will a record fine for Qantas deter other companies from breaking the law?

On Monday, the Federal Court of Australia handed Qantas a record fine of A$90 million^[1] for breaching the Fair Work Act by unlawfully terminating the employment of 1,820 ground workers during the pandemic.

The decision to impose this penalty – the largest ever issued^[2] under the Fair Work Act – marks the final instalment in a five-year litigation saga initiated by the Transport Workers’ Union (TWU).

Delivering the ruling, Federal Court Justice Michael Lee ordered $50 million of the fine be paid to the union, partly to act as a deterrent that “should encourage others to pursue compliance with industrial relations laws^[3]”.

The fate of the remaining $40 million will depend on a later hearing to determine if some or all of it should be paid to the sacked workers. That would be on top of $120 million in compensation^[4] already agreed.

A quick recap

This saga began in 2020, after the TWU launched an action alleging that Qantas had unlawfully terminated the employment of 1,820 ground handling workers when it made the decision to outsource the staff at the height of the pandemic.

The union argued Qantas made this decision because of the workers’ future right to engage in collective bargaining and take protected industrial action when their enterprise agreement expired.

At trial, Qantas failed to show that this reason had not been a substantial and operative factor in making the outsourcing decision.

This meant that in making the workers redundant, Qantas had breached the Fair Work Act 1,820 times – once for each affected worker. Qantas appealed this outcome all the way to the High Court, but ultimately failed.

Once Qantas had exhausted all rights of appeal, the matter was returned to Justice Lee to determine compensation for the affected workers. After much toing and froing between the parties, in December 2024, a compensation package totalling $120 million was agreed between Qantas and the TWU.

A meaningful deterrent

That left a final outstanding matter for the court – the “appropriate” penalty to be imposed against Qantas for breaching the law. The maximum penalty available for this breach under the Fair Work Act was just over $120 million.

To determine an appropriate penalty under the Fair Work Act, a judge must exercise a level of discretion and weigh up various factors. These include the nature, circumstances and consequences of the breach, the size of the business and the extent to which the contravenor has shown remorse.

So why the record fine? The size of this penalty is partly because there were so many workers affected by Qantas’ breach of the Fair Work Act.

But it also reflects Justice Lee’s view^[5] that there was a need for “real deterrence” to ensure big employers are not tempted to “get away” with unlawful conduct because the potential rewards outweigh the risks of getting caught.

‘The wrong kind of sorry’

On whether Qantas had shown genuine remorse, Justice Lee acknowledged^[6] Qantas had belatedly apologised for its conduct.

But the company’s formal expression of regret was described as “the wrong kind of sorry”. That is, the company seemed to be sorry they got caught and suffered financial and reputational loss, but not truly sorry for the effect of the unlawful conduct and its impact on the workers.

Justice Lee expressed^[7] scepticism that Qantas’ corporate culture had genuinely changed. In deciding to outsource its ground handling operations, Qantas was found to have been “lawyered from the start and up to the hilt”.

The judge noted that, throughout the litigation, Qantas pursued a vigorous defence, alongside an aggressive public relations strategy, continuing to deny any wrongdoing.

Justice Lee also observed that, at the 11th hour, even after the High Court decision had found in favour of the union, Qantas tried to deploy a strategy to ensure the affected workers received nothing.

It was only when facing the prospect of a massive fine, that Qantas expressed regret, putting forward evidence their corporate culture had changed. However, it continued to use the same legal team that came up with the outsourcing strategy.

In Justice Lee’s view, it was telling that no senior leaders who had been involved in the decision and remained with Qantas took the stand to explain what they had learned and why it would not happen again.

Ultimately, this outsourcing decision cost Qantas a combined amount of around $210 million in compensation and penalties. This figure does not include the millions of dollars of legal fees Qantas incurred in fighting the litigation.

But it was estimated outsourcing the ground handling operations saved Qantas about $100 million per year^[8]. In essence, despite being handed the biggest fine on record, Qantas still appears to be financially better off as a result of the unlawful outsourcing decision.

Portion paid to the union

Under the Fair Work Act, it is difficult to recover legal costs. This makes it challenging for unions, and others, to pursue litigation through the courts and hold companies to account.

The decision to pay $50 million – more than half of the penalty – to the TWU was made partly because the union took on the perils of protracted litigation. And, as Justice Lee pointed out, adverse action cases can be dicey. The outcomes are by no means certain.

Here, the union bore the risk and has reaped the reward. This means more money in the TWU coffers to pursue other employers who may breach the Fair Work Act. It is also an important signal to other unions, and worker representatives, that the benefits of enforcing the law may now outweigh the risks of doing so.

References

1. ^{^} A$90 million (www.judgments.fedcourt.gov.au)
2. ^{^} largest ever issued (www.abc.net.au)
3. ^{^} should encourage others to pursue compliance with industrial relations laws (www.abc.net.au)
4. ^{^} $120 million in compensation (www.abc.net.au)
5. ^{^} view (www.judgments.fedcourt.gov.au)
6. ^{^} acknowledged (www.judgments.fedcourt.gov.au)
7. ^{^} expressed (www.judgments.fedcourt.gov.au)
8. ^{^} $100 million per year (www.codea.com.au)