The IR and legal fallout from Qantas

For employers, the case demonstrates the serious risks of running an aggressive industrial strategy and losing, writes Julian Arndt.

$90 million.

The industrial relations world is still coming to terms with the sheer scale of the decision from Justice Michael Lee of the Federal Court of Australia last Monday (15 August) to impose a penalty of $90 million on Qantas for its pandemic-era decision to outsource ground operations across 10 airports, displacing approximately 1,820 employees.

Qantas’ decision, challenged by the Transport Workers Union, was found unlawful because it was made in part to prevent employees from exercising future workplace rights.

With the unlawfulness of Qantas’ conduct already determined by Lee J and the High Court, and compensation agreed to the amount of $120 million to the dismissed employees (in addition to redundancies already paid), the last stage of the proceedings was to determine what pecuniary penalty Qantas should pay in respect of its breaches (i.e. the ‘fine’).

Penalty decision

Lee J’s decision to impose a penalty of $90 million was triggered by 1,820 separate breaches, one for each of the affected employees. The Judge considered the conduct to be “of a singular scale and character”.

The $90 million figure was approximately 75 per cent of the maximum possible penalty. In his reasons, Lee J determined that the large penalty was warranted to make breaching the Act ‘an economically irrational choice’ and to ensure that penalties were not simply the ‘cost of doing business’.

The court made comments that the relevant decision makers must have known about the unlawfulness of the prohibited reason and suggested that considerable efforts were made to ensure that relevant records did not record reasons for the decision.

A central theme of the penalty judgment was the court’s belief that Qantas had not behaved in a way which suggested it was truly contrite but rather was engaging in ‘performative remorse’.

Already notorious for its ‘combative industrial relations culture’, the court noted that Qantas’ consistent PR campaign throughout the litigation suggested that it did not accept that its decision was unlawful, that it had sound commercial reasons for making the decision and that it would not have changed the decision. Further, it had consistently sought to minimise the court’s liability findings and had published immediate statements disagreeing with findings of the court (presumably before those reasons had been properly considered).

In total, while Lee J accepted that Qantas was sorry, His Honour was not convinced that it was the ‘right kind of sorry’.

The amount

The $90 million penalty was made up of a $50 million award to the union, with the remaining $40 million to be determined later.

The award to the union was made due to the risks and costs incurred in running a five-year case.

Implications

As acknowledged in the judgment, Lee J’s decision applied relatively uncontroversial principles about penalties. Respectfully, the decision does not change the law.

The sheer size of the penalty will create significant shockwaves in boardrooms; IR teams and law firms are faced with difficult industrial decisions. Qantas’ own lawyers suggested in the proceedings that the case was a ‘wake up call to corporate Australia’. How rude that awakening will be, remains to be seen.

On any view, the award of $50 million from an employer to a trade union is remarkable.

While very few decision makers will make decisions involving the termination of 1,820 employees in one go, large-scale redundancy decisions are common and invariably arise for complex reasons and in difficult scenarios.

As was noted in the case, the penalty will ‘send a message’ to well-resourced employers that breaches of the act will not only result in significant penalties, but that those penalties will have the compounding effect of financially empowering unions as ‘enforcers’ of the Act and advocating for improved conditions.

The Qantas decision will allow unions to put significant pressure on employers in redundancy scenarios (or just general adverse action scenarios) with threats of similar penalty proceedings. Given that the operation of general protections laws places an onus on employers to prove the lawfulness of their conduct, this threat is not an empty one.

The prospect of securing meaningful penalties against large employers will provide an attractive carrot for unions and fear-inducing sticks for employers.

Applicant or class-action ‘for profit’ law firms are also likely to have taken note of the prospect of pursuing penalties as part of a revenue-generating business model.

For employers, the case demonstrates the serious risks of running an aggressive industrial strategy and losing.

Many employers will no doubt be left considering whether an approach of candour, compromise, cooperation, and (if necessary) contrition may better serve their ends.

At the very least, even if you are not sorry, it may save you a great deal of money to at least act like it.

Julian Arndt is a director at Australian Business Lawyers & Advisors.