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Qantas believed outsourcing was a ‘low’ legal risk, court told

Qantas executives assumed the legal risk of outsourcing 1,700 ground handling staff in November 2020 was “low”.

user iconNaomi Neilson 21 March 2024 Big Law
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The executives, including then-executive manager of Qantas airports, Colin Hughes, met with lawyers from Herbert Smith Freehills (HSF) and an industrial relations expert in early June 2020 to discuss the decision to terminate the ground handling staff.

While HSF never used the term “low risk”, Hughes told the Federal Court on Wednesday (20 March) the executive team characterised the decision as one that would withstand court scrutiny.

“There were the commercial reasons that we had and, on that basis, we understood there were certainly no barriers to progressing (with the outsourcing) and the legal risk was low,” Hughes said.

 
 

Despite the low-risk belief, the Federal Court found the outsourcing was illegal and this was upheld by the High Court on appeal.

Hughes, who was promoted to chief operating officer before he resigned in 2023, was giving evidence on behalf of Qantas as part of its argument that the compensation it now owes to the ground handling staff should be limited to 12 months of work.

The airline told the court in a “counterfactual world” where the November 2020 outsourcing never occurred, it would have still found a legal way to move ahead with the terminations in early 2021.

Hughes told the court two meetings with HSF included then-chief operating officer Paul Jones, executive manager and lawyer Sonia Millen, and strategy manager Paul Nicholas.

They were also joined by Ian Oldmeadow, an independent industrial relations expert with his own consultancy practice.

Hughes said the first meeting was largely for Oldmeadow to question the commercial reasons for the outsourcing.

Oldmeadow had been “sceptical about some of those things”, particularly whether the commercial reasons were “believable”.

Several days later, the group met again to hear from HSF.

Hughes said there was some discussion about the legal framework and “about it being okay for cost reduction to be a reason”.

The group also discussed an in-house bid being put together by the Transport Workers Union (TWU) and the possibility of a public campaign to prevent the outsourcing from going ahead.

In the end, Hughes said they believed the decision was a low risk and there was “no challenge to that viewpoint” from the lawyers.

“That was our characterisation of that, my characterisation of that, based on what I had heard, what I knew about the proposal, what I knew about the reasons and what I believed could be done about the in-house bid process,” Hughes said.

Asked by Qantas counsel Richard Dalton KC about what may have played out had the November 2020 outsourcing never occurred, Hughes said the team would have reconvened with HSF in early 2021 to “refresh the position effectively”.

He added the outsourcing would have always happened.

“I can’t think of any Qantas manager who would not have recommended consideration of that proposal,” Hughes said.

“It is hard to think why that wouldn’t have been the case.”

When asked if Qantas would have considered the in-house bid, Hughes said it was “entirely implausible”.

“There wasn’t really anything in the in-house bid,” Hughes said.

“I’ve set out ad nauseam why that was the case and the practical reality (is we wouldn’t have) accepted it because it was undefined.

“To accept that we were going to enter some ongoing, undefined, unregulated discussion about the proposal (is wrong).”