Legal Insights

Past, present and future — High Court confirms Qantas unlawfully outsourced operations to prevent future workplace rights

By Michael Nicolazzo, Grace Turner-Mobbs & Maxwell Bond

• 18 September 2023 • 4 min read
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In Qantas Airways Limited v Transport Workers Union of Australia, the High Court has confirmed that employers will contravene general protection provisions of the Fair Work Act by taking adverse action against employees in order to prevent them from exercising a future workplace right.

Relevant background

In 2020, in light of the financial losses Qantas was suffering as a result of the COVID pandemic, Qantas commenced a process of outsourcing its ground handling operations to reduce its costs. As part of this process, Qantas obtained bids from external services providers, as well as obtaining an in-house bid from the Transport Workers Union of Australia (TWU) on behalf of Qantas’ existing employees.

At the conclusion of the bidding process, Qantas made the decision to reject the TWU bid and outsource the services to a third-party provider, resulting in the affected employees being either redeployed or retrenched (Outsourcing Decision).

The TWU challenged Qantas’ Outsourcing Decision in the Federal Court on the basis that Qantas’ reasons for the decision included preventing the employees from engaging in protected industrial action against Qantas in the future – in contravention of the prohibition in the Fair Work Act against taking adverse action against employee to prevent the exercise of a workplace right.

In defending TWU’s challenge, Qantas made numerous arguments, including advancing evidence that:

  • the reasons for the Outsourcing Decision were sound financial considerations, in particular that the TWU bid was not financially competitive compared to specialist third-party ground handlers who provided these services to many airlines as their core business; and
  • preventing the employees from engaging in protected industrial action in the future was not a substantial and operative reason for the Outsourcing Decision.

However, the Federal Court (at trial and on appeal) concluded that, while Qantas had “sound commercial reasons” for the Outsourcing Decision, its evidence failed to prove that preventing the employees from engaging in protected industrial action in the future was not a substantial and operative reason for the decision.

High Court decision

Of particular importance to Qantas’ High Court appeal was the fact that, at the time the Outsourcing Decision was made, the relevant employees did not actually have an existing right to take protected industrial action because the enterprise agreement which covered their employment had not yet reached its nominal expiry date. Qantas argued that the general protections in the Fair Work Act could not extend to future (not currently existing) workplace rights.

The High Court wholly rejected Qantas’ argument. The Court unanimously found that it will be unlawful for an employer to take adverse action to prevent employees from exercising a workplace right they will have in the future – even though that workplace right is not held at the time the adverse action is taken.

The High Court also commented that a decision-maker’s mere knowledge or consideration of the existence of a future workplace right will not result in a contravention, unless preventing the exercise of the future workplace right is a substantial and operative reason for the decision to take adverse action.

Key takeaways for employers

There has been much commentary – both leading up to the High Court’s decision and since – that the ability to outsource operations is severely compromised given the acceptance of the TWU’s argument.

This decision, however, confirms what many employers would have already understood to be the state of the law – that is, employers must not take adverse action for the substantial and operative reason of depriving an employee the opportunity from exercising a future workplace right.

For example, most employers would have understood that the Fair Work Act:

  • prohibits restructuring operations and terminating a particular employee’s employment because they will soon be entitled to take long service leave, for example, in the coming months; but
  • does not prohibit restructuring operations on the basis of sound, defensible and objectively robust commercial reasons that do not include a particular employee’s entitlement to take leave in the future.

The High Court decision is a timely reminder that it is important for employers to:

  • Ensure that they do not take adverse action against employees to deprive them of any existing or future workplace rights (or because they have, in the past, exercised a workplace right)
  • Carefully consider decision-making processes in respect of operational decisions which will adversely affect employees, and ensure that the decision-maker’s reasons are sound and justifiable and do not include a prohibited reason.

Our Employment, Safety & People expertise

If you wish to discuss this decision or any proposed operational changes further, please reach out to a member of the Maddocks team.

By Michael Nicolazzo, Grace Turner-Mobbs & Maxwell Bond

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