New Zealand Steel Ltd v Haddad [2023] NZEempC57

1 June 2023

The Employment Court’s decision in New Zealand Steel Ltd v Haddad is a useful reminder to employers everywhere undertaking workplace change that you need to get the basics right.

In 2019, New Zealand Steel (NZ Steel) proposed changes to its IT department, where Ra’ed Haddad worked as a manager. NZ Steel proposed a two-phase approach to this workplace change process. Phase one was to establish the “target state” for IT, and phase two proposed changes to various reporting lines as well as the disestablishment of Mr Haddad’s role.

NZ Steel undertook phase one without consulting Mr Haddad. It created three new managerial roles and also changed reporting lines – however, there were no redundancies. NZ Steel then presented Mr Haddad with a change proposal for phase two and invited feedback. Mr Haddad raised concerns about the proposal’s unintended consequences, resisted redundancy, and made it clear he was interested in redeployment. Despite Mr Haddad’s feedback, NZ Steel confirmed the change proposal and disestablished his role.

The Court was critical of NZ Steel’s consultation with Mr Haddad, noting its use of the word “proposal” throughout was “semantic only”. An essential problem for NZ Steel was the fact that Mr Haddad had been excluded from discussion around phase one, which (in the Court’s words) “set the scene for phase two and the outcome in relation to Mr Haddad’s position…”. That meant, by the time NZ Steel began ‘consulting’ with Mr Haddad on phase two, “there was no evidence of an open mind…”.

Having disestablished Mr Haddad’s role (albeit unjustifiably, in the Court’s ultimate view), the Court then addressed the question of redeployment. NZ Steel argued there is no obligation to offer redeployment in the absence of a contractual term requiring otherwise because “ obligation to deal fairly with an employee [does not] extend beyond the job in which he or she is employed.” This argument relied on the Court of Appeal’s decision in Thwaites[1], made under the former Employment Contracts Act 1991.

However, the Court instead applied Jinkinson[2], a subsequent decision made under the current Employment Relations Act 2000, which held that employers must consider redeployment when restructuring and also that an employer must comply with its good faith obligations, including after any decision on redundancy is made. In the Court’s view, this was a development in the law since Thwaites, occasioned by the introduction of the Employment Relations Act 2000, which “substantially altered the law in this area”.

So what does this decision teach us? Firstly, a genuine business reason for change isn’t always enough – it needs to be complemented by a fair process. And secondly, employers must consider redeployment and must proactively engage with affected workers on any redeployment options.

[1] New Zealand Fasteners Stainless Ltd v Thwaites [2000] 2 NZLR 565 (CA).

[2] Jinkinson v Oceana Gold (NZ) Ltd (No 2)[2010] NZEmpC 102.

Rob Davies is part of our Commercial Disputes & Employment team at Norris Ward McKinnon.

Commercial Disputes & Employment Team