Don’t wing your outsourcing decisions: Takeaways from the Qantas decision

The High Court of Australia’s recent decision in Qantas Airways Limited v Transport Workers Union of Australia [2023] HCA 27 confirms that an employer is prohibited from taking adverse action against an employee to prevent the exercise of a future workplace right.

Whilst significant, this decision does not suggest that employers should avoid outsourcing arrangements. Rather, it highlights that employers should carefully consider the decision to outsource and ensure that the reasons to outsource do not include preventing employees from exercising workplace rights.

Background

On 30 November 2020, Qantas announced that its ground handling operations would be outsourced to third-party suppliers (outsourcing decision). As a result, thousands of Qantas Airways Limited (QAL) and Qantas Ground Services Pty Ltd (QGS) employees were made redundant (collectively, ‘Qantas’ employees’). Many of these employees were members of the Transport Workers Union of Australia (TWU).

At the time of the outsourcing decision, Qantas employees were prohibited from exercising their workplace right to engage in protected industrial action and enterprise bargaining (workplace rights). This was because the QAL employees’ enterprise agreement had not yet passed the nominal expiry date, and whilst the QGS employees’ enterprise agreement had passed nominal expiry, none of the procedural steps towards industrial action had been completed.

The TWU commenced proceedings in the Federal Court, alleging that the outsourcing decision was made to prevent employees from exercising their workplace rights, which contravened section 340(1)(b) of the Fair Work Act 2009 (Cth) (the Act).

A single Federal Court judge held that despite Qantas’ sound commercial reasons for the outsourcing decision, they failed to prove that the decision was not made to prevent affected employees from exercising their workplace rights.

Qantas appealed to the Full Federal Court. This appeal was dismissed and the primary decision upheld. Qantas then appealed to the High Court of Australia.

The central issue on appeal was whether Qantas, by terminating its employees at a time when they only had a future workplace right, breached section 340(1)(b) of the Act, which prohibits a person from “taking adverse action against another person to prevent the exercise of a workplace right.”

Qantas’ case

In support of its appeal, Qantas submitted a ‘broad’ and ‘narrow’ construction of section 340(1)(b) of the Act.

Qantas argued that:

• section 340(1)(b) only applies where there is a workplace right that is “presently in existence” at the time of the adverse action (broad construction); and in the alternative,
• an employer does not ‘prevent’ an employee’s exercise of a workplace right by merely taking a window of opportunity to take adverse action when the Act prevents the employee from exercising that right (narrow construction).

Decision

The majority of the High Court rejected Qantas’ argument and dismissed the appeal. Whilst the High Court confirmed that Qantas had sound commercial reasons for the outsourcing decision, the airline also had additional reasons which contravened the Act.

The key findings from the High Court judgement are as follows:

• section 340(1)(b) of the Act prohibits adverse action against another person if a substantial and operative reason for the action is to prevent the other person from exercising a “presently held or future workplace right”
• where a person’s ability to exercise a workplace right depends on temporal or circumstantial circumstances, then the person has a workplace right, even if it is not presently exercisable  
• where a person’s exercise of a purported workplace right is prohibited, or would expose the person to legal process, then that person does not have a workplace right
• ‘mere awareness’ of the effect on another person’s workplace right will not contravene section 340(1)(b) of the Act. Rather, a substantial and operative reason for taking the adverse action must be to prevent the exercise of a workplace right.

 Key takeaways

1. The decision does not overturn the current application of the Act. In other words, the laws as they have previously applied remain relatively unchanged by the High Court’s decision. Rather, the key implication is that the High Court confirmed the meaning of ‘workplace right’ does include future rights.
2. Importantly, the High Court does not question the lawfulness of an employer’s decision to outsource operations on a commercial basis. Rather, it reinforces that a decision to outsource will be lawful as long as the decision does not include an unlawful reason. This position is consistent with the application of the general protections provisions more broadly.
3. The decision reminds employers to carefully consider and determine the driving forces for business decisions. If the driving force includes an unlawful reason, such as to prevent the exercise of workplace rights, the general protections provisions will protect against such conduct.
4. As such, the High Court did not critique the commerciality of the decision to outsource. However, it is possible that such reasons for outsourcing will be significantly impacted by the Fair Work Amendment (Same Job, Same Pay) Bill 2021. Should the Bill pass, employers will be required to ensure that labour hire employees receive the same wages as those directly employed by the company. Employers should be watchful for news on the Bill passing and consider how it might affect the commercial aspects of their outsourcing decisions.
5. Finally, compensation and penalties against Qantas are yet to be ordered. Now that the final opportunity for appeal has been exhausted, the case will revert to the Federal Court for consideration of remedies. The legal arguments considered at this hearing will also be of interest to employers.

If you have any questions or wish to discuss what this decision means for your organisation, please get in touch with our team below.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Jennifer van Bronswijk

Julia Wyatt, Chloe Hamer

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