Australia: The Full Bench Of The Australian Industrial Relations Commission Recently Handed Down A Landmark Ruling On The Genuine Operational Reasons Exemption For Unfair Dismissal Claims.

This Employment Update follows on from our update in November 2006 concerning the exclusion of employees whose employment was terminated for general operational reasons from making unfair dismissal claims.

The Full Bench of the Australian Industrial Relations Commission (AIRC) has handed down a decision which clarifies the application of the genuine operational reasons exemption from making unfair dismissal claims. The Full Bench considered whether the termination of a manager by Village Cinemas (Village) was for general operational reasons under the Workplace Relations Act 1996 (the Act).

The Act provides that an employee whose employment has been terminated may apply to the AIRC for relief in respect of the termination on the grounds that it was 'harsh, unjust or unreasonable'.

The Act limits the circumstances in which such an application for relief may be made. One of these circumstances is where the Act stipulates that an unfair dismissal claim must not be made ‘if the employee’s employment was terminated for genuine operational reasons or for reasons that include genuine operational reasons’. In essence, under the Act, an employee whose employment has been terminated due to general operational reasons cannot make an unfair dismissal claim. However, if the employee makes a claim, the Act provides a process under which the employer may apply to the AIRC to have the application dismissed.

On 26 July 2006, Mr Carter’s employment was terminated due to his position being made redundant. Mr Carter was the General Manager of the Village cinema at Doncaster when on 15 June 2006, Village received a notice to vacate the premises where the cinema was located.

After receiving the notice to vacate, Village looked for comparable positions in which to redeploy Mr Carter, however at the time no such positions were available so his employment was terminated.

Village applied to have Mr Carter’s claim dismissed on the basis that the claim was excluded from the unfair dismissal provisions in the Act. At the hearing of Village’s application, Commissioner Hingley decided that Mr Carter was not excluded from making an unfair dismissal claim as he did not consider that his employment was terminated for genuine operational reasons.

In reaching this conclusion, Commissioner Hingley decided that certain matters, including the fact that Mr Carter was the only person whose position was made redundant, that he was ‘eminently re-deployable’, that he had offered to take his entitlement to long service leave in the hope that a position may become available during that period, and the fact that he was never asked whether he would consider or accept a position of lower status were relevant matters to take into consideration when assessing whether his employment was terminated for genuine operational reasons.

In essence, the Full Bench decided that the Commissioner had taken into account ‘irrelevant considerations’ when deciding whether or not Mr Carter’s employment had been terminated for genuine operational reasons.

The Full Bench held that Commissioner Hingley had ‘erred by allowing extraneous or irrelevant matters to guide him’. The Full Bench found that the termination of Mr Carter’s employment was a direct consequence of the closure of the Doncaster cinema and there was no suggestion that his employment was terminated for any other reason. Having granted leave to appeal, the Full Bench allowed the appeal, dismissed Mr Carter’s unfair dismissal claim and quashed Commissioner Hingley’s decision.

The Minister for Workplace Relations and Employment also intervened in the hearing before the Full Bench in order to provide assistance to the Full Bench by making submissions as to the intended operation of the relevant provisions in the Act.

Despite suggestions in some media reports, the Full Bench decision does not provide employers who employ 101 or more employees with an easy option to terminate an employee’s employment and avoid an unfair dismissal claim.

The Full Bench’s decision was based on the fact that the closure of the Doncaster cinema which led to the termination of Mr Carter’s employment was the operational reason for the termination of Mr Carter’s employment.

The Full Bench made it clear that, in appropriate cases, it will be necessary to examine the circumstances of a termination of employment of a particular employee said to be for genuine operational reasons, to determine whether or not the alleged operational reason or reasons relied upon by the employer were genuine.

The Full Bench also emphasised that an employer will bear the onus of persuading the AIRC that the termination of employment of a particular employee was for a genuine operational reason or reasons. A mere assertion to that effect by an employer will usually not be sufficient to discharge the evidentiary onus. The evidence that will suffice will vary from case to case depending upon the circumstances.

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