I recently had a chat with our go-to employment lawyer Emily Moore from De Novo Legal about a number of employment issues that we come across for our clients. As always, Emily brought her sharp insight and practical advice, and we thought it would be too valuable not to share. We kicked things off with a key question - is the use of AI causing you to rethink your org structure? Here’s what NZ employers need to know.

Many NZ businesses are starting to realise the benefits of AI - whether it’s speeding up manual processes, cutting down time to complete tasks or just making things more efficient. If you’re starting to see opportunities to rethink roles or structures within your business due to the use of AI, you're not alone.

At JW Legal, we’re often talking with our clients about the benefits and legalities of using AI, and the opportunities it can present from a commercial point of view. From time to time we’re also asked whether it’s ok to make structural changes due to the introduction of AI or other new technologies. Emily Moore from De Novo Legal, joins us to answer this and various other frequently asked questions.

1. Can I use AI as a reason for restructuring?

If a company’s use of AI means a particular role is no longer needed - whether in its current form, or at all - then yes, it’s possible they have a legitimate business reason to restructure, whether by adjusting or removing the impacted roles. Restructures must always be driven by a genuine commercial rationale - which can include operational changes driven by new technology.

The key is that the decision is based on the role and not the person in it. The fact that an employee might be underperforming, has personality clashes or perhaps just doesn’t "get" AI isn't, on its own, a legitimate reason to restructure their role. It’s critical that you’re able to justify the decision by pointing to a genuine commercial reason as to why the role is no longer needed.

However, it’s critical that a fair process is followed - see below for more.

2. What’s the process requirement?

Even with a solid business reason, you must still follow a fair and reasonable process when restructuring. At a minimum, for a relatively straightforward restructure, this will include:

Preparing a written proposal outlining the reason for change for the employee to consider, before any firm decisions are made;

Providing the employee with any relevant supporting information;
Giving the employee adequate time to provide feedback on the proposal (I usually recommend a week for the employee to consider the initial proposal);
Genuinely considering any alternatives or feedback the employee raises; and
Ensuring you explore all viable redeployment opportunities before confirming any redundancy.

Documentation at every step is crucial, not only for transparency but also to protect the business if the decision is later challenged.

Importantly, if the employer is proposing to reduce headcount across a group of similar roles, all employees in the group must be consulted. A clear and transparent selection process must be followed, including a fair assessment of each individual against clearly communicated criteria.

3. What if there’s another role the person could do?

In the context of a restructure, you’re legally required to consider whether there’s another suitable role in your business for an employee whose employment is at risk of termination, even if the job title, pay, or responsibilities differ slightly. If another role exists (even if it might require a bit of upskilling), in most cases, it should be offered to the employee before redundancy is confirmed.

This is a common misstep - assuming that if one job disappears, it automatically means the person must go. In fact, many successful restructures involve redeployment, not termination.

4. If we make someone redundant, what do we need to pay them?

After following a fair consultation process, if you confirm a redundancy, the employee will be entitled to receive:

Any final pay owing: This includes payment for all hours worked up to the final day of employment, any unused annual leave, and any other contractual entitlements (such as bonuses or incentives, if applicable).

Notice or pay in lieu of notice: You must either allow the employee to work out their notice period (as set out in their employment agreement) or pay them in lieu of that notice.

Redundancy compensation (if applicable): Under New Zealand law, there’s no automatic entitlement to redundancy compensation unless it’s set out in the employment agreement or has become a contractual entitlement through company policy or past practice. You’ll need to check the employment agreement carefully.

Employers might also opt to offer additional support such as outplacement services or a reference to assist with the employee’s transition.

5. What are the risks of getting it wrong?

If you skip steps, rush the process, or make the restructuring about the person rather than the role, you open the business up to legal risk. In the current tight labour market, many employees aren’t afraid to raise a grievance or challenge decisions about their employment if they feel they have been treated unfairly. Importantly, even where the reason for change is genuine, a flawed process can still render the dismissal unlawful.

A successful grievance can result in the employer being required to pay the employee 3+ months in lost wages, plus compensation which might fall anywhere between $15,000 and $30,000. In the long run, taking a bit of legal advice from the outset can save an employer significant time and cost.

For more info & upcoming event

If you have an employment issue or question, feel free to chat to Emily directly. You’ll find her contact details here: https://www.denovolegal.co.nz/contact -us

Special event: Emily will be presenting in Auckland next Thursday 5 June alongside Glenda Lewis from the Leadership Academy on the topic of “Lead it Right - or Risk the Fight”, a presentation aimed at people leaders looking for guidance on leadership and managing employment risk. More info and tickets available here.

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Disclaimer

This publication should not be construed as legal advice. It is necessarily brief and general in nature. Please seek professional advice before taking any action in relation to the matters discussed in this publication.

Restructuring FAQs: Chat with Emily