Business Restructuring: The pitfalls of not applying agreement provisions

28 May 2024

 The process of restructuring can be complicated at the best of times – both for the employer and the affected employees.  It is usually an emotionally charged time, and there are considerable risks to the business if the proper process is not followed.

In E Tū Incorporated v Television New Zealand Ltd [2024] NZERA 276, the Employment Relations Authority found that TVNZ’s restructure process did not comply with the relevant collective agreement. As a result, the Authority ordered TVNZ and E Tū back to mediation, in the hope that the parties will reach a mutually agreeable resolution.

Part 10 of the collective agreement sets out the process that TVNZ has agreed to follow with staff in the management of change. Clause 10.1.1 states that it will support ‘the active participation’ of staff in the development of the organisation and changes in workplace practices. This requires the acknowledgement and respect for the role of staff who are organised in the independent organisation of their union and ‘assisting’ staff to be involved in the ‘developmental stages’ of decision-making processes and in the business planning of the organisation. 

Clause 10.1.1 further records that change is an ‘evolutionary process’ and that employees will be ‘involved throughout.’ The aim of this participation is to ‘discuss all relevant information openly and honestly’ and to ‘reach agreement and make recommendations to management.’ In addition, TVNZ is to enter these discussions with ‘an open mind’ and that it will fully consider options and proposals put forward by staff and take any recommendations ‘fully into account’ as far as possible when making final decisions.

If after following the process outlined above, TVNZ identifies that it has a ‘surplus staffing situation,’ cl 10.1. 2 requires it to advise the relevant employees and their union of this fact and to provide ‘up to’ 28 days’ consultation between TVNZ and the union on the best options in relation to the surplus staffing situation. Should none be identified, other means to the resolve the situation may be considered and in the event that no agreement is reached, TVNZ may invoke the redundancy provision at cl 10.3(i).

The Authority noted that Part 10 of the collective agreement is an uncommon term, but the point is those provisions must be strictly followed. The Authority found that TVNZ did not do that.

A similar situation occurred in Tertiary Education Union v Vice Chancellor Auckland University of Technology [2022] NZERA 676, where the Authority upheld the TEU in its claim that AUT’s restructure process breached the collective agreement. AUT had offered voluntary redundancy as a first step, which might sound like a commonsense approach, but the collective agreement required specified positions to be identified before offering the opportunity of voluntary severance.

In this case some staff had already left through voluntary severance, but notice had to be suspended or withdrawn for other staff.

The Authority’s determination in both cases serves as an important reminder to carefully apply the specific terms of the relevant employment agreement before proposing any business restructure.

If you are contemplating restructuring, click here to read our recent article on Fair Restructuring Processes

For further advice, click here to get in touch with us today, or contact: Tony Teesdale 021 920 323, Justine O’Connell 021 920 410, Michelle Battersby 021 993 735, or Esther Cohen-Goh 021 178 4111