Qantas facing significant damages for decision to outsource ground handling operations

Background

This case arose from Qantas' November 2020 decision to outsource its ground handling operations at ten Australian airports to several third party ground handling companies (the outsourcing decision). Prior to the outsourcing decision, Qantas’ ground handling operations had been undertaken by employees of Qantas or a Qantas subsidiary. The effect of the outsourcing decision was that the vast majority of the Qantas-employed ground handlers had their employment terminated.

The Transport Workers' Union (TWU) challenged the outsourcing decision, alleging Qantas took adverse action in order to prevent its employees from exercising their workplace right to participate in protected industrial action, including by participating in a protected action ballot, and to participate in enterprise bargaining. The outsourcing decision arose in the context of the nominal expiration and imminent nominal expiration of two of the enterprise agreement applying to this workforce.

In July 2021, Justice Lee found Qantas contravened s 340(1)(b) of the Fair Work Act 2009 (Cth) (FW Act) as the outsourcing decision was partly motivated by a desire to prevent employees from bargaining and taking future protected action. Justice Lee subsequently dismissed the TWU’s claim for relief in the form of reinstatement of the employees. After various appeals and cross-appeals by both parties, in relation to various aspects of Justice Lee’s decisions — all of which were dismissed by the Full Court of the Federal Court and one of which was dismissed by the High Court — Justice Lee returned to answer the question of the appropriate compensatory relief.

For this purpose, three ‘test cases’, involving three former employees — Mr Carney, Ms Piggott, and Mr Bennett — were used to determine the compensation structure that would apply to the approximate 1,683 affected employees. The procedure by which the TWU sought to settle the issue of compensation was critiqued by Justice Lee, who had entreated the TWU to consider reconstituting the remaining aspects of the dispute as a class action. Justice Lee described the process adopted by the TWU as ‘cumbrous and unwieldy’ in comparison with the ‘manifold benefits of the modern class action regime’ for dealing with the question of compensation for such a large number of individuals.

Arguments

In seeking to limit the amount of compensation payable, Qantas argued it would have lawfully outsourced the work in any event, in 2020 or 2021, due to compelling commercial imperatives, which included delivering $100 million annual cost savings, improve efficiency by ensuring ground handlers were only engaged when an aircraft requiring ‘turning’ at an airport, and avoiding $80 million capital expenditure in updating its ground handling equipment.

The TWU contended employees would have remained employed until retirement and encouraged the Court to assess compensation on this basis. However, the TWU conceded that Qantas ‘would not have done nothing’ in relation to its ground handling workforce and accepted that determining the likely course of action to be taken by Qantas in 2020, was essential to assessing the value of any compensation.

The decision

In assessing compensation under s 545(1) FWA, his Honour examined principles governing causation and damages for statutory compensation. On causation, his Honour found the TWU established the outsourcing decision caused the employees to lose an opportunity of continuing employment. However, this loss was limited to the timeframe set out in the second counterfactual — which contemplated that Qantas would have lawfully outsourced the work by late 2021 anyway due to its financial situation worsening and Qantas remaining laser-focused on cutting costs.

Regarding damages, Justice Lee noted the discretion in s 545(1) of the FW Act is broad but not at large, and requires contextualised judicial reasoning, not just fairness, to compensate for the consequences of the contravention. His Honour adopted an ’informed estimation‘ approach to quantifying future loss and lost opportunities, recognising some imprecision is inevitable.

On economic losses, employees were credited for prospective income until 12 months post-termination, including superannuation, but then discounted for likely stand-downs. For non-economic losses, the unchallenged evidence established Mr Carney suffered loss of security, anger, and panic attacks ($30,000 awarded); Ms Piggott experienced distress, anxiety, and strained relationships ($40,000 awarded); and Mr Bennett developed major depression and suicidal ideation ($100,000 awarded). His Honour rejected Qantas' attempt to impugn this evidence.

His Honour’s orders require the parties to confer on calculations in respect of the remaining employees, with the matter to be relisted, in the event the outstanding questions of compensation cannot be resolved.

Key takeaways

The case highlights the significant potential costs involved for contraventions of the general protection provisions of the FW Act.

Read the full text of the court’s judgment here: Transport Workers’ Union of Australia v Qantas Airways Limited (Compensation Claim) [2024] FCA 1216

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