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Australia – Outcome In The Long-Running Qantas Dispute With The Transport Workers Union.

 31 August, 2012

 

Legal News & Analysis – Asia Pacific – Australia – Labour & Employment

  

In brief

 

  • A Full Bench of Fair Work Australia (“FWA”) today handed down a workplace determination binding on Qantas, Q Catering Limited, the Transport Workers Union of Australia (“TWU”) and approximately 4,000 ground staff (baggage handlers, freight handlers and catering employees).
  • The decision is the first contested workplace determination made under section 266 of the Fair Work Act 2009.
  • Ashurst Australia’s Sydney Employment team acted for Qantas and Q Catering in the proceedings.
  • The decision upheld Qantas’ position on almost all issues in dispute, most significantly in relation to wages and maintaining the freedom to use contractors, labour hire and Qantas Ground Services (a wholly owned subsidiary of Qantas) as it determines appropriate.
  • Although many of the issues in dispute were specific to these industrial participants, the decision provides guidance on a number of key issues of relevance for employers which we discuss below.

 

Background

 

Qantas, Q Catering and the TWU had been negotiating for a number of months over the terms of an enterprise agreement to cover ground staff, without resolution.

 

The TWU and its members took strike action against Qantas between August and October 2011 which, along with industrial action by two other unions, caused disruption to passengers, significant costs to Qantas and a negative impact on future passenger bookings.

 

On 29 October 2011, Qantas made a decision to lock out employees from three union groups including those covered by the TWU as a response to their ongoing industrial action.

 

FWA terminated all industrial action by Qantas and the unions on 31 October 2011 pursuant to section 424 of the Fair Work Act 2009 (“the Act”).

 

This triggered a compulsory arbitration process before FWA to determine all matters in dispute between the companies and the TWU in relation to the terms and conditions of employment to apply to the ground staff.

 

Some of the key issues in dispute included the TWU’s claims for:

  • 5% per year wage increases which were well in excess of the average applying in the industry
  • 1% additional superannuation each year over and above Superannuation Guarantee obligations 
  • imposition of restrictions on Qantas’ use of contractors and flexible labour including site rates to apply to all contractors and labour hire workers and ratios to restrict the number of contractors and labour hire workers to no more than 20% of the Qantas workforce 
  • restrictions on Qantas’ right to determine how overtime is allocated 
  • union involvement in various other aspects of managerial prerogative 
  • the dispute settlement procedure to apply to all matters at the workplace.

There were approximately 25 other less significant issues also to be determined.

 

The arbitration was heard by a Full Bench of FWA (Vice President Watson, Senior Deputy President Harrison and Commissioner Harrison) for a number of weeks over the period March to June 2012.

 

The determination

 

Section 275 of the Act sets out the factors that FWA must take into account in deciding the terms of a workplace determination, including relevantly:

 

a) the merits of the case

b) the interests of the employers and employees who will be covered by the determination 

c) the public interest

d) how productivity might be improved in the enterprise concerned

e) whether the conduct of the bargaining representatives during bargaining was reasonable and complied with the good faith bargaining requirements

f) incentives to continue to bargain at a later time.

 

Merits of the case

 

In considering the merits of the parties’ positions, the Tribunal had particular regard to:

 

  • the competitive context of the employer
  • the terms of the previous enterprise agreement
  • the practices of other employers in the industry and the terms and conditions applying to their employees
  • the general principle that an industrial tribunal ought not interfere with the right of management to manage its business, unless some unfairness to employees is demonstrated
  • the extent to which the industrial parties have been prepared to deal with matters during the enterprise bargaining negotiations.

 

The interests of the employer

 

In balancing the interests of employees and the employer, FWA accepted that the evidence demonstrated that Qantas faced significant competitive pressures and needed to implement cost savings in order to respond to those pressures. It gave due weight to the efforts taken by Qantas to obtain greater flexibility to meeting operational peaks and troughs and reduce its operational costs and enhance its competitive position.

 

Conduct during bargaining

 

The TWU asserted that various aspects of Qantas’ conduct during the negotiations were unreasonable or were a breach of the good faith bargaining obligations, including its decision to engage in employer response action in the form of a lockout.

 

However, FWA made it clear that generally speaking, conduct that is lawful and available under statute would not be considered unreasonable because the Act provides a scheme for the taking of protected industrial action by employees and employers.

 

Furthermore, FWA found that Qantas’ conduct such as advancing non-negotiable offers and placing deadlines on acceptance of package offers was not a breach of the good faith bargaining requirements and noted that:

 

“it can be expected that bargaining in a hotly contested dispute will be robust and that parties will take steps to bring about a desired result that the other party will regard as unreasonable or uncalled for… However it is quite a different thing to contend that the action was capricious or unfair and undermines collective bargaining.”

 

Wages

 

In rejecting the TWU’s claim for a 5% per year wage increase, FWA took into account the minimum wage of 2.9% awarded by FWA from 1 July 2012, the current CPI figures, previous wage deals with this group of employees and other similar groups, competitor rates of pay, ongoing cost pressures on Qantas and the fact that there was no demonstrable increase in productivity by employees.

 

FWA awarded a 3% pay rise per year for 3 years as pressed by Qantas.

 

Significantly FWA awarded backpay to 1 July 2011 when the previous enterprise agreement had expired. This seems to depart from established case law which generally provides that no backpay is payable unless exceptional circumstances warrant it. The tribunal did not provide substantive reasons justifying this outcome and the decision is a concerning precedent as it places employees in the same position as they would have been in if they had not engaged in damaging industrial action.

 

Site rates and conditions

 

The TWU claimed that the rates and conditions of the workplace determination should apply to contractors and labour hire workers engaged by the company. They also sought the imposition of a number of other obligations on the company in relation to the engagement of contractors or labour hire workers.

 

In a significant finding, FWA rejected the entirety of the TWU’s claim in this respect, determining that:

 

“In our view it is not appropriate for this Workplace Determination to directly or indirectly govern the terms and conditions of employment of employees not covered by it. The use of contractors and labour hire employees is widespread in the airline industry and is a method by which airlines are able to achieve operational flexibility and reduce costs. It has become part of the operational strategy of Qantas and other airlines. Granting the TWU claim would overturn the approach of Qantas in using contractors and lead to immediate and significant increases in its costs with respect to contractor and labour hire employees. In view of the strong opposition of Qantas and its expressed need to reduce its costs in a difficult market environment the claim cannot be justified. The claim fails on the grounds of merit and by virtue of its negative impact on efficiency and productivity.”

 

Limits on the number of contractors and labour hire workers that can be engaged The TWU sought the imposition of a cap on engagement of contractors and labour hire of 20% of the permanent Qantas and Q Catering workforces.

 

The tribunal rejected the claim on merit grounds finding that:

 

“The determination of how to engage labour, the extent to which contractors are utilised and the numbers of employees to be engaged in various categories are classically regarded as matters properly to be determined by the management of an enterprise.”

 

FWA also found that Qantas had a long history of engaging labour hire and contractors and the TWU had not established that this was causing unfairness to employees such that the tribunal should interfere with management’s rights on such matters.

 

Qantas also opposed the inclusion of ratios on jurisdictional grounds, but FWA found it unnecessary to determine the jurisdictional issue.

 

Job security

 

One of the key issues raised by the TWU in the proceedings was the protection of employees against Qantas engaging supplementary labour at the expense of permanent employees to be covered by the determination.

 

FWA included a provision that, for the life of the workplace determination, there would be no compulsory redundancies of permanent employees as a direct result of the company’s use of contractors or labour hire workers.

 

This clause was based on the terms of a written undertaking given by Qantas during the proceedings.

 

Aspirational clauses and terms adequately dealt with elsewhere FWA rejected the TWU’s claims for a number of other clauses on the basis that they were aspirational, not appropriate for inclusion in a workplace determination or were otherwise adequately dealt with by legislation.

 

Implications of the decision

 

Although the decision overall was favourable to Qantas, there are considerable risks in putting enterprise bargaining in the hands of a third party. However, if the approach of the Bench in this decision is applied in other circumstances it would seem that the more extreme types of claims will be rejected.

 

For example, many unions are making excessive wage claims which do not take into account the employer’s competitive position or the current economic environment. FWA has determined that, at least in the circumstances before it in this matter, a wage increase of 3% per annum is a reasonable outcome.

 

We are also seeing a trend of unions making bargaining claims to impose significant and unreasonable restrictions on companies making sensible use of contractors and trying to contain their costs. Unions are often seeking a decision-making role on matters that should be at the employer’s discretion so long as they are not unreasonable. FWA has taken a sensible approach to this issue and has made it clear that employers should be free from such restriction unless there is demonstrable unfairness to employees.

 

FWA’s comments on the parties’ conduct during bargaining in this matter may have relevance for employers in defending union claims for bargaining orders.

 

Some of the key issues in this case are issues that many employers are grappling with and which have been raised in submissions to the Fair Work Act review panel recently, namely:

 

  • Content of enterprise agreements A number of employers made submissions seeking to limit the matters that can be bargained for (and over which protected action can be taken) in enterprise bargaining, particularly around the employer’s right to use third party contractors/labour hire and union rights. These issues have been features of some of the big industrial disputes recently making headlines including the Qantas and BMA disputes. The review panel did not make any recommendations to change the current content rules which means that we are likely to continue to see protracted industrial action campaigns where unions press for these matters and employers oppose them.
  • Easier access to FWA for compulsory arbitration to resolve bargaining disputes Many submissions to the review panel sought amendments to the Act to permit easier access to arbitration in the case of long running disputes. The panel did not accept that any changes should be made to the Act in this regard. Accordingly, we are likely to see continued protracted and damaging industrial disputes.

 

 

For further information, please contact:

 

Rachel Bernasconi, Partner, Ashurst

rachel.bernasconi@ashurst.com

 

Talia Firth, Ashurst

talia.firth@ashurst.com

  

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