Legislation Background

Section 634(1)(a) of the Act allows a dismissed employee to apply to the AIRC for relief in respect of the termination of their employment on the basis that the termination was "harsh, unjust or unreasonable". However, such applications are precluded under section 643(8) if the employer is able to establish that the termination was for "genuine operational reasons". These are "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."

Original Proceedings

The Applicant, Mr Carter, brought proceedings under section 643 of the Act after his employer, Village Cinemas Australia Pty Ltd, terminated his employment as manager of Village's Doncaster cinema complex in Melbourne due to the closure of the complex. Village asserted that Mr Carter was barred from making the application because his employment was terminated for genuine operational reasons.

The Commission heard evidence that on 15 June 2006, Village received a notice to vacate the Doncaster complex by 1 August 2006. Mr Carter was notified on 25 July 2006 that as a result of the closure, his employment would end on 31 July 2006. Mr Carter had been employed with Village for over 19 years.

However, before the decision to terminate Mr Carter's employment was made, Mr Carter had offered to take long service leave in order to wait and see if another similar position became available. This request was refused. Evidence was also produced that Mr Carter would have accepted redeployment to a lower status position if it had been offered to him.

Commissioner Hingley determined that Village had not established genuine operational reasons for Mr Carter's employment termination, having regard to such factors as Mr Carter's skills and length of service (ie his redeployability), Village's refusal to allow him to take long service leave and Village's failure to offer him redeployment to a lower position. As a result, the jurisdictional objection was dismissed.

Appeal Proceedings

On Appeal, the Full Bench quashed the Commissioner's determination, ruling Village had in fact established "genuine operational reasons" for the termination. In researching this conclusion however, the Full Bench upheld the Commissioner's finding that the onus rests with the employer to prove that the application is excluded under section 643(8).

The Full Bench held that the operational reason relied upon by an employer need only be a ground or cause for the termination of the employment of an employee. Further, the termination does not have to be an unavoidable consequence of the operational reason for the exclusion in section 643(8) of the Act to operate.

In this regard, the Full Bench held that whether the employer could have done something other than terminating the employee's employment is generally irrelevant in determining whether the termination was for genuine operational reasons or for reasons that include genuine operational reasons. The Full Bench stated that "Where, as in this case, it can be clearly established that the termination of employment was for operational reasons it is not necessary to have regard to such matters as the refusal of Mr Carter's request for long service leave in order to ascertain whether the reasons relied on by the employer for the termination of the employee were genuine."

The Full Bench also observed that Village's refusal to allow Mr Carter to take long service leave (which would have delayed his employment termination) did not convert an employment termination for genuine operational reasons into one that was not for such reasons.

As a result, the Full Bench dismissed Mr Carter's unfair dismissal application.

Implications for Employers

While the Full Bench decision has made it clear that questions of whether an employer could have done something other than terminating the employee's employment will not generally be relevant in deciding whether the termination was for genuine operational reasons, employers should be aware that merely asserting that the termination was for genuine operational reasons will not be enough to discharge the evidentiary onus required to make out this defence.

If relying on the exclusion, employers must be able to produce credible evidence which demonstrates that the employee's termination was based on genuine operational reasons or reasons that include genuine operational reasons. What evidence will suffice will depend on the facts of each case.

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