High Court confirms Qantas's decision to outsource airport ground handling was unlawful

Following the High Court of Australia's decision that Qantas had unlawfully outsourced the jobs of nearly 1700 ground handlers, employers are on notice that they cannot take adverse action against employees based on their future or potential workplace rights.

In Qantas Airways v Transport Workers Union of Australia^[1], the High Court unanimously found that the Fair Work Act 2009 (Cth) (FW Act) prohibits an employer taking adverse action, such as terminating an employee's employment, if a substantial and operative reason for the employer's decision is to prevent the employee exercising a workplace right that the employee does not have now, but will or may have in future.  

What were the facts in this case?

In 2020, Qantas decided to outsource ground handling operations performed by employees of Qantas Airways Pty Ltd (QA) and Qantas Ground Services Pty Ltd (QGS). In the context of revenues being severely affected by COVID-19, Qantas had a clear and a very real financial imperative to outsource.

Before making the decision, Qantas invited external bids and an internal bid (from QA and QGS employees) for the work. The employees' bid was less competitive than external providers' bids, and in November 2020, Qantas announced a decision to proceed with external outsourcing.

At the time of the outsourcing decision, for various reasons, neither affected QA nor affected QGS employees were able to take protected industrial action.

The TWU, on behalf of affected QA and QGS employees, commenced a proceeding in the Federal Court.  Among other things, the TWU argued that Qantas made its decision in part because it knew that (although they could not do so at the time) QA and QGS employees would soon become eligible to engage in enterprise bargaining and take protected industrial action. The TWU alleged that Qantas made its decision because it wanted to prevent QA and QGS employees exercising those workplace rights.

Lower Court decisions

At first instance, Justice Lee of the Federal Court accepted Qantas's evidence that its decision was significantly motivated by its financial pressures.  

However, Justice Lee also concluded that, on the evidence of the Qantas decision-maker, one of the substantial and operative reasons motivating Qantas was indeed the future rights of QA and QGS employees to engage in enterprise bargaining and take protected industrial action, which are  protected 'workplace rights' under the FW Act.  

Justice Lee further concluded that it was unlawful under the FW Act to take adverse action with the intention to prevent the exercise of a workplace right that an employee does not have now, but will or may have in future.

On appeal, a Full Court of the Federal Court confirmed Justice Lee's decision.

Qantas appealed to the High Court, arguing that the prohibition on the taking of adverse action in relation to employees' workplace rights relates only to workplace rights that are in existence at the time the adverse action is taken, not future or potential workplace rights.

What did the High Court say?

The High Court agreed with the Federal Court, noting in particular that:

• A person does not have a workplace right if the law expressly prohibits the exercise of the alleged workplace right. In this case, the QA and QGS employees were not legally permitted to take protected industrial action as at November 2020, and so a breach of the adverse action provisions was not technically possible in relation to that right at that time.
• However, the FW Act makes it clear that adverse action to prevent the exercise of a workplace right is unlawful, and that protection extends beyond a current workplace right, to a workplace right that does not exist at the time the adverse action is taken. This might include, as in the present case, a future right of an employee to take industrial action (and while not directly relevant to this case, the High Court observed that it might also include an employee's future right to take leave).
• Adverse action taken with 'mere awareness' of a future right is not unlawful. Accordingly, it will not always be the case that it is unlawful to take adverse action in relation to an employee with a future or potential workplace right.
• However, where the evidence (as in this case) indicates that the employer's desire to prevent the exercise of the future or potential right was in fact a substantial and operative reason for taking the adverse action, there will be a contravention of the FW Act.  

Key to this decision was the evidence of Qantas's real and substantive reasons for this decision. The Court stressed that if Qantas had proved that its reasons did not include the prohibited reason (namely, preventing the future exercise of a future or contingent workplace right to engage in enterprise bargaining and take protected industrial action), the Court may have come to a different conclusion.

The questions of compensation and civil penalties remain for consideration.

What next for employers?

When making decisions that may affect employees adversely in their employment, decision-makers must always bear in mind the FW Act prohibitions on taking adverse action on the basis of the employee's workplace rights.  

In short, decisions to take steps such as termination of employment (or any other decision that may have a negative effect on an employee in their employment) should not be connected to employees' workplace rights. In the wake of the Qantas case, it is important to be conscious that this prohibition applies to decisions motivated by the existence or exercise of not only an employee's existing workplace rights, but also workplace rights the employee will or may have in future.

To assist in defending claims of this type, employers also need to ensure that there is clarity about who is the decision-maker in sensitive matters, and that the reasoning behind contentious decisions is clearly understood and recorded.

Please contact a member of our Employment, Workplace Relations and Safety team for advice specific to your organisation's circumstances.

^[1] [2023]HCA 27

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