Australia: Restructure Of Business And Redundancy – Evidence Of Operational Reasons For Dismissal

Key Points

  • Genuine operational reasons must be established by employers on the balance of probabilities.
  • The starting point is the employer's evidence as to the statement of the reasons for the dismissal.

Unfair dismissal applications may involve the threshold issue whether dismissal is for "operational reasons". The Workplace Relations Act 1996 (Cth) specifically says in section 643(8) that an application for unfair dismissal must not be made if the grounds for termination are "genuine operational reasons" or "reasons that include genuine operational reasons". The operational reason must be determined on the evidence. The recent decision in Saverino v Orrcon Operations Pty Ltd [2008] AIRCFB 98 illustrates the evidentiary factors which are taken into account.

The Facts In Saverino

Orrcon Operations Pty Ltd operated a plant at Unanderra. Its Engineering Department was not meeting performance targets. ABB Australia Pty Ltd, an external consultant engaged by Orrcon, recommended changes to enhance the operations of the Department and a new organisational structure to support the changes. When the Department was restructured following the report, three positions were removed, including that of Mr Saverino, who had been in the position of Process Improvement Operator. His position was not replaced. Following this, there was also a downsizing of the Unanderra plant, with 27 positions lost.

After his termination of employment, Mr Saverino applied for relief for harsh, unjust or unreasonable termination. Orrcon applied to the Australian Industrial Relations Commission to dismiss his application on the grounds that the termination was made for genuine operational reasons, but Commissioner Raffaelli dismissed it. The basis of the Commissioner's decision was that he was not satisfied that Orrcon had established on the balance of probabilities that it dismissed Saverino for genuine operational reasons, mainly because it did not present further evidence to rebut testimony that Orrcon wanted to dismiss Mr Savirono for reasons other than operational reasons.

AIRC Ruling On Establishing The Reasons For Termination

On appeal, the full bench of the AIRC held that the Commissioner made an error in the conclusion about the evidence. It ruled that the evidence of the Acting Engineering Manager for Orrcon's Engineering Department in Unanderra, NSW, was significant - he gave "sworn evidence, all of which withstood cross-examination" and this evidence established the operational reasons for the termination of employment.

The critical issues relevant to the finding of "operational reasons" were:

  • the underperformance of the Engineering Department against targets;
  • the restructuring removing Mr Saverino's position following the recommendation by the external consultant;
  • Mr Saverino's position was not replaced;
  • Orrcon no longer required his job to be done by anyone; and
  • the duties undertaken by Mr Saverino were no longer performed.

The AIRC concluded that the termination took place for operational reasons, ordering the Commissioner's decision to be quashed and the unfair dismissal application to be dismissed.

Starting Point For Evidence: The Decision-Maker

Another earlier decision of the AIRC's full bench, Acworth v Boeing Australia Limited [2007] AIRFB 730, illustrates an evidentiary approach to proving operational reasons for the dismissal. In brief, an employee, Mr Acworth, did not take up Boeing's offer of an alternative position, which Boeing argued was made to him as his current role in Boeing Process Improvement was about to end. In the letter sent to Mr Acworth, there was no reference to this role coming to an end but rather that he had resigned. The question was:

'In the circumstances can it be said that Mr Acworth's employment was terminated for genuine operational reasons or for reasons that include genuine operational reasons?'

At first instance, Senior Deputy President Richards decided that the reason for dismissal was Mr Acworth's refusal to carry out a reasonable and lawful direction to take up reassigned duties and this did not amount to operational reasons.

On appeal, the AIRC full bench stated that:

'Evidence as to the reasons for that deliberate decision [of Boeing to terminate employment] are the ones relevant under section 643(8) ... [T]he reasons for termination are the reasons of the employer and, in particular, the reasons of the decision-maker'.

The starting point for analysing the reason for termination, the AIRC said, "should have been Boeing's evidence as to the reasons for termination". That evidence then would be the Project Manager's statement of reasons for termination and the letter of termination itself, as he was the decision-maker.

This evidence showed that there would be no future work in Mr Acworth's current role. The letter sent to him terminating employment was not inconsistent with this. This evidence should have been accepted at first instance.

The AIRC full bench held that the reasons included operational reasons and were structural in nature:

"Where an employer terminates the employment of an employee with particular qualifications and experience because no suitable assignment can be found for an employee with these qualifications and that experience, the termination is for an operational reason."

Implications For Employers

Genuine operational reasons must be established by employers on the balance of probabilities. Significant evidence of this is that the employer has not replaced the person in the position and that it does not require the job in the future to be performed by anyone.

The evidence brought before the Commission may not always be consistent, however, especially within a large organisation. The cases discussed indicate that the starting point is the employer's evidence as to the statement of the reasons for the dismissal. If these indicate operational reasons within the meaning of that term and that evidence withstands cross-examination and is not rebutted by other evidence to the contrary, then the employer will have established the operational reasons which exclude the dismissal from review under the Workplace Relations Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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