Qantas receives record $90M Fair Work penalty with key lessons for employers

Background & summary

Qantas has been ordered to pay $90m in penalties after the Federal Court of Australia found that it had contravened the general protections provisions of the Fair Work Act 2009 (FW Act). This arose from Qantas' decision to outsource its ground handling operations during the COVID-19 pandemic, which affected 1,820 of its workers.

To recap, the Federal Court had previously held that Qantas contravened these provisions of the FW Act, by effectively making its outsourcing decision for a prohibited reason of preventing its affected employees from exercising rights of participating in enterprise bargaining and engaging in protected industrial action.

This $90m penalty imposed on Qantas is at around 75% of the maximum penalty that could have been ordered against Qantas in this case (~$121m). It is the largest penalty ever imposed by a court for a breach of the FW Act’s general protections provisions (or any of its predecessor provisions over 120 years of Australian industrial relations laws).

In addition to these penalties, Qantas had previously agreed to pay compensation to its former workers affected by these contraventions of the FW Act, in the total amount of $120m.

Assessment of penalty - how much and who should it go to?

The Federal Court, in arriving at the $90m penalty it imposed on Qantas in this case, took into account factors including:

The 'public interest' purpose of these penalties - which is to achieve general and specific deterrence from further contraventions of the FW Act;

1. Arriving at an appropriate penalty so that it cannot be regarded as "an acceptable cost of doing business" (i.e. assessing the proper penalty as against financial savings and benefits Qantas achieved as a result of its outsourcing decision);
2. Specific conduct of Qantas in relation to these proceedings - including its public comments over the course of the proceedings, its approach to this litigation, its evidence of contrition or remorse over its FW Act contraventions, its culture in decision-making, and corrective steps it had taken to improve its culture of compliance;
3. The size and scale of the contraventions, and their impact on the affected employees; and
4. Damage already suffered by Qantas as a result of these proceedings - including significant adverse publicity.

On the question of who this $90m penalty should be paid to, the Federal Court ordered that:

1. $50m of this penalty be paid to the Transport Workers' Union of Australia (TWU), who ran these proceedings against Qantas on behalf of the affected workers - which is an unprecedented payment to a trade union; and
2. The remaining $40m of this penalty be the subject of further assessment and determination as to who it should be paid to - including whether it should be paid directly to affected workers.

Takeouts for employers

Whilst this is a somewhat unique case (and the penalties imposed on Qantas are unprecedented), there are some key takeouts for employers from this penalty decision (and these proceedings more broadly). These include employers:

1. Understanding that courts are willing to impose significant financial penalties on parties who breach the FW Act, and these should not viewed as merely the cost of doing business;
2. Ensuring that their organisation has a culture in place where management can be challenged and tested on their proposed business decisions - particularly where there is a risk that these decisions could be made (or be perceived to have been made) for prohibited reason/s under the FW Act;
3. Considering the best approach to litigation of this nature - including the making of public statements during the course of proceedings;
4. Evidencing contrition and remorse for affected worker/s, and the robust inquiries and corrective actions that they have undertaken, where they have contravened the FW Act; and
5. Understanding that courts recognise the important role that trade unions can play in enforcing employers' compliance with the FW Act, and the possibility that unions will now become increasingly active in prosecuting employers for alleged contraventions of the FW Act, in light of the significant penalty awarded to the TWU in this case.

For more information about how this could impact you or your organisation, please contact a member of Lander & Rogers' Workplace Relations & Safety team.