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TERMINATION FOR OPERATIONAL REASONS

TERMINATION FOR OPERATIONAL REASONS

One of the big changes brought about by the WorkChoices legislation has been its change to unfair dismissal claims. Businesses that employ 100 or fewer employees are now exempt from such claims. Although businesses with more than 100 employees remain at risk of unfair dismissal claims, the right to bring these claims has been significantly restricted, for example:

  • employees must have been employed for more than 6 months before they can pursue an unfair dismissal claim; and
  • no claims for unfair dismissal can be brought where the employment has been terminated for "genuine operational reasons" or for reasons that include "genuine operational reasons".

The new legislation explains that genuine operational reasons are reasons of an economic, technological, structural or similar nature relating to the employer's business.

Since the Village Cinemas decision, any opportunity for challenging a dismissal for operational reasons appears to have been eliminated. However, the recent resurgence of cases on this issue suggests that there may still be scope for mounting a challenge to these terminations. We examine some of these cases below.

Carter v Village Cinemas

At the time of his dismissal, Mr Carter had been manager of Village Cinema's Doncaster complex. When he lodged a claim of unfair dismissal, the company responded by alleging that it had terminated his employment for "genuine operational reasons". In considering the matter, Commissioner Hingley took into account a number of factors (eg Mr Carter's length of service; that he was multi-skilled and redeployable; that he was the only employee out of 12 to be made redundant) and concluded that the termination of Mr Carter's employment was not for "genuine operational reasons".

The matter went on appeal to the Full Bench of the Commission. The Full Bench found:

  • the onus for proving that the dismissal was for "genuine operational reasons" rests with the employer; and
  • while the reason needs to be "genuine" in the sense of being real or true, it does not need to have been "valid" in the sense of being sound or defensible, ie. provided the employer can show that operational reasons were a cause for the termination, considerations such as whether there were alternatives to termination are irrelevant.

The Full Bench allowed the appeal and quashed Commissioner's Hingley's decision.

This decision has been interpreted to mean that where the employer can show that an employee has been dismissed for genuine operational reasons (or for reasons which include genuine operational reasons), that is the end of the matter. To demonstrate this, the employer will need to produce evidence to demonstrate that the termination was because of technological or structural change or financial need. The only way of challenging this would be for the dismissed employee to show that the alleged redundancy was a sham, for example because another employee has been appointed to perform the exact same tasks as the employee had previously performed.

Recent Cases

In Rawolle v Don Mathieson and Staff Glass Pty Ltd, a downturn in work for glaziers led to six glaziers being put to work in the factory as production employees and five unskilled factory hands, including Mr Rawolle, being made redundant. Mr Rawolle challenged the termination, firstly by alleging the decision was not for genuine operational reasons and secondly, by alleging the termination was because he was entitled to benefits under a certified agreement whereas the employer preferred to employ persons on AWAs.

Although Mr Rawolle alleged that the employer had advertised for unskilled workers shortly after terminating his employment, the Commissioner found the evidence did not demonstrate conclusively that someone else was now performing his job. He found that the termination was for a number of reasons, including for operational reasons and dismissed the unfair dismissal claim. However, he noted that the employee could still pursue the second challenge in court, ie. that his employment had been terminated for a prohibited reason under s793 of the Workplace Relations Act 1996 (because he was entitled to benefits under a certified agreement).

In Cruickshank v Priceline Pty Ltd, Priceline dismissed Mr Cruickshank on the grounds of redundancy and then readvertised his job, initially at a lower rate and then at around the same rate. Mr Cruickshank challenged the termination, arguing that where an employee is replaced by someone else to do exactly the same duties, it was sham redundancy notwithstanding the Company's financial difficulties. Commissioner Eames did not agree and found that the termination was for a genuine operational reason.

The matter went on appeal to the Full Bench. The Full Bench dismissed Mr Cruickshank's first ground of appeal that the decision was wrong but upheld his second ground that the reasons for the Commissioner's decision were inadequate as they did not indicate how conflicts in the evidence were resolved. The Full Bench quashed the decision and directed that the application be reheard by another Commissioner.

In Sperac v Global Television Services, Commissioner Smith found that while matters could have been better handled, he felt that it was irrelevant that the employee was not offered a position which was available and which she had previously been promised. He found that the way in which the employee was treated in the process was not relevant. The only issue for review was whether the restructuring of the business was for genuine operational reasons - he found that it was.

Implications for Employers

Employers should be mindful that:

  • Procedural fairness is not required when terminating an employee for operational reasons, the only issue is whether the termination is for genuine operational reasons;
  • If the matter is contested, the employer will be expected to provide evidence that the termination was for reasons of a technological, economic, structural or similar nature.

Providing evidence of a generalised operational need to reduce employment is not sufficient, rather evidence should be provided of the reasons for the termination of the particular employee's employment;

  • Where another employee is appointed to perform the exact same tasks as the dismissed employee, or where the employer advertises for such an appointment, this could result in the redundancy being found to be a sham;
  • If an employee's employment is terminated because he/she is entitled to benefits under an industrial instrument (eg a certified agreement), this will be prohibited and open to challenge in court.

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