Qantas will pay $120m in compensation to 1820 baggage handlers the airline illegally sacked in 2020 as the full cost of its controversial outsourcing decision continues to grow.
On Tuesday, Qantas and the Transport Workers Union (TWU) announced they had finally reached an agreement over the payout, following a years-long legal battle that included the airline appealing the initial decision to the full bench of the federal court and later the high court – both of which were unsuccessful.
After losing its final appeal, the two parties spent more than a year in mediation and remedy hearings to determine how much Qantas would have to pay the outsourced workers for economic losses linked to lost wages.
To agree on a final compensation payout, the federal court examined test cases of three outsourced workers with differing circumstances. In October, justice Michael Lee determined that individual compensation amounts should range from $30,000 to $100,000.
Lee found that the workers would have been retrenched one year later in 2021 anyway due to the airline’s “laser-like” focus on cutting costs, capping the economic component of compensation calculations at 12 months.
The test case compensation figures also took into consideration “non-economic loss” suffered, related to hardship and distress caused by the airline’s decision.
A compensation fund will be established early next year, with legal firm Maurice Blackburn to administer payments to eligible employees.
In addition to the $120m in compensation, legal costs incurred due to its various challenges and the incident’s contribution to a tumultuous period for Qantas’ brand, the airline still faces significant penalties that could be imposed on it for breaching labour laws. Penalties will be determined next year.
The $120m compensation amount – and looming penalties – mean the true cost of the outsourcing has ballooned past the $70m Qantas had budgeted for the saga in its most recent financial results.
However, Qantas’ strong financial performance – it posted a $2.1bn annual underlying profit last financial year, after a record $2.47bn profit the year before – means the compensation agreement is unlikely to dramatically destabilise the airline’s financial outlook.
The $120m price tag for the outsourcing caps off a costly year for Qantas in terms of payouts, after it agreed to a civil penalty of $100m and $20m to customers in compensation over landmark legal action for allegedly selling tens of thousands of tickets to flights that had already been cancelled.
On Tuesday, the Qantas CEO, Vanessa Hudson, reiterated the airline’s “sincere apologies” to the illegally outsourced ground handlers.
Hudson – who served as chief financial officer at the airline under former CEO Alan Joyce when the outsourcing decision was made – said reaching an agreement with the TWU over compensation was “an important step in bringing closure” to their former employees.
“We know this has been a difficult period for those affected and are pleased we have been able to work closely with the TWU to expedite this process and resolve it ahead of Christmas,” Hudson said.
The TWU national secretary, Michael Kaine, said the compensation agreement ended “four gruelling years” for the sacked employees, who had suffered “family breakdowns, financial stress and mental hardship”.
“These workers helped build the ‘Spirit of Australia’. Many worked decades, proud to play their part in delivering the safety and service standards that made Qantas a national icon,” he said.
“Delivering justice to these workers is just the first step in turning Qantas around –but there’s still a long way to go to bring back the flying kangaroo Australians used to love,” Kaine said. He reiterated his calls for a safe and secure skies commission to overhaul how Australia’s aviation industry operates.
In the initial 2021 ruling over the outsourcing, the federal court found the decision illegal because it acted against protections in the Fair Work Act and was in part driven by a desire to avoid industrial action.
Compensation hearings that followed Qantas’ unsuccessful appeals focused on what would have occurred if the illegal outsourcing did not occur.
The court also heard that some of the workers had suffered significant psychological distress after losing their jobs and had to take medication to cope.
