Business Of Restructuring
With economists predicting a downturn in the economy, it is timely to review employers' obligations when restructuring. Any economic downturn is likely to lead to business sales, restructuring and other efficiency measures. Before you start, check your employment agreements
Employment Protection Provisions
A business cannot be 'restructured' as defined in the Employment Relations Act 2000 unless the affected employees' employment agreements contain 'employee protection provisions'. So if your employees don't currently have employment protection provisions in their employment agreements, you will need to insert these before you can restructure.
Restructuring includes sale, transfer or contracting out all or part of a business. Restructuring does not include sale of a business by a sale of shares, or while the employer is bankrupt or in receivership or liquidation. Employee protection provisions for most employees are provisions providing a process the employer will follow to negotiate with a proposed new employer about affected employees. Some categories of employees, such as cleaners and cafeteria staff, ('vulnerable employees') get a higher level of protection than other employees. Vulnerable employees have the right to choose to transfer to the new business on their existing terms and conditions of employment, if they are made redundant because of the restructuring. The new business must agree redundancy compensation for any transferring employees it wishes to make redundant, unless their previous employment agreement excluded compensation in that situation.
For further information on union clauses, case law on this area and pitfalls to avoid, check out the article in full which was written by John Hannan and Rani Amaranathan, DLA Philips Fox team, for HRINZ publication titled "Rules for business restructuring - a timely reminder ".