When IT giants collide

HP-Compaq is not the only merger under way and the IT industry is still slashing by the thousand, so what are workers' redundancy rights, bosses and all?

Big chiefs Barry Hastings and Russell Hewitt both describe the Hewlett-Packard-Compaq merger as “exciting”, even though it may cost one or both of them their jobs.

A staffer at one of the firms told me last week that some of their workers are excited, others are apprehensive, and many are thinking “here we go again”.

They recall the earlier Compaq-Digital merger of 1998 which led to several dozen redundancies in New Zealand out of 250 Digital and 80 Compaq staff.

Today, Compaq employs 380 staff in New Zealand and Hewlett-Packard 110, with the global giants planning to slash 15,000 of their 160,000 combined head count.

The whole point of a merger is to create cost savings, known in the trade as synergies, which ultimately means job lay-offs. HP-Compaq estimates its “synergies” at $US2.5b, even if the redundancies and associated lay-off and re-hiring costs themselves will run into many millions.

HP-Compaq is not the only merger under way and the IT industry is still slashing by the thousand, so what are workers’ redundancy rights, bosses and all?

In New Zealand, much depends on what is said in a worker’s individual employment contract.

The Employment Relations Service says starkly: “In the event a company is sold, the new employer has no legal obligation to offer or retain the services of those staff. In such circumstances the responsibility rests on the original owner to pay out holiday pay and any other monies owing, and advise those employees in a manner which is deemed to be fair and reasonable.”

“Compensation for loss of job is not a legal requirement," says information officer Gerard French. "An employer will only be obligated to pay redundancy compensation where the employment agreement has provided for such payments or where an employer or employee agree to such payments."

Peter Tritt of the Employers and Manufacturers Association confirms this.

“If there is no redundancy provision within an agreement, then there is no entitlement in law to redundancy compensation. All that is required is for the employee’s employment to be terminated in terms of the employment agreement’s termination procedure; that is, if one month’s notice of termination is required, then this must be given.

“Many employers nevertheless do agree to pay redundancy as part of a severance package, even though not required to do so in terms of an employment agreement,” he says.

By this definition, then, with HP buying Compaq, the 380 Compaq New Zealand staff apparently have no right to expect HP to keep employing them. And any redundancy depends on their contract.

Furthermore, if the new company can show other posts are superfluous, other people can go.

“This may be the result of restructuring within the company, the sale of the business, or that the company is experiencing some financial difficulties. When an employee’s job is terminated by way of a redundancy it is not a reflection on that person’s ability to do the job or for other personal reasons.

“Financial difficulties must not be confused or used in conjunction with other concerns such as an employee’s ability to do the job or differences resulting from personality clashes,” French says.

Tritt says courts generally defer to businesses about their needs, but employers must be procedurally fair when terminating any position for redundancy, using principles of “good faith”.

“This requires consultation with any potentially affected employees regarding any company proposals; an opportunity for the employees to comment upon the proposals and offer suggested alternatives. The employer must then take these into account before making any final decision. The final decision remains with the employer. Failure to follow correct procedures can result in compensatory payouts being awarded by the courts,” he says.

The ERS reminds us that while consultation is not mandatory, recent Court of Appeal cases involving Aoraki and Coutts Cars effectively means it is.

“As part of this process,” says Tritt, “an employer is entitled to develop the criteria it wants to make redundant and who to retain.

“It doesn’t have to advertise positions, but sometimes this is done either internally or externally or both. An employer knows best the type of jobs it needs to fill and is able to choose the best applicants for the position,” he says.

For HP-Compaq, then, this means the new entity can create new posts and fill them as it sees fit, even to the extent of employing outsiders.

“When you are looking at a new position you have an obligation to consider existing people but, if they do not meet requirements, the firm can go elsewhere. But generally companies try and use existing staff because they have an investment there and keep on who they can,” Tritt says.

Some companies then find they make redundancy payments and are hit with hiring costs as well, often because the best people choose to leave and must be replaced.

However, Tritt warns: “The biggest redundancy is at the operator end. You do not need two CEOs, financial managers, etc. If they have complementary services you should not find much of a redundancy,” he says.

Therefore, it makes sense to check your contract and if your employer is in an impending merger, maybe dust off that old CV. With Compaq and HP aparently having complementary products, "the workers" should largely be safe. But if I was Hastings or Hewitt, I might be worried -- or happy -- at the thought of an impending fat cheque.

*The ERS, as part of the Department of Labour, says as an impartial government service it cannot comment on individual cases. Instead workers should contact an appropriate legal source.

But if someone feels treated unfairly or unjustifiably dismissed they should use its services. Alternatively, union members can speak to their union.

Greenwood is Computerworld's human resources reporter. Send email to Darren Greenwood. Send letters for publication to Computerworld Letters.

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