Employment Update - What is Stand Down?

WithCOVID-19 control measures being escalated, the effect on many workplacescreates a lot of questions around how senior managers will manage the downturnand how they will handle their staff. The situation is changing everyday and itis important to understand what the effect of government decisions have on theoperation of your organisation.

It isapparent from media coverage that there are employers who are taking steps toreduce their wage expenses without understanding the repercussions of theirdecisions. It is critical that employers get advice that is specific to theircircumstances before taking steps to stand down employees.

Fair Work Act

The FairWork Act 2009 (Cth) (the Act) sets out the minimum standards for employmentfor employers functioning in the federal jurisdiction and for the purpose ofthis article, we will focus on that jurisdiction.

Section 524(1)(c) of the Fair Work Act, provides that an employer may stand an employeedown during a period that an employee cannot be usefully employed, because of astoppage of work for any cause that the employer cannot reasonably be heldresponsible.

Section524(3) provides that if an employer stands down an employee during a perioddescribed in s524(1), the employer is not required to make payments to theemployee for that period.

Whilst youmay think that a downturn in income streams, because of COVID, is somethingthat is beyond your control and you can stand your employees down, it isunlikely to be the case. The view of the Fair Work Ombudsman (FWO) is that employerscannot generally stand down employees simply because of a reduction of organizationalincome or because an employee has coronavirus.

If anemployer unlawfully stands down employees without pay, the employees may beable to recover unpaid wages for the period of the stand down.

Whether youhave the option of standing down employees in the current coronavirus related circumstancesis entirely reliant on the facts of your situation and you should exercise theoption cautiously. You must be able to demonstrate that:

• thereis a stoppage of work;
• theemployees to be stood down cannot be usefully employed (which is not limited tothe work an employee usually performs); and
• youcannot reasonably be held responsible for the cause of the stoppage.

The FWOencourages employers and employees to work together to find appropriatesolutions that suit the needs of individual workplaces and staff. Employees whoare stood down without pay remain employed for the period of the stand down andcontinue to accrue their entitlements during a stand down period because theiremployment remans operative.

When can you stand down employees?

The FWO hasprovided some examples of when they consider employers may be able to standdown employees, which include:

• ifthere was an enforceable government direction requiring the organisation toclose (which means there is no work at all for the employees to do, even fromanother location)
• ifa large proportion of the workforce was required to self-quarantine with the resultthat the remaining employees/workforce cannot usefully be employed
• ifthere was a stoppage of work due to lack of supply for which the employer couldnot be held responsible.

You mustremember that enterprise agreements and employment contracts can have differentor extra rules about when you can stand an employee down without pay, forexample, a requirement to notify or consult. You should review the relevantawards, agreements, contracts and workplace policies to ensure that what youpropose to do can be legitimately done.

If you canstand down employees, you are not required to make payments to them for thestand down period. However, it is at your discretion to do so if you would liketo.

Stand downis not effective if employees are taking paid or unpaid leave that isauthorised by the employer, or the employee is otherwise authorised to beabsent. You will be required to pay them under the normal leave provisions forthat period.

Stand downprovisions do not apply to casual employees because they have no guarantee ofhours and so no guarantee of income.

Alternatives to stand down

If youcannot legitimately stand your employees down or would prefer not to for aslong as possible, you may consider:

• seekingemployees’ agreement to take paid (annual or long service) leave for a period;
• invery limited circumstances, directing employees to take paid annual leave;
• subjectto consultation and notice provisions, negotiating with employees to changeregular rosters or hours of work; or
• terminatingthe employment of the employees, in which case the you may have to provideredundancy pay.

Recently,we have seen emergency changes to some modern awards that vary the restrictionsaround rosters, flexibility and directions to take annual leave, so currentadvice before you make a decision is important.

If youstand down your employees, they can take up other employment for the durationof the stand down but that may be subject to contractual obligations or prioragreement with you.

Termination of employment

The FairWork Act includes requirements that employers have to meet before they canterminate an employee’s employment, such as providing notice of termination orpayment in lieu. Unless the employee is legitimately dismissed because they havefailed to meet the reasonable requirements resulting from a performancemanagement process, you may also have to pay redundancy. Before you considerterminating someone’s employment in the current circumstances, you should getprofessional legal advice.

You mustalways remember that an employee is protected from being dismissed because ofdiscrimination, a reason that is harsh, unjust or unreasonable or anotherprotected right. Breaching those requirements can lead to expensive claimsagainst your organisation. Additionally, employers are prohibited from exertingundue influence or pressure on employees in relation to making certainagreements or arrangements relating to their employment.

Examplesof proposed stand downs

The FWO hasrecently released some example of situations relating to stand down to assistemployers to understand the provision. They are set out below.

Example:Lack of vital supply – Stand down

Sally'scompany operates a business that imports and sells electrical goods which are manufacturedin China. The factory in China ceases to operate as a result of coronavirus andannounces that it will not be exporting any goods for a period of at least 3months.

Sallyexplores other options but is unable to identify any alternative work of anyvalue for her 20 permanent employees to do.

Sallycloses her shop and regrettably informs her employees that they are to be stooddown without pay. Sally explains that they are entitled to take any accruedpaid leave during the period as an alternative to being stood down without pay.

Example:Non-essential services – stand down of employees

Gemma is apart-time employee at a cinema complex in Brisbane’s CBD. The cinema employs 10permanent employees and 15 casual employees. The Prime Minister has issued anenforceable government direction under emergency powers that certainnon-essential services must shut down because of coronavirus.

Gemma’smanager calls her to explain that the cinema is closed for the duration of theGovernment’s direction and that cinema management will need to stand allemployees down without pay, as they can’t be usefully employed.

Gemma andher colleagues are advised that permanent employees can take any accrued annualleave they have as an alternative to being stood down without pay. However,casual employees are not entitled to be paid while the business is closed.

Example:Non-essential services – no stand down of employees

Teddy is apart-time food and beverage attendant in a Sydney restaurant. The New SouthWales Government issued an enforceable government direction under the PublicHealth Act 2010 (NSW) that certain non-essential services must shut downbecause of coronavirus.

Teddy’semployer contacts him to let him know that the restaurant has closed its diningservice immediately for the duration of the direction. The restaurant willcontinue offering its takeaway and delivery service. Teddy’s employer lets himknow that instead of carrying out his usual waiting duties at the restaurant,he and the other waiting staff will be needed to help with receiving, packingand delivering orders.

This is nota stand down because Teddy can still be usefully employed, so he’ll continue tobe paid. 

Conclusion

As you cansee, stand down of employees is a very limited provision that turns entirely onthe facts of your situation. Even a small change in how you organise yourbusiness can change the effect of the provision.

If you think that you may need to stand down your employees or that you need to take other related steps in the current circumstances, seek advice before you make a decision. Our team can provide advice and draft documents to help ensure that you remain compliant with your obligations.

You can contact us on (07) 3160 0010 or at michelle.cowan@nfplawyers.com.au

Disclaimer - Reliance on Content
The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.