Qantas and the Fair Work changes

In early August 2011, Qantas announced a net profit for 12 months to June 30, 2011 of $250 million, compared with $112 million for the prior period.

Qantas says the dispute with the three unions has cost Qantas to date $68 million. A subsequent offer of free flights valued at $20 million will bring that cost to $88 million. It would be reasonable, based on the above, that the total cost of damage done to brand and the recovery process for Qantas would probably exceed $125 million. As a result, the true cost to Qantas of the disruption was half of last year’s profit.

So why did Qantas go for the jugular? There is little doubt that union activity was undermining the credibility of Qantas. Furthermore, it is inevitable that the Qantas International arm must offshore many of its activities if it wishes to be competitive. This is something that Qantas has known for several years.

The legal reasons behind Qantas’ sudden announcement of a lockout are the ambiguous nature of the requirement that the lockout must be in response to industrial action taken by the union. Prior to the Fair Work Act 2009, an employer could give notice of its intention to lockout and lockout as a pre-emptive step. This permitted businesses like Qantas to say to unions, if you continue to take this industrial action we will, in 10 or so many days, exercise our right to lock you out on notice. It did not matter whether the unions ceased industrial action – the employer’s right to lockout was independent of the employees’ industrial action.

Qantas did not have that luxury as a result of the introduction of the new Fair Work Act. Further, the powers of suspension or termination of protected industrial action by Fair Work Australia (FWA) are quite limited. They are designed to encourage parties to bargain vigorously. The thresholds for FWA exercising a discretion to suspend or terminate the protected industrial action are very high. Qantas, quite properly, would have judged that the action being taken by its employees would not have permitted it to obtain such an order. As a result, Qantas argued its hands were tied and it had to take the industrial action in the manner that it did to prevent the unions out manoeuvring it.

Subsequent accounts have suggested that part of that strategy involved the Federal Government intervening, which would, under the circumstances, have the capacity to have all industrial action suspended or terminated. However, some of the unions have now challenged that suggestion. If that was the strategy, its execution was expensive, damaging to its brand and its stakeholders and has not reduced the venom of the unions. A similar approach adopted by the Victorian Government in the nurses dispute is attracting an angry backlash from unions but, in this case, the key issue is money not off-shoring – a place the Government may find support with FWA.

Recent commentary from academics and un-named practitioners suggest that Qantas had a strategy to attract Government intervention to enforce arbitration. They draw comfort from the provenance of the current provisions saying unions have found in the past little pleasure from arbitration (the old 170MX provision of the Workplace Relations Act). If it was the Qantas strategy, did Qantas know:

• It would suffer losses of greater than $100 million?
• It would strand 80,00 customers without any contingency plans?
• It would offend the national Labour Government which has powers to amend the Qantas Act to prevent off-shoring?
• It would further poison its relationship with its employees?
• It would damage its brand internationally or domestically?

And if so – was it really the right decision?

Qantas always had the capacity to bring the matter before FWA to conciliate. It could have invited the union to arbitration (s 240 of the Fair Work Act). It could have brought an application to suspend or terminate the industrial action, or had a third party do that.

Before I am shorted down by curb side critics – yes, the chances of such an application were slender, but the union were at certain risk of losing. There would have been pressure. Importantly, the customers and Government would have seen Qantas trying to resolve it. Clear indication could have been given of responsible action by Qantas, contingencies put in place (costing significantly less than $20 million) to protect customers as the Government engaged in the strategy. Qantas would have been politically on the front foot saying – this airline is not viable unless we off-shore significant parts to lessen the impact upon its workers. Stakeholders would both buy and support the message.

Industrial relations is as much about stakeholder management and communication as it is about legal process. Industrial relations at one time was a battle of who had the hairiest chest – is that the testosterone-ridden environment we want our human relations management to subsist within? Will that really deliver for the business, the stakeholders and employees? I don’t think so.