Federal Court clears QANTAS for stand down employees during pandemic

By Chao Ni, Principal, MST Lawyers

On the 1 April 2022, the Full Court of the Federal Court of Australia handed down its decision in the case of Australian Licensed Aircraft Engineers Association v Qantas Airways Limited [2022] FCAFC 50. This case concerns the validity of the standing down of Qantas and Jetstar aircraft engineers during the period of limited air travel caused by the COVID-19 pandemic.

The enterprise agreements

The enterprise agreements for both Qantas and Jetstar aircraft engineers contained stand-down provisions which allow the airlines to stand an employee down if they “cannot be usefully employed” due to a “stoppage of work through any cause for which Qantas cannot reasonably be held responsible”.

The Jetstar enterprise agreement required “a stoppage of work by any cause, which Jetstar cannot reasonably prevent”.

The two enterprise agreements are substantively similar in operation.

Agreed facts

During the peak of the COVID-19 pandemic, the two airlines experienced an “almost total” reduction in passengers due to government travel restrictions. Most flights were operating at such a significant loss that the financial viability of the airlines would be questioned unless operations were altered drastically.

As a result, the airlines cancelled or reduced capacities on all routes to minimise losses. Despite this, the maintenance of aircraft engineers still represented a significant cost to the airlines’ operations. After exploring and implementing other cost-saving measures, the airlines felt they had no choice but to stand down a significant number of aircraft engineers, and accordingly did so. 

Proceedings

The aircraft engineers, represented by the Australian Licensed Aircraft Engineers Association (ALAEA), initiated proceedings against Qantas and Jetstar, alleging that the stand down provisions in their respective enterprise agreements had been wrongfully engaged.

They argued that even with decreased air travel, the engineers could be ‘usefully employed’, and therefore did not face a ‘stoppage’ of work. Examples were provided of work which these engineers could have performed, included ‘heavy maintenance, addressing time-deferred defects, corrosion repair and routine and non-routine aircraft maintenance’.

The primary judge held that the stand down provisions had been validly engaged. The stoppage of work was identified as the stoppage of passenger flying. The judge reasoned as follows:

  • Although the immediate cause of the stoppage of work was Qantas and Jetstar’s decision to stop flying, the ultimate cause was the pandemic.
  • Even after exploring and implementing all other reasonable cost-saving measures, the circumstances were such that the standing down of employees was a ‘necessity’.
  • These actions were taken to ensure the airlines’ ‘very economic survival’ and ‘ultimate financial viability’.
  • Therefore, the airlines could not reasonably be held responsible for, or prevent, these circumstances arising, and thus the stoppage of work which arose was enough to engage the stand down provisions.

The appeal

On appeal to the Full court of the Federal Court, ALAEA submitted the following arguments:

  • The relevant ‘stoppage of work’ was the stoppage of passenger flying.
  • The cause of that stoppage was a decision made by the airlines to stop flying.
  • The stand down provision does not take into account economic consideration, relying on the High Court case of Pickard v John Heine & Sons Ltd (1924) 35 CLR 1. To illustrate this point, a transport company probably should not stand its employees down simply because petrol prices were too high.
  • Questions of reasonableness are only relevant when the employer’s decision is not a direct cause of the stoppage. To illustrate this point, in the High Court case of Ford Motor Co (1962) 3 FLR 198, employees at a factory were stood down due to a lack of vital components, owing to a strike by shipping clerks. The Court held that the company could not reasonably be held responsible for this shortage.
  • An employer would ‘reasonably be held responsible’ if the stoppage was a ‘natural and probable consequence’ of their decision (relying once more on Ford Motor Co). The stoppage of work is clearly the natural and probable consequence of the decision to stop flying.
  • A decrease in demand is not enough to engage the stand down provision.
    • The case of Re Textile Industry (1963) 5 FLR 328 was referred to. In this case, the employees in a mill were stood down on a rolling basis due to a shortage of orders. The Court found that the stand downs were not authorised by the stand down provisions, although they were authorised by another unrelated clause.

The respondents, Qantas and Jetstar, submitted these arguments:

  • In considering the cause of the stoppage, the underlying factors should be taken into account. Rather than focus only on the immediate or direct cause, the ‘real, substantial or effective’ cause should be considered. Here, it is argued that the actual cause of the stoppage was a lack of passengers.
  • The focus of the clause is whether the employer could have prevented, or ought to be held reasonably responsible for, the stoppage.
  • As long as the employer’s decision was a cause to the stoppage, it will be necessary to examine the reasonableness of that decision.

Unanimous decision

All three judges of the Full Court agreed that the appeal should be dismissed.

Justice Besanko and Justice Wheelahan agreed with the trial judge’s reasoning. Justice Besanko noted the following:

  • The use of the words ‘by’ and ‘through’ do not suggest that the causation analysis should be limited to immediate and direct causes.
  • The inclusion of the word ‘reasonable’ means that the stand down clauses demand both causation and reasonableness to be determined. Pickard v John Heine requires the acts of an employer to be compared against ‘the means which a reasonable man might be expected to employ in such circumstance’.
  • An inquiry which is limited to identifying an immediate or direct cause ignores the ‘real, substantial or effective’ reasons behind it.
  • Therefore, such an inquiry may establish causation, but would be unable to address an issue of reasonableness of that act.
  • Although ‘the stand down provisions cannot be engaged by mere market fluctuations or reductions in profitability’, the circumstances faced by the airlines due to COVID were extreme, such that the market for airline services almost completely collapsed.
  • It is accepted that the decision of the airlines was the immediate cause of stoppage. However, in view of the extraordinary circumstances, that decision was one which a ‘reasonable man might expect to employ’.
  • The stand down was therefore valid.

Decision of Justice Bromberg

Justice Bromberg also agreed with the orders which Justice Besanko and Justice Wheelahan made, but thought they, along with the parties, had wrongly decided the ‘stoppage of work’ to be the reduction of flights. However, since the issue was not raised, it could not affect the result of the appeal.

Nevertheless, in Justice Bromberg’s view, a downturn in business such as a reduction of flights could not be considered a stoppage of work. He reasoned that:

  • A ‘stoppage of work’ must mean an anterior event which prevented the employee from being usefully employed.
  • It must amount to a ‘cessation of work’ rather than a mere reduction.
  • A cessation of an employer’s economic activities needs to be distinguished from a cessation of work. A cessation of economic activities does not necessitate a ‘stoppage of work’, although a cessation of economic activities can result in a cessation of work.
  • Cessation of flying by the airlines does not lead to a cessation of aircraft maintenance work. A short cessation of flying may in fact represent an opportunity for the aircraft engineers to service planes which otherwise would be flying.

Justice Bromberg also quoted an excerpt from an article in Australian Journal of Labour Law by Professor Anthony Forsyth and Professor Andrew Stewart, which noted the following problems with construing a reduction of economic activity as a ‘stoppage of work’:

  • If a business is prohibited from trading, there will be a stoppage of work. Clearly, this stoppage of work will end when the prohibition is lifted.
  • If a business suffers a drop in business, which gradually improves, would there be a stoppage of work? If there is, when would the stoppage end?
  • In situations such as the above, employers may gradually reinstate some workers but not others. Should the other employees remain stood down?

What this means

This case stands as authority for the proposition that in certain circumstances, a reduction in business may suffice as a reason for standing down employees. That is not to say that any reduction in business can justify a stand down.  The decision which leads to the standing down of the employees must be considered reasonable in the given circumstances.  It is still unclear, however, what economic circumstances are required before a decision to stand down would be considered reasonable. The circumstances in this case are unique and provide little indication for where the threshold may generally lie.

If you have any questions about this article, please contact the MST Lawyers’ Employment Law team by email on workplace@mst.com.au or phone on +61 3 8540 0200.