Adverse Action and Outsourcing

ADVERSE ACTION AND OUTSOURCING.

Qantas Airways Ltd v Transport Workers’ Union of Australia [2022] FCAFC 71

The Full Federal Court of Australia has issued an important judgment regarding an outsourcing decision taken by Qantas Airways Ltd during the COVID-19 pandemic.  It provides useful confirmation for employees and trade unions regarding the potential scope of collective labour rights.  It also provides helpful clarity for companies regarding which factors they can and cannot consider when outsourcing.

The facts

The case concerns a decision taken by Qantas Airways Ltd (Qantas) in November 2020, at the height of the pandemic, to outsource all its ground handling operations in 10 Australian airports to be undertaken by third-party entities.  This was work that had previously been undertaken by employees of Qantas or its wholly owned subsidiaries.  During 2021, the employment of 1683 employees was terminated and Qantas ground handling operations ceased to exist.

One effect of the outsourcing decision was that it ‘effectively eliminated’ the prospect of protected industrial action being taken by affected Qantas employees during the period from the end of 2020 and 2021.  This was because no protected industrial action could take place until after the expiry of the Qantas enterprise agreement on 31 December 2020.  Protected industrial action is action taken where those participating are immune from suit under s.415 of the Fair Work Act 2009.

The reason that this is a potential issue is because the right to take industrial action is a ‘work place right’ under the Fair Work Act 2009 (s.341) and is protected by a provision which prevents a person taking adverse action against another for exercising that right (s.340(1)(b)).  It was alleged by the Transport Workers’ Union of Australia (TWU) that Qantas had contravened this right.  The union sought reinstatement of the employees, compensation and pecuniary penalties.

What a single Judge of the Federal Court decided

The case was heard at first by a single judge of the Federal Court in 2021.  That judge found that Qantas had contravened s.340(1)(b) of the Fair Work Act 2009, subjecting the employees to adverse action for exercising a workplace right in taking their outsourcing decision.  The judge refused the union’s application that the employees should be reinstated in light of the substantive finding. 

Consequently, both parties filed appeals which were heard by the Full Court of the Federal Court in February 2022.  Qantas appealed the substantive finding that they had contravened s.340(1)(b) of the Fair Work Act (the TWU also cross appealed) (‘the Qantas appeal’).  The TWU appealed the decision to refuse reinstatement of the employees (‘the TWU appeal’).

The Full Court dismissed both appeals.

The Qantas Appeal

In their appeal, Qantas argued that there was no prohibited reason for their outsourcing decision and specifically that the protection against adverse action could not extend on an anticipatory basis to action which could arise and in relation to a right which may be exercised in the future but was not live at the time of the decision making.  The Full Court rejected this found that the scope of s.340(1)(b) could extend to situations where the intention was to avoid the exercise of a right in future. 

The Court upheld the initial judge’s decision to reject unconvincing evidence from Qantas as to the motivation for their decision.  It was for Qantas to demonstrate that a prohibited reason did not form a ‘substantial and operative reason’ for the decision to outsource.  Qantas failed to do so.  The Full Court also rejected an argument from Qantas that there could be no contravention of s.340(1)(b) in relation to employees who were not union members.  It was, according to the Court, also for Qantas to establish that the outsourcing decision was made ‘in the absence of any anticipation that non-union employees would participate’ in protected industrial action organized by the TWU where they had the legal capacity to do so.

The TWU

The TWU appeal was unsuccessful because the Court upheld the initial judge’s reasoning for refusing reinstatement, specifically noting that that Qantas no longer had a ground handling business function and that all the services were subject to a series of third-party contracts.  Reinstatement would necessitate the recreation of the disbanded business function which would involve terminating ongoing contractual arrangements, buying back equipment, re-engaging staff (beyond those affected in the dispute) and entering into lease arrangements with relevant airports. 

Key factors which were relied on to support the view that this prevented Qantas reinstating the employees were the costs to Qantas, the lack of clarity on how many employees would accept reinstatement, the risk of uncertainty and ongoing dispute, the inevitability of retrenchment and the availability and appropriateness of compensation for affected employees.  The Full Court took the view that the initial judge balanced the factors appropriately and did not overly place emphasis on any one individual factor (such as costs to Qantas for instance) and that the judge was entitled to conclude that compensation was a more appropriate remedy in the circumstances. 

It is understood that the case has been appealed by both parties to the High Court of Australia.