The High Court's decision in Qantas Airways Limited & Anor v Transport Workers Union of Australia [2023] HCA 27 provides greater clarity about the application of the Fair Work Act's (FW Act) adverse action regime. In dismissing Qantas' appeal, the High Court upheld earlier decisions of the Federal Court that Qantas had breached the FW Act's adverse action provisions by outsourcing its ground handling operations for 'substantial and operative' reasons which included preventing affected employees from exercising certain workplace rights (including to take protected industrial action). Significantly, the High Court found that this was the case even though the affected employees did not actually have the rights at the time Qantas made the outsourcing decision but may have these rights in the future.
What is this case about?
In 2020 Qantas outsourced ground handling operations at ten Australian airports (Outsourcing Decision), saving it around $100 million per year, and a further $80 million in capital costs over 5 years. Given the impact that the COVID-19 pandemic was having on Qantas' revenue, the commercial benefits of the Outsourcing Decision were obvious.
At the time the Outsourcing Decision was made, the affected employees were covered by two enterprise agreements (one had passed its nominal expiry date; the other was set to expire on 31 December 2020). Relevantly, the employees under each of these agreements were prohibited from taking protected industrial action at the time of the Outsourcing Decision either because the enterprise agreement that applied to them had not passed its nominal expiry date or because the procedural steps required by the FW Act to engage in protected industrial action had not been taken.
This meant that at the time of the Outsourcing Decision, the employees did not presently have a right to engage in protected industrial action. However, it was expected at the time that the affected employees would be able to exercise those workplace rights, and would in fact exercise those rights, in the following months.
After Qantas made the Outsourcing Decision, the Transport Workers Union of Australia (TWU) commenced adverse action proceedings in the Federal Court seeking compensation and penalties for breaches of the FW Act. The TWU alleged that Qantas' reasons for making the Outsourcing Decision included preventing the affected employees exercising their workplace right to engage in protected industrial action after the nominal expiry date of the applicable enterprise agreements had passed and the necessary procedural steps had been taken.
Case before the Federal Court
There was no dispute that the Outsourcing Decision was 'adverse action' for the purposes of the FW Act because it altered the position of the affected employees to their prejudice – the effect of the Outsourcing Decision was that the positions of the affected employees were all redundant. The question for the Federal Court was whether Qantas' reasons for making the Outsourcing Decision included an unlawful reason.
At first instance, the Federal Court (Lee J) was satisfied that Qantas had sound commercial reasons for the Outsourcing Decision and that these were 'substantial and operative' reasons for making the decision. However, Lee J also found that Qantas had not discharged its evidentiary onus under the FW Act (a reverse onus applies) to disprove that preventing the affected employees exercising their workplace rights to engage in protected industrial action was an additional 'substantial and operative' reason for making the Outsourcing Decision. On this basis, Lee J concluded that preventing the affected employees exercising their workplace rights to engage in protected industrial action was an additional 'substantial and operative' reason for the Outsourcing Decision and that, therefore, the Outsourcing Decision amounted to unlawful adverse action under the FW Act.
Qantas' unsuccessfully appealed Lee J's decision to the Full Court of the Federal Court and then appealed again to the High Court.
High Court's decision
On appeal to the High Court, Qantas did not challenge the finding that it had failed to discharge the evidentiary onus in relation to the alleged unlawful reason. Instead, the appeal was limited to an argument that the prohibition on taking adverse action to prevent an employee exercising a workplace right only applies to workplace rights that exist, and are able to be exercised, at the time the adverse action is taken and not to workplace rights that employees may have in the future.
In three separate judgments, the High Court unanimously dismissed the appeal. Each of these judgments confirm that the FW Act prohibits the taking of adverse action against another person if a 'substantial and operative' reason for the action is to prevent the other person exercising a presently held or a future workplace right.
The High Court also emphasised the distinction between the mere awareness, appreciation or consideration of employees' workplace rights and of those workplace rights being a 'substantial and operative' reason for taking adverse action. Significantly, only the latter will breach the FW Act's general protection provisions. If Qantas had been able to prove that the only 'substantial and operative' reasons for the Outsourcing Decision were the sound commercial reasons that had been identified, the outcome would have been very different.
While not directly relevant to the outcome of the Qantas appeal, Steward J also made some interesting comments on the related issue of whose reasons are relevant when considering whether adverse action was taken for a prohibited reason. This is an issue in relation to which there has been some inconsistency from the Full Court of the Federal Court of Australia (discussed at length in Snaden J's decision in Serpanos v Commonwealth of Australia [2022] FCA 1226, a matter in which we represented the ATO in successfully defending the significant adverse action claim that Mr Serpanos made against it). In particular, some recent decisions have suggested that the reasons of non-decision-makers may be relevant if the decision-making process incorporates those persons' states of mind. The effect of this approach is that the reverse onus may not be discharged if those other persons do not give evidence or are proved to have been motivated by unlawful reasons.
While Steward J did not expressly consider this diverging authority, his Honour stated that the relevant enquiry is concerned with 'the actual, immediate or operative reason or reasons for taking adverse action' and that this 'may well require one to reject… the musings or thoughts of employees that ultimately play no part in the decision-making process'.
Whether Steward J's comments suggest a rejection of the Federal Court's recent approach will only be clear when the High Court is required to squarely consider and decide this issue.
The matter will now return to the Federal Court to determine potential compensation and penalties.
What employers need to know
It is now clear that the prohibition on taking adverse action against a person to prevent them exercising or proposing to exercise a workplace right applies to both existing and future workplace rights. This reinforces the need for decision-makers to ensure that they can demonstrate that preventing the exercise of such rights is not a 'substantive and operative' reason for making decisions which may impact one or more employees adversely.
However, it is important to remember that it will not always be unlawful to take adverse action against an employee who has or will have a relevant workplace right. The possibility of such claims being made in relation to existing or future workplace rights simply reinforces the need for decision-makers to clearly distinguish between 'substantial and operative' reasons for their decisions and other matters of which they may have merely been aware of or considered in the lead up to making a decision.
In practical terms this means that, where employers are considering any action which may adversely impact members of their workforce, they will be best placed to defend any decision if they ensure that:
- a specific person or persons are chosen and designated as the decision-makers;
- identified decision-makers understand what unlawful adverse action means;
- decisions are documented appropriately to reflect the lawful substantial and operative reasons for the decision (e.g. the commercial rationale) – not infected by unlawful reasons; and
- decision-makers must be willing and able to clearly demonstrate the lawful substantial and operative reasons for their decisions (and reject that any alleged unlawful reason was a substantial and operative reason) before a court if ever challenged.
If you would like to discuss the potential impact of this decision for your business, including how we can help equip your key decision-makers with any training and support they may need, please contact our team.