Qantas (ASX:QAN) share price drops after federal court loss

A court has ruled against the airline over its outsourcing of 2,000 jobs

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The Qantas Airways Limited (ASX: QAN) share price is facing some turbulence after a federal court ruled it had outsourced jobs contrary to the Fair Work Act.

At the time of writing, shares in the national carrier are trading for $4.61 – down 0.22%. The S&P/ASX 200 Index (ASX: XJO) is 0.03% lower for context.

Let’s take a closer look at today’s news.

Qantas share price down with court loss

In his findings, Justice Michael Lee agreed with the Transport Workers Union’s (TWU) argument that Qantas’ decision to outsource around 2,000 jobs was partly motivated by employee membership in the union.

Under the Fair Work Act, an employer is prohibited from making a decision about redundancies or firings based on union membership

Qantas rebutted the outsourcing was only due to financial pressures, particularly those brought on by the COVID-19 pandemic.

However, Justice Lee did not agree with that assessment.

“The operational disruptions caused by the pandemic were, viewed as at November 2020, likely to continue for some time but not, mercifully, indefinitely,” Justice Lee said.

“I am not satisfied that Qantas has proved on the balance of probabilities that (Qantas domestic and international chief executive Andrew) David did not decide to outsource the ground operations for reasons which included the Relevant Prohibited Reason.”

This legal loss may be affecting the Qantas share price.

Qantas responds

In a media statement, Qantas confirmed it will appeal today’s judgement.

“The TWU has put forward its persecution complex that our decision to save $100 million a year in the middle of a global downturn was really about stopping them from walking off the job at some time in the future,” said Qantas group executive John Gissing.

“Qantas was motivated only by lawful commercial reasons, and this will be the subject of our appeal.”

Furthermore, Qantas stands by its argument the only factor motivating its decision to outsource these ground handling jobs was the financial implications of COVID.

The company points to the fact that pre-pandemic it was actively recruiting new staff for ground handling as evidence that COVID was the force majeure that prompted its decision.

In what may be a saving grace for the Qantas share price, the company confirmed it does not have to reinstate any workers lor pay any penalties or compensation – at least for now. Qantas says it will oppose any such orders if they are made.

Qantas share price snapshot

Over the past 12 months, the Qantas share price has increased by around 36%. The ASX 200 is up around 23% over the same period. Additonally, Qantas has outperformed the ASX 200 by more than 11 percentage points in the last 5 years.

Qantas Airways has a market capitalisation of $8.7 billion.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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