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Excerpt from this article first published in Human Resources Magazine, Issue 118, 28 November 2006
Under the Workplace Relations Act, an employee is excluded from making an application for unfair dismissal if the employee’s employment was terminated for “genuine operational reasons” or for reasons that include genuine operational reasons. Two recent decisions of the Australian Industrial Relations Commission have further clarified what is a “genuine operational reason” for the purposes of the unfair dismissal exclusion.
In Kieselbach v Amity Group Pty Ltd (AIRC, 9 October 2006, PR973864) Deputy President Hamilton decided that Amity’s “assertions” to Ms Kieselbach about its inability to continue to employer her because of staffing costs and insufficient funding from the Government were not sufficient to meet the test of “genuine operational reasons”.
The Commission referred to the fact that there was insufficient evidence provided by Amity to support the assertions. Deputy President Hamilton highlighted the lack of evidence in relation to staffing costs for a particular year and related funding levels. This led him to the view that there were no reasons provided as to why the staffing costs were unsustainable.
Deputy President Hamilton noted: “Amity has provided me with a statement that costs are greater than income, apparently the operational reasons relied on. That is all I have. Amity has not sought to lead evidence that persuades me that this statement is genuine or to explain it. It has not even provided me with sworn evidence that the assertion is true and correct.”
In response to Amity’s query as to “what is enough evidence?” to show a genuine operational reason, Deputy President Hamilton responded that a simple statement or assertion by an employer would be insufficient, however there were limits on the amount of evidence an employer would be required to submit. An employer must only make its case on the balance of probabilities. To allow an employer merely to make a “simple statement” would effectively shift the burden of proof back to the employee to disprove the statement - which was not the intention of the Act and practically speaking, would be very difficult for an employee to disprove.
In Nicholson v Riviera Marine Pty Limited (AIRC, 29 September 2006, PR974198), Riviera Marine argued that Mr Nicholson was jurisdictionally barred from commencing an unfair dismissal claim because the reason for the termination was “genuine operational reasons”. Indeed, Mr Nicholson was one of 17 employees made redundant by Riviera Marina after a slump in boat building orders at its east business unit.
Mr Nicholson argued that Riviera Marine continued to increase profits, was planning for further growth and was recruiting for positions available at its west business unit.
Commissioner Spencer decided that although there were genuine operational reasons of an economic nature at the east business unit, there was no evidence that the same genuine operational reasons extended to the west business unit or affected all of the operations of Riviera Marine. There was also no evidence that termination of employment was necessary as a result of the east business unit restructure or that a redeployment exercise had been undertaken for Mr Nicholson across the operations of Riviera Marine.
The Commission referred to the decision of Perry v Saville Pty Limited (PR973103) which decided “[t]he restructuring of positions so that an employee’s position is no longer available does not, in itself, establish operational reasons for the termination of an individual employee’s employment. The termination must be “genuinely” related to the employer’s operational requirements in the sense that the termination is a logical response to those requirements.’
Commissioner Spencer concluded that while the evidence demonstrated a need to restructure the east business unit, the lack of evidence of any attempt to possibly redeploy Mr Nicholson within the west business unit “cast a shadow” over whether genuine operational reasons necessitated the termination of Mr Nicholson’s employment. He decided “[w]hilst an employer is able to structure its business according to its production needs, it is not sufficient for an employer to restructure one division within its corporate entity and make employees redundant when potential similar positions remain in another division of the same company”.
an assertion that a dismissal is for operational reasons will not be enough;
if a dismissal is based on ‘operational reasons’ be able to demonstrate these reasons;
think outside the square - in a restructure situation, prior to dismissing an employee whose position has become redundant, consider whether the employee can be deployed elsewhere in the business.
Joanne Ede
Senior Associate
