Operational reasons for dismissal: new ruling in Work Choices legislation

By John Oakes.

Key Points:
The Commission was clear in its view that inquiring into the operational reasons does not necessitate inquiring into what alternatives to dismissal were available.

Employers are able to dismiss employees for "operational reasons" without contravening unfair dismissal provisions in the Workplace Relations Act 1996 (Cth). What is an "operational reason"? Is it based on the subjective decision of the employer or does it need to meet an objective test? Does the "operational reason" have to be the dominant or sole reason for dismissal? These questions were addressed in the full bench Australian Industrial Relations Commission case discussed below.

In Carter v Village Cinemas Australia Pty Ltd [2007] AIRCFB 35, the full bench of the Australian Industrial Relations Commission considered whether a claim could be made for unfair dismissal after a cinema manager's employment was terminated, or whether the termination was for "operational reasons" and so exempt from the application of unfair dismissal laws.

Statutory provisions

The Workplace Relations Act, section 643(8), specifically excludes "genuine operational reasons or … reasons that include genuine operational reasons" as a ground for "harsh, unjust or unreasonable" dismissal.

"Operational reasons" are defined in section 643(9) as:

"reasons of an economic, technological, structural or similar nature relating to the employer's undertaking, establishment, service or business, or to a part of the employer's undertaking, establishment, service or business."

The Commission has power to dismiss an unfair dismissal application on the basis that the termination of employment was for, or included, genuine operational reasons.

The termination of Mr Carter

Mr Carter had been employed by Village Cinemas for nearly 20 years, and most recently as manager of the Doncaster cinema.

Following receipt of a notice to vacate the Doncaster complex in which the cinema operated, Village Cinemas decided to close that cinema, and discussed that prospective closure with Mr Carter, without any decision being made about his employment.

Mr Carter suggested to his employer that he take his accrued long service leave of six months, which might allow time for any other position with Village Cinemas to which he could be redeployed to become available. His long service leave request was not accepted by his supervisor who decided that his employment should be terminated.

Mr Carter claimed that his dismissal was "harsh, unjust or unreasonable" and also that Village Cinemas had dismissed him for a prohibited reason, including discrimination.

Village Cinemas gave notice that his claim should be dismissed by the Commission on the grounds that his dismissal was for, or included, operational reasons.

Village Cinemas' application to dismiss the claim for unfair dismissal was rejected by the Commission so Village Cinemas then appealed to the full bench against that determination.

Full Bench ruling: Dismissal was for "operational reasons"

This was the first time a full bench of the Commission had to decide the issue of the scope and application of the operational reasons exemption since the introduction of the new Work Choices provisions in the Workplace Relations Act.

The full bench (Drake SDP, Kaufman, SDP and Eames C) decided that the operational reasons ground had been made out, and that Mr Carter's claim for unfair dismissal should be dismissed.

Genuine operational reason

The Commission noted that the meaning of "genuine" was "real, true or authentic, not counterfeit".

Other courses of action: Must dismissal be an unavoidable consequence of the redundancy?

The Commission decided that the ground of operational reason "need not be something that demands or brings about an obligation to terminate the employment of a particular employee". This meant that terminating employment did not have to be "an unavoidable consequence" of the employer's operational decision in order to make out the ground of "operational reasons".

The full bench took the view that where there was another course of action open to the employer, the existence of alternative options "will generally be irrelevant in deciding whether the termination was for genuine operational reasons, or reasons that include genuine operational reasons".

Meaning of "genuine operational reasons"

The full bench made a number of points in relation to the meaning of "genuine operational reasons":

• the expression should have its natural meaning
• the context in which the words are used in the legislation should be taken into account
• while the operational reason must exist, it is not necessary to analyse whether the test is an objective or subjective one
• the relevant inquiry is to whether the position is redundant and the particular employee's dismissal was for genuine operational reasons; and
• the plain meaning of the words in the Workplace Relations Act should be followed.

Application of the full bench’s principles to the facts

The full bench took the view that the matter was clear, ruling that:

• the cinema was closing;
• the position of manager no longer existed; and
• the closure of the cinema was not only one of the reasons but the reason for terminating the manager's employment.

The denial of the long service leave request by the dismissed employee’s superior did not alter these conclusions. That refusal of long service leave, in the words of the full bench:

"did not convert what was otherwise a termination of employment of a particular employee for genuine operational reasons into one that was not for such reasons".

Who bears the evidentiary burden?

The full bench noted that the applicant in an unfair dismissal claim has the onus of proving the elements necessary for the claim. Where the employer asserts that the dismissal was for "genuine operational reasons", the employer bears that onus to prove that the reasons were for that reason, or included that reason. In such an application to establish operational reasons, the Commission stated that:

"a mere assertion by the employer to that effect will not usually be sufficient to discharge the evidentiary onus".

Moreover, the different circumstances of each case will mean that what evidence is sufficient to establish operational reasons will vary.

Implications of the decision for employers

In this first full bench decision since the Work Choices legislation on the scope of "operational reasons", the full bench took a view of "operational reasons" which focused on the particular workplace in which the employee was engaged, and not the workplaces in the wider Village Cinemas complex. It was not relevant that a position might later come up to which the employee could be deployed – hence the denial of taking long service leave to facilitate the possibility of future redeployment did not alter the reason for dismissal being based on operational reasons.

The Commission was clear in its view that inquiring into the operational reasons does not necessitate inquiring into what alternatives to dismissal were available. The Commission's role, it seems, is not to intrude into the management decision about the best course of action, but to inquire into whether the dismissal reason, or one of the reasons, was for "genuine operational reasons".

Employers who are in doubt about the application of "operational reasons" to their workplace should seek legal advice.

Thanks to Marilyn Pittard for her help in writing this article.