Scope of managerial prerogative

In Construction, Forestry, Mining and Energy Union v HWE Mining Pty Limited [2011] FWA 8288 Fair Work Australia confirmed the test for determining the scope of management prerogative.

Vice President Lawler found that absent any constraint(s) imposed by a statute, an award, a statutory agreement or a contract of employment, an employer can manage its own business - unless it is seeking from an employee something that is unjust or unreasonable.

The test for what is unjust or unreasonable was taken from Australian Federated Union of Locomotive Enginemen v State Rail Authority of New South Wales (1984) 295 CAR 188. It is extracted at [11], as follows:

The test of injustice or unreasonableness would embrace matters of safety and health because a requirement by an employer for an employee to perform work which was unsafe or might damage the health of the employee would be both unjust and unreasonable. The ACTU submitted to us that we should apply the test as to whether the demand of the employer was just and equitable having regard to all the circumstances. It is our view that under any given set of facts the test suggested by the ACTU would not lead to a different decision from the test which the Commission has applied over time. Accordingly in reaching our decision we have approached the matter from the point of view of making a judgement whether the request of the SRA that the XPT be manned by one man is unjust or unreasonable.

At [12] Lawler VP stated:

I proceed on the basis that an exercise of managerial prerogative will not be unreasonable in this sense if a reasonable person in the position of the employer, could have made the decision in question.

This decision highlights that whilst managerial prerogative has a wide scope, it still needs to be exercised in a just and reasonable manner.

Contacts: Justin Zeeman & Allan Walsh

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