I sometimes wonder what became of Mr Cox. He was a highly valued executive with Philips Industries in England. A rival company tried to entice him away. Philips responded with a promotion and a pay rise.
Later, foolishly as it turned out, Mr Cox complained that his annual pay rise wasn’t high enough. Suddenly, he found himself demoted to a position of lesser responsibility with little to do. His pay stayed the same.
Some people might think this was ideal – same pay, less work and less responsibility – but not Mr Cox. He became depressed and anxious, and eventually resigned.
He sued Philips. They argued he had lost nothing. He argued his own case in court, and won. The court said that Philips had breached Mr Cox’s contract when it relegated him. The principle he established is now standard in employment law.
I think of Mr Cox when we arrive back at work after the holidays, fresh with ideas for changing our business. This requires planning and consultation. Employers cannot just impose major changes upon their employees, no matter how good those ideas are.
Minor changes, such as slight changes in duties or reporting lines, are fine. However, if an employer wants to make changes that might significantly affect its employees, then it should go through a proper restructuring process.
Let’s take Mr Cox. Perhaps Philips no longer needed someone at his level. The way it changed his job content but not his pay didn’t work. If Philips was in this situation today, what should it do?
Firstly it should analyse Mr Cox’s existing position, and decide how much it needs to change. If the changes might be significant, Philips needs to explain them to Mr Cox, and tell him that, if they are made, his position will be disestablished, and a new one created.
Under the Employment Relations Act 2000, Philips has to consult Mr Cox, get his feedback, and act in good faith during the restructuring. There is no mathematical formula for how much change constitutes a significant change.
It has been said that a 20 per cent change of duties is significant, but each situation is different, and courts have different interpretations.
One court ruled in the 1970s that a worksite move from Petone to Featherston (60 kilometres) meant that affected workers were redundant; another in 2004 said that a move from Wanganui to Palmerston North (74 kilometres) wasn’t a reason for redundancy.
Changes to duties, hours, pay, a person’s level within the organisation, management responsibility and location are all potentially important.
Once Philips has decided on the changes it wants to make, it can disestablish Mr Cox’s existing position and create the new position.
Sometimes an employer can redeploy an existing employee (whose position is disestablished) to a substantially similar new position, provided this is permitted under the employee’s terms of employment.
Philips couldn’t do this to Mr Cox, as the new position would be a demotion, even if the pay didn’t change. Mr Cox would still be facing redundancy today if there was no other position for him within Philips.
Employers often underestimate the toll that a restructuring takes on an employee. A good employer will offer support, such as counselling, during the process.
Mr Cox became stressed because of the changes he was forced to make, lost his senior position, and endured his court battle.
Thanks to him, that should not happen today.
By Penelope Ryder-Lewis, first published in The Dominion Post