There are many facets of an employment relationship in which an independent umpire like the Fair Work Commission can get involved in the event of a dispute. However both the common law and the statute law of Australia has always recognized that there are limits to the matters which can and should be legitimately reviewed in this way. The line in the sand is what is termed managerial or management prerogative.
This concept defines the bar below which an employer is free to run its business without being at risk of having management decision being second guessed by industrial tribunals. There are a number of reasons for this wise approach including that industrial tribunals are generally manned by persons who are not competent or qualified to run a business (especially the lawyers) and that it is business which puts up the capital and bears the risk of that investment.
Here is an example of management prerogative in action.
“I note that AFS contended that the Commission should consider the present circumstances as being one of “managerial prerogative” and should apply the approach discussed in the XPT Case. Australian Federated Union of Locomotive Enginemen and State Rail Authority of New South Wales (1984) 295 CAR 188. In the XPT Case, the Full Bench stated:
“It seems to us that the proper test to be applied and which has been applied for many years by the Commission is for the Commission to examine all the facts and not to interfere with the right of an employer to manage his own business unless he is seeking from the employees something which is unjust or unreasonable.”
This approach is broadly relevant given the circumstances of the parties. However, the XPT “principles” must be considered in the context of the Commission’s role to assess whether a dismissal was unfair having regard to the various statutory considerations. Although in a different context, see: See Lend Lease Project Management and Construction (Australia) Pty Limited v Construction, Forestry, Mining and Energy Union [2015] FWCFB 1889 31.”
Tawasoly v Alpha Flight Services Pty Ltd (2017) FWC 813 delivered 7 March 2017 per Hampton C