'It does remind employers to carefully consider and determine the driving forces for business decisions,' says employment lawyer
Earlier this year, Qantas lost its appeal in the High Court over the outsourcing of 1,700 jobs back in 2020.
The High Court upheld the Federal Court's decisions that found it unlawful for Qantas to outsource baggage handlers, cleaners, and ground staff during the pandemic.
"As we have said from the beginning, we deeply regret the personal impact the outsourcing decision had on all those affected and we sincerely apologise for that," the airline said in the statement at the time.
For employers, there are definite lessons to be learned on the best way to approach outsourcing.
Reasons for outsourcing
A company may decide to outsource some of its work because of commercial reasons such as the need to reduce its fixed cost base, Jennifer van Bronswijk, special counsel at Holding Redlich told HRD Australia.
“The engagement of direct employees is a fixed cost in the cost base,” she explained. “So if you were to outsource, which would result in a reduction in direct employee numbers, then the commensurate result would be a reduction in fixed cost.”
Another reason for outsourcing could be because of a need to increase productivity and the possibility of engaging labour more flexibly in line with customer demand, van Bronswijk said.
“For example, if an organisation engages a labour hire provider to provide labour for a set period,” she said. “That's something that you can turn on and off according to what your business requirements are at the time because those engagements are regulated through commercial arrangements. And the third-party provider, [for the] most part, has a lot of the legal risk that arises
The third reason, which van Bronswijk sees as the most common, is the need to gain access to specialist knowledge or expertise that an employer can’t necessarily resource internally.
General protections provisions and outsourcing
“Outsourcing is not free from legal risk,” van Bronswijk said, and it will generally be illegal if an employer makes the decision to outsource for an unlawful reason.
“Under the Fair Work Act, there’s the general protections provisions, which provide that it's illegal to outsource if the substantial operative reason for the outsourcing was for an unlawful reason,” she said. “Unlawful reasons will arise if the decision is made because an employee or group of employees have a workplace right or if the decision is made to prevent the exercise of workplace rights.
The challenging part about the general protections provisions for employers is that the employer has the burden of proof (otherwise known as the reverse onus of proof), she said, “so the conduct is taken to have occurred unless the employer can effectively discharge that burden, which is a really high bar to meet.”
Workplace rights at Qantas
In the High Court’s decision, it was found that while Qantas had sound commercial reasons for outsourcing their ground handling operations, they hadn't disproved that the substantial and operative reason was to prevent the affected employees from exercising workplace rights, van Bronswijk said.
And those workplace rights were to engage in industrial action and participate in enterprise bargaining.
The one important takeaway is the decision supports the idea that outsourcing for commercial reasons is a legitimate way for an employer to organise its business, van Bronswijk said, but employers need to be careful about the ultimate reasons why they are outsourcing.
“It does remind employers to carefully consider and determine the driving forces for business decisions… in the context of outsourcing,” she said. “If the driving force includes an unlawful reason, such as to prevent the exercise of workplace rights, then the general protections provisions are intended to prevent against such conduct.”
Best practices for HR in outsourcing
There are three key takeaways for HR teams to consider when it comes to outsourcing, according to van Bronswijk. The first is compiling a business case that outlines what the operational imperatives are behind the decision to outsource.
“[The] business case process should include articulating and identifying the drivers that sit behind outsourcing decisions,” she said. “I would say that planning and preparation really is key.”
The second is developing a communications plan which contains the key messages and channels that the organisation will communicate with its impacted employees.
“It goes without saying but outsourcing decisions often have significant impact on employees,” van Bronswijk said. “So I think it's really important that employees understand the reasons for the decisions and are brought on the journey for the next chapter of the organisation.”
And the third takeaway is it serves as a reminder for employers to consider obtaining legal advice early in the planning processes.
“That helps you at the start to understand where the key risk areas are and the steps you need to think about as you mitigate your overall legal risk,” she said.
