workers in situations of contracting out of sale of business, which Labour dealt with in the ERA amendments 2004. But I won’t, because right now, I am focussed on getting support for my bill, because it won’t make it without a ground swell of support to persuade National that it should be sent to select committee at first reading. So, if, in your opinion, Labour failed, let’s not make it a failure of the Labour movement, because we can’t get over our differences. Surely it’s time we worked together on the issues we do agree on? If the Workers Party supports minimum redundancy rights, then please get behind the campaign on

    I don’t care who gets the credit, or the blame. I only care that workers in New Zealand are currently being made redundant, through no fault of their own, without any protection to tide them over during the hard times.

  2. John Edmundson says:

    Darien Fenton said she wouldn’t “spend a lot of time” apologising for Labour’s failures on workers’ rights, but in fact most of what she wrote above was exactly that. As she notes, it was only when Labour faced a crushing defeat at the polls that redundancy suddenly became a manifesto issue. The ongoing attacks on tertiary education, with accompanying redundancies, are a Labour legacy. I hope her Bill is passed (although I’m not holding my breath) because any protection is better than none at all. But it was a Labour government that unleashed the attacks on workers back in the 1980s and the three term Clark government did little to rectify any of the damage. Now that Labour are in opposition, they have suddenly discovered that workers are under attack in this country, as if that is a phenomenon that has only occurred in the last 11 months. Few workers have much faith in the Labour Party any more and I think that’s a good thing.

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