The Qantas Lockout of Employees in 2011

Subject: Employee Management
Pages: 7
Words: 2023
Reading time:
9 min
Study level: PhD

Summary about the Dispute

The Cause

The Qantas dispute was all about a dialogue to reach enterprise agreements (EAs) with three unions. The key issues that were the focus of the negotiations involved wage increases, better working conditions, and the impact of Qantas’s managerial policy on “wages and job security” (Mules, 2013, p. 2). The unions demanded a 2.5% annual wage hike for the ground handling staff on grounds that inflation was increasing and the capping of temporary labour at 20% of the entire staff population (Mules, 2013).

Background Information

This industrial dispute pitted Qantas against three labour unions. Its genesis goes back to 2009 when the Qantas Group founded a subsidiary company to supply a workforce for its baggage handler/ramp operations (Mules, 2013). The new entity, Qantas Ground Services Pty Limited or QGS, also hired contractors and on-hire staff for Qantas. The QGS workers were paid less than the Qantas ground handlers were (Mules, 2013). To address this pay gap, negotiations were initiated between the carrier and the Transport Workers’ Union (TWU). The bargaining discussions sought to reach an agreeable uniform package for all ground handlers.

How the Dispute Unfolded

As the discussions progressed, Qantas stated that it would utilise QGS to recruit future labour hire staff for its ground operations (O’Neill, 2012). Further, the company indicated its intention to discontinue paying labour hire organisations at rates pegged on Qantas’s terms of employment. These proposals led to the stalling of the negotiations and precipitated a 38-day industrial action by TWU member employees beginning in 20 September 2011 (O’Neill, 2012). As the talks with TWU went on, Qantas was holding simultaneous enterprise bargaining discussions with the Australian and International Pilots’ Association (AIPA) and the Australian Licensed Aircraft Engineers’ Association (ALAEA) (O’Neill, 2012).

Following the stalling of negotiations with the three unions, the carrier, on October 29, announced a complete lockout of the employees to compel the unions to drop some of their claims. The lockout saw the carrier ground its whole fleet, incurring $194m in costs. This forced the Minister in charge to call on the Fair Work Australia (FWA) to either terminate or suspend the strike forthwith (Hurley-Smith, 2012). Subsequently, the disputes were sent to the FWA for arbitration following a spate of unsuccessful negotiations. Ordinarily, the FWA, under the Fair Work Act, intervenes in disputes that have implications for the Australian economy, especially in the Tourism industry (Australian Government, 2012).

In this case, the parties were ordered to terminate the industrial action by the 31st October 2011 and reach an agreement within 21 days (Hurley-Smith, 2012). However, after no EAs were reached at the expiry of the period between Qantas and two unions – TWU and AIPA, the FWA intervened. Section 266 of the Fair Work Act mandates the FWA to make a workplace determination where no enterprise agreement is feasible (Patmore, 2006). A workplace determination refers to “an arbitrated outcome of all matters” regardless of whether they have been agreed on or in dispute between the parties (Patmore, 2006, p. 10). The outcome of the arbitration included a 2.9% annual pay rise backdated to November 2010 and the disapproval of the 20% labour cap (Wilson, 2011). On the other hand, the Qantas-ALAEA EAs did not need arbitration, as conciliation was adequate to resolve all issues but job security (Arlington, 2011).

External Business Environment Factors

External factors were at play in this dispute. One of these factors was the high unit labour price in Australia. Labour costs constitute a major competitive factor for carriers pursuing a cost leadership strategy. It requires firms to reduce operational costs and pass the cost savings to its clients. As Bussell and Farrow (2011) note, since the “unit price of labour differs significantly between airlines”, labour cost is the main cost differentiator between carriers (p. 394). Therefore, major competitive gains could be acquired in the airline industry by minimising the labour costs.

Over the past decade, unit labour costs in Australia have grown by 37% (Forsyth, 2011). The wage increases do not match productivity levels in key industries, such as commercial airline industry. As a result, Qantas sought to achieve labour efficiency through global outsourcing of its supplementary staff – ramp and ground handlers – to QGS, as opposed to an in-house bidding. The carrier often used labour hire organisations and contractors for its supplementary staffing needs. The outside workers were not protected against the contractors and they received lower wages than the Qantas staff did, precipitating the dispute.

Another external factor that contributed to the dispute is progressive inflation in the country. A growing demand for Australian exports and economic challenges in the US and the EU resulted in a high AUD (Forsyth, 2011). The high AUD made local goods more expensive than imports to Australia. For Qantas, the stronger AUD led to lower freight revenue and a decline in its market share. As a result, the firm’s market share dropped from 34% in 2000 to 19% in 2010 and costs continued to increase (Creighton & Forsyth, 2012). Subsequently, the management developed a transformative strategy that involved a restructuring of Qantas’s business to cut costs and enhance efficiency (Creighton & Forsyth, 2012). The diminishing revenue due to high AUD, costly fuel and spare parts, and route-related costs – often paid in USD – meant that the carrier could not offer a 2.5% annual wage increase and remain profitable.

Critical Stakeholder Analysis of the Dispute

Employer’s Perspective

The key issues in dispute between the parties included ground-handling rates, the capping of contractor workers, and annual pay increases. The employer’s (Qantas) goals in this dispute were to force the unions to drop some of their claims related to the above issues through a lockout and invite the FWA to arbitrate the dispute on grounds that it posed an economic risk to the country.

Faced with increasing competitive pressures locally and internationally, the employer could not agree to sign new enterprise agreements. To forward its claim, the employer used two main strategies or tactics. The first tactic involved a deliberate refusal to start talks until July rather than March 2011 (Siegel & Drew, 2011). The second tactic was a complete employee lockdown in response to the protected industrial action. The employee lockout took place on October 31, 2011 and saw the employer ground its fleet to compel the FWA to arbitrate the dispute (Briggs, 2007).

Employee Perspective

The outside hire personnel – engineers, baggage handlers, and ground handlers – sought to have their pay harmonised with Qantas’s staff. Their goals in this dispute were related to wage increases, improved employment conditions, and job security through new enterprise agreements with Qantas. To advance their claims, the employees used three strategies or tactics: participation in a protected industrial action, stop work meetings, and work bans. All the employee groups participated in a 38-day protected industrial action that commenced on September 20, 2011 (Hurley-Smith, 2012). The engineers held a one-hour stop work meetings, reported to work one hour late, and right-handers indicated that they would use their left hands (Mules, 2013). On their part, the ground handlers engaged in a four-hour stop work meetings and work bans (Mules, 2013).

Unions’ Perspectives

As stated, three unions represented the workers in this dispute – TWU, AIPA, and ALAEA. Their goals in this dispute differed between the unions. The ALAEA’s claims were to have the employer establish a maintenance facility, control third-party hire organisations, and exclude union members not siding with ALAEA (Morton, 2011). TWU’s goal was to have the employer restrict/control on-hire labour organisations. In relation to AIPA, the goals were to have uniform employment terms for Qantas and on-hire staff and review the terms of all workers, including those stationed abroad (Schneider, 2011).

To advance their claims, the unions used different industrial strategies. The TWU presented new wage claims to the airline’s management eight months before the lockout. The union also declared that its 9,000 members would engage in a protected industrial action to demand for a pay rise (Feltham & Nichol, 2011). The long-haul pilot members of AIPA carried out a FWA-approved balloting that resulted in the decision to engage in the strike (Feltham & Nichol, 2011).

State/Federal Government’s Perspective

The goals of the government in this dispute were two-fold; first, to have the protected industrial action by the employees suspended or halted, and second, to have the employee lockout lifted. Its arguments before the FWA sought to demonstrate that the impending lockout, which was an employer’s response to the industrial action, would hurt the Australian economy, more so the tourism industry. The main strategy or tactic employed to advance these claims included making an application to the FWA to “terminate or suspend the industrial action” involving Qantas, the Engineers, the TWU, and the AIPA members (Guidice, 2011, p. 553). Subsequently, the FWA step in to arbitrate the industrial dispute and stop the lockout.

The Resolution of the Disputes

The disputes between Qantas and the three unions were forwarded to the FWA following the Minister’s application. An urgent hearing was convened where the FWA recognised that the industrial action posed a significant threat to Australian tourism and aviation industries (Creighton, 2011). The FWA also established that the response action by Qantas (lockout) could cause further damage to the national economy, as it will affect critical sectors, i.e., passenger air travel and freight transport. In this regard, the FWA directed Qantas and the unions to suspend all strikes on 31st October 2011 and start three-week negotiations on the contested issues (Hurley-Smith, 2012).

After this period expired with no resolution, the FWA intervened through a workplace determination of the disputes between Qantas and two unions – TWU and AIPA. A workplace determination gives “an arbitrated outcome of all matters”, including EAs for issues agreed upon and those in dispute (Sorkowitz, 2012, p. 373). The issues that required the FWA determination included introduction of site rates, a 5% annual pay hike, and the capping of contractor labour at 20% (Creighton, 2011).

In making the determination, the key considerations included “the merits of the claims, employer/employee interests, public interest, and compliance with good faith principles” (Smith & Howard, 2012, para. 5). In this case, the EAs made included a 2.9% annual pay increase, backdated for twelve months and the rejection of the 20% cap on the on-hire labour (Wilson, 2011). With regard to the dispute between Qantas and the Engineers’ union, an EA was reached through conciliation. All issues were resolved, except job security for contractors. The two parties agreed that the state of affairs would continue until the subsequent round of negotiations.

Analysis of Effectiveness of the Dispute Resolution

The initial hearing by the FWA focused on the financial costs of the dispute to the employer and to the economy. The Minister’s testimony provided indisputable evidence that the dispute portended a significant damage to the economy (Sangkuhl, 2011). The lockout posed a significant threat to the tourism and aviation industries. However, the challenge was if the FWA should suspend or halt the strike and the lockdown. The resolution of this dispute did not consider the employer’s motives for instigating the costly lockout. While the unions’ protected industrial action was necessary to forward their claims for new EAs, as provided for in the Fair Work Act, the Qantas lockout appears to have been driven by ulterior motives.

As Hannan and O’Brien (2011) note, the lockout amounts to the use of coercive power to obtain a desirable industrial outcome. Therefore, it should be highly regulated to protect the employees in line with the good faith principle. However, in this case, it appears that there were no grounds for deploying this coercive power, except to force a favourable outcome. It is evident that the protected industrial action was hurting Qantas. However, the FWA’s decision to terminate the lockout and the strikes and force arbitration did not adequately respond to the bargaining objectives of the unions. The Qantas dispute highlights the need for a legislation to regulate the application of employee lockout and provide a means for any party dissatisfied with the FWA decision to seek for a suspension of an industrial action, as opposed to a termination.


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