Australia: New Jurisdictional Hurdle – How High Must Employers Jump To Clear The ‘Genuine Operational Reasons’ Requirement?

Last Updated: 8 November 2006
Article by Rick Catanzariti

Under Work Choices there are new jurisdictional requirements which impact unfair dismissal claims. One of the jurisdictional requirements introduced is to exclude employees whose employment was terminated for genuine operational reasons or for reasons that include genuine operational reasons.

The Explanatory Memorandum of the change provided examples illustrating the exclusion. The examples focused on the genuineness of the operational reason shown by the employer as to why an employee’s position at the relevant time was not required. The examples do not focus on the steps (if any) the employer took after its decision to dismiss the employee.

However, since the 27 March 2006 implementation of Work Choices the Australian Industrial Relations Commission (the Commission) has adopted a broader view of the issue taking into account amongst other things, any alternative positions offered. The Commission’s approach in these decisions, some of which are referred to below, is likely to come under challenge.

Meaning Of ‘Genuine’

The Workplace Relations Act 1996 (Cth) defines ‘operational reasons’ as ‘reasons of an economic, technological, structural or similar nature relating to the employer’s undertaking, establishment, service or business’ or part of that.

There is an additional requirement that the operational reasons must be genuine. This means that an employer cannot just assert a termination is for operational reasons, but must provide sufficient supporting evidence such as witnesses, management directives and financial reports. The standard of proof the employer must provide is on the balance of probabilities.

Indeed, the case of Springer Commissioner Cargill dismissed the application because of a lack of evidence. In that case the Human Resources Manager gave the primary evidence, however he was not involved in the review of the position or the decision to restructure the position. The quality and detail of the evidence on which the decision to terminate is based, is therefore critical to the Commission determining the genuineness of any reason.

The Commission has described ‘genuine’ as the lack of a ‘sham’ arrangement. The Commission’s decisions that followed showed an interesting approach. In the case of Perry there was a merger between the employer and another company leading to a merger of the applicant’s position with another position. The employer then created a new position of Finance and Administration Manager which, according to the evidence listed 95% of the applicant’s current duties. The applicant applied for and failed to obtain the re-defined position because she was unfamiliar with the Microsoft Office PowerPoint program.

The Commission ultimately found (essentially through a lack of the applicant’s evidence) that the restructure was genuine and reflected genuine operational reasons.

However, the Commission ruled that not only must the restructure be for genuine operational reasons but the termination of employment resulting from the restructure must be for genuine operational reasons. In that case the applicant’s termination was not considered genuine as the company had the ability to find her an alternative role within her skill set, particularly as it was expanding.

Since Perry, the Commission decisions have increasingly focused, not on whether an employee’s position was genuinely redundant but on other aspects of the termination, including whether the employer looked for, or offered, alternative positions.

In the Nicholson case the Commission also found genuine operational requirements for the restructure, but not for the resulting termination of employment, as the employer did not offer alternative positions within another business unit of the same corporate entity. The fact that similar positions were advertised only weeks after the applicant was made redundant in the other business unit, led the Commission to conclude that the reasons for termination were not entirely genuine.

Another case of interest involved the Commission accepting that the closure of an operation in which the employee worked was genuine but the failure to offer the employee a lower status position at a different site and even allow him to take six months accrued long service leave to await an alternative position meant the ultimate dismissal was not for genuine operational reasons.

These, and other Commission decisions demonstrate that whether or not there is actually a position for redeployment is an issue the Commission considers to be relevant to the genuine operational requirements assessment. The Commission decisions suggest employers must establish at least two steps. First, that the employee’s position was no longer required because of genuine operational reasons and second, that the employer looked for and offered any suitable alternative positions that existed.


It is arguable that the Commission has, in some cases, interpreted the genuine operational requirements provision too broadly in terms of what an employer must demonstrate. At the moment, factors including consideration of suitable alternative positions, and even offering lower status positions are being take into account by the Commission on this issue.

A challenge to this interpretation is likely in the near future and the result may be a change in approach. In the meantime, employers will need to take the current approach into account when making operational decisions.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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